Sdi Share Discussion Threads

[gdjs100] 06/6/2023 09:00

SDI is on about half the valuation of Halma.

[worldwidet] 06/6/2023 08:44

Take off your rose-coloured glasses and ignore one-off orders from covid contracts and evaluate the core business and the M&A development. FCF growth is stagnant and SDI is failing to turn the M&A wheel faster. The last few years have been a golden locks scenario of cheap money and strong economic growth. Now they are facing a reversal. The economy is falling into recession and interest rates have risen at record speed.

If SDI keeps the 28% annual growth that management has issued. Will, a lot has to happen.

SDI is valued like a multi-billion conglomerate like Halma but run like a microcap with a 10 million market cap with a single hero trying to take care of everything.

When SDI was valued at 50 million, it worked well to have Mike Creedon as a one-time army taking care of everything. From filling the toilet paper to M&A. But now it's being neglected to look to the future.

I stand by my assessment that SDI has massive potential but something needs to happen in management.

[trident5] 06/6/2023 08:26

We are: +404%

[worldwidet] 06/6/2023 08:09

Follow the FCF ...

[tudes100] 06/6/2023 00:43

"SDI has been stagnant for 3 years " ?!!
Since 2019 Rev's +186%, FCF +404%, PBT +371%, EPS +200%.
Please let me know of any other Co's that you are aware of WWT that are stagnating as I'd love to get some money invested in them....

[trident5] 05/6/2023 21:48

Well, your English is very good, so when you said that SDI "closely controlled" Finncap it seemed appropriate to comment on.

And on the day that Judges blast through £100 it also seems appropriate to note that in 2017 their revenue was £71m and net profit: £4m.

Last year SDI revenue was £50m and profit over £7m.

Both companies had/have similar one man key risk profiles.

[trident5] 05/6/2023 17:35

Have we just acquired Finncap?

[worldwidet] 05/6/2023 14:50

FinnCap (the broker closely guides by SDI management) expects only GBP 4.4m FCF for the current FY23. This means that SDI would still be trading at 30 times FCF at the current share price 131p.

Still no acquisitions in the current calendar year 2023. SDI would have to turn the M&A wheel much faster. SDI would have to make 4-6 acquisitions annually and thus constantly increase the FCF and the annual acquisitions.

But SDI is not making the much-needed progress in acquisitions because they are not creating the necessary M&A structures and lack the financial resources.

Everything at SDI is focused on one person, Mike Creedon.

Mike is pretty much handling the M&A activity on his own, but SDI urgently needs to build a competent M&A team that is focused on M&S networks and M&A execution so that the CEO and the leadership team can focus on strategy alignment and organic growth to grow FCF organically.

Mike is resting on his laurels but SDI has been stagnant for 3 years and FCF is actually declining.

If SDI does not manage to expand the M&A structures and build a competent team to minimise the one-man risk of Mike Creedon, I see serious problems.

The valuation with the 30 x FCF is still far too high. If the FCF continues to suffer in the coming recession as organic growth shrinks, the valuation will rise even further.

The share price would have to fall to 90-100p to offer an adequate risk premium.

[dan_the_epic] 05/6/2023 10:25

This is more tolerable at 130p than it has been for much of the last years. I am not rushing as there is no reason why this should bounce 15% fast but at least it can sit on a watchlist

[tudes100] 01/6/2023 01:26

WWT - Danske reduced their holding from 8.02% to 7.99% on May 25th. On Feb 14th they increased their holding to 8.02% from 8%, on Feb 6th they went from 8.01% to 8%.
Interpreting tiny moves in institutional holdings as in some way indicative of long term intentions is ridiculous and demonstrates lack of objectivity in your comments.
I don't have any interest in whether you're long or short but think it's only fair to point out when you're talking absolute rubbish.

[steeplejack] 31/5/2023 22:26

Thank you very much.We'll ring you.

[worldwidet] 31/5/2023 19:54

Danske Bank reduces its SDI position.
Risk budgets ... others (JPM etc.) will have to follow if share price falls in a market wide sell-off.

Danske is already deep in the red with its SDI position.

Short-term temporary recoveries in the share price due to technically oversold indicators could be used by large institutions to sell as part of risk budget management.

100-120p range could be interesting.

The coming recession is not priced into the broad equity market.

[hastings] 18/5/2023 10:52

Good to see Chell launching new products.https://t.co/Tyv2R4NLAt

[steeplejack] 17/5/2023 13:11

I suppose it would be reassuring if the management had more shares in the company but frankly its not essential as far as i'm concerned.Its a personal decision as to whether you load up to the gunnels with stock in the company you manage,the company that pays your salary..For one thing,you risk having all your eggs in one basket.My worldwide portfolio is spread across some 40 stocks.I probably should of done myself a favour and put the whole lot in Apple or Nvidia years ago but,even with those two,it would have been a nervy ride.A reasonable asset spread in life is obviously sensible if not more relaxing.I'm always curious about insider dealing but recognise that without scrutinising the management's financial in-goings and outgoings,its not the be all and end all.

[hastings] 17/5/2023 12:29

WWT thanks for the comment, appreciated.Obviously we have some differing opinions, but your points are interesting, where different views are what make the market!

[hastings] 17/5/2023 12:13

I suggest you undertake a bit of research into SDI. The CEO has outlined his position on buying shares over a period of years.Whether you agree with that or not is irrelevant in the overall performance from him and other board members. Mike Creedon has done an excellent job, so your implication or assumption is unfounded and unjustified.

[fuji99] 17/5/2023 12:08

WorldWideT: I agree if the main directors do not hold enough shares in their own company there is something wrong somewhere. They probably know something we don't. If one is convinced his business is sound he doesn't sell the shares of his company unless in very special circumstances. If they really wanted to sell to institutions, they could have easily issued new shares - knowing pretty well the total number of already issued shares is not large.

[worldwidet] 17/5/2023 11:56

Mike also kept talking about Monmouth wanting to expand through the existing Synoptics office in the US. Nothing more has been heard on this.

It is not as easy as people think to expand into other countries through existing small offices.

SDI is thinking into the future, but does not have the necessary personnel and material structures to move into new dimensions. It also lacks the financial firepower.

SDI would have to optimise the business for profitability and FCF generation after the collapse of the Atik orders and create the structures to be able to expand internationally and turn the M&A hamster wheel faster.

With the current M&A structure, which is essentially based on the work of a single executive, namely the CFO Creedon, who is mainly responsible for the M&A activities, SDI cannot meet its growth target of 28% per annum.

Not in an environment of high interest rates and economic headwinds.

SdI is certainly not a bad business, but it needs more for the future than the constant hope of individual large orders being landed. SDI needs to be systematically and structurally positioned for the future.

It is always argued that 1-2 small bolt on acquisitions are in the pipeline.

Hell, to sustain 28% growth it takes more than 2-3 small acquisitions a year.

The M&A hamster wheel has to turn faster and the management will have to realise this painfully.

Hopefully, no mistakes will be made in the acquisitions under this pressure.

Investors' expectations are damn high. SDI is still expected to exceed its forecasts. I am eager to see whether Mike can maintain the growth target of 28% per annum.

It's a great company, but I personally think the risk premium is too low at the moment.

Nevertheless, thank you for your always very detailed reports Hastings.

[hastings] 17/5/2023 11:39

It'll be interesting in the year ahead as to what could emerge on ATIK's trialling of its CMOS camera along with Mike's forthcoming trip to China. Possibly nothing, but then again potentially big business.

[worldwidet] 17/5/2023 10:04

Institutional investors now work heavily on the basis of risk budgeting. Risk budgeting is one of the latest methods of portfolio optimisation and is to be used in conjunction with the widely used capital budgeting method.

The problem, however, is that risk budgeting forces institutional investors to close or sharply reduce their positions after a certain loss threshold.

Especially in the case of microcaps, which tend to be sold off particularly strongly under low volume in market breadth sell-offs, this is problematic if in this phase the large institutional investors are also forced to bring their shares into the market in which there are already no more buyers.

The shares would have been in the best hands with SDI Management, as was the case with JDG, for example.

I think it is a mistake for Mike and Ford to sell their shares to large institutional investors.

If Mike and the management think SDI will continue to do well and the valuation is attractive then they should have kept the shares and provided continuity. But they put their shares in the hands of institutional investors who are driven by other motives and who have to work with risk budgets.

The management should own massive amounts of shares, preferably bought with their own money, so that they are in the same boat as the investors.

It is always celebrated here by the bulls when big institutional investors buy but I would much rather see management buying massively. the fake purchases Mike and the CFO make where they buy a few shares for little money is meaningless.

At VLX, Rothschild also made one of these fake purchases and then the share fell by another 25-30%.

If Mike and management are convinced that SDi is undervalued then we should see buying in the £100k range.

Managers earning £150-200k a year should be able to buy more than for 6-7k shares.

Don't get me wrong. SDI is not going to go bankrupt. It's a great company. Mike is doing a great job.

But given the economic and monetary environment and the structural problems at SDI, I don't think the risks are adequately priced.

At prices around 110-130p, the risk premium could be attractive.

In the short term, the stock appears to be technically oversold, which could cause some traders to drive the price in the short term, but in the medium term I see strong downside potential in the 100-120p range.
Those with long term investments need not worry SDI will grow into valuation in the very long term.

But in the coming 12-18 months I could see even better entry points than the current ~150p.

My opinion. We will see what happens.

[rivaldo] 16/5/2023 22:32

Good to see another institutional investor taking the opportunity to invest at these levels. Vind Equity crossed the threshold on 12th May with 4.35m shares, the day after the update, so were presumably buying/topping up soon afterwards.

There's not much to be found about them online, but they have invested previously in Ideagen and Porvair, so they have form in investing in successful companies.

[steeplejack] 16/5/2023 16:14

https://vindgroup.com4.18% stake notification.

[death by donut] 14/5/2023 13:49

Thanks Hastings , much appreciated.DbD - Long still :-)

[hastings] 14/5/2023 08:45

Cheers gnm. I note that Chell appear to sound bullish with the launch of a new website to support an expanding customer base.Interesting also to see that it was selected by Lilium for the German electric jet development.https://www.aerospacetestinginternational.com/news/supplier-news/lilium-picks-chell-pressure-scanners-for-evtol-development.html