Sdi Share Discussion Threads

[worldwidet] 02/8/2023 11:18

@trident5

Let's wait for the next few months... and when SDI is trading ~100p we can talk about how I invest...

[trident5] 02/8/2023 08:09

Did you invest in Bernie Madhoff mate? He produced very regular constantly positive returns.

[worldwidet] 02/8/2023 08:04

The results will only show what happened over a year ago. The general conditions have deteriorated massively since then.

The bulls should ask themselves why the MAnagemnt keeps talking about a strong M&A pipeline but fails to turn the M&A wheel for more than 10 months.

Bulls should also ask themselves why organic growth collapsed over 3 years even though the economy was still on the upswing. Now the economy is cooling down sharply and the bulls think organic growth at SDI will pick up again?

Where will M&A growth come from if there are no acquisitions? But how will acquisitions be made if there is a lack of FCF because organic and M&A growth is collapsing?

At SDI, the hamster wheel is starting to turn backwards!

A CEO who sells almost all of his stock (which was very low anyway) to help his daughter financially instead of holding on to his stock.

Now an RNS comes a few days before the publication of the results because SDI did not manage to publish the results in the time frame of the last years. SDI is increasingly losing its continuity and professionalism.

When a CEO talks about bringing existing businesses (Monmouth) to the US but then you don't hear anything about it or when the CEO talks about having a strong M&A pipeline but then no acquisitions follow for almost a year and then he sells his entire stock....
he slowly loses credibility.

Bulls you can keep celebrating every news, no matter how insignificant. You can keep celebrating the CEO as a saint and I can be dead wrong.But I think it can get ugly for you here if a recession really hits and the bond markets are already pricing that in.I don't think SDI is the safe ship that will steer easily through a global recession.

That is my personal opinion and you are welcome to hate me for it!

Regards

[rivaldo] 02/8/2023 07:29

Results confirmed for next Tuesday - good to see an Investor Meet presentation on 11th August too:

[worldwidet] 01/8/2023 15:48

For almost a year (last acquisition 10/22), SDI has failed to make an acquisition to keep M&A growth going while (already very low) organic growth continues to weaken.

Early economic indicators are sounding the alarm. The massive interest rate hikes are already eating into the economy and financial systems. The broad equity markets are only supported by greedy momentum with only a few (hyped) stocks benefiting.

Companies are increasingly suffering from the high interest rate level, which has a very negative impact on investment activities.

I maintain my view that SDI is not only facing structural challenges that the current management is no longer able to cope with, but that the coming economic downturn will weigh heavily on SDI's operating business.

The current valuation offers no margin of safety. The bulls could still be in for some nasty surprises here.

My opinion... But the bulls here certainly know better...

[hastings] 24/7/2023 18:30

Given that SDI use GT as their auditors I wouldn't be surprised for the results to be a few more weeks yet! Could be wrong but given the experience of others such as THRU and very recently CNC, it wouldn't come as a surprise.

[worldwidet] 21/7/2023 13:16

The fact that SDI does not manage to publish the annual report as in the same period of the last years confirms my statements that SDI with its structures is not brought along to the necessary extent.

In principle, it doesn't matter if the annual report is published 2-4 weeks later than in previous years, but why is that?

According to my assessment, it is because SDI does not have the structures to go along with it. SDI is becoming more and more complex and costly because of its larger number of subsidiaries and because of the growing numbers. SDI has to put in much more effort than in the last few years to keep growth even close to what it is used to.

SDI management, like the bulls here on the forum, insist that SDI will continue to do what they have been doing for the last few years and they always celebrate how well they have done. But the problem is that it will take much more than what has been done in the last few years. SDI is facing big challenges and I'll be honest... I don't think the CEO is up to the task anymore.

Mike will try to carry on for the next few years until his retirement as he has done for the last few years. He will try to do the best but I think that will be not enough to keep the growth just about where it has been in the last few years.

Collapsing organic growth

Strongly weakening M&A growth

Interest rates at 5-6% and UK gilt yields above 5% will have a massive impact on demand and corporate CAPEX.

Managing a company through an economic upturn with historically low interest rates is one thing ... steering a company through a years-long economic downturn with interest rates above 5% is another ...

[alter ego] 20/7/2023 13:50

says expect to announce results July/Aigust

[fillspectre] 20/7/2023 13:04

I am hoping the BOD are concentrating on maximising organic growth for now and are less intent on pursuing the next acquisition. Fils.

[rivaldo] 20/7/2023 12:15

The results were 21st July last year and 20th July the year before. Presumably any day now then, although there are large-ish acquisitions to consolidate this year which might take a tad longer.

Of course we already know from the trading update that results will be in line with expectations.

[worldwidet] 20/7/2023 11:47

No final results ?

[alter ego] 06/6/2023 14:22

spot on. I had that one filtered long ago

[worldwidet] 06/6/2023 13:13

@trident5

SDI's management has repeatedly confirmed and reissued the LONG-TERM growth target of 28% p.a., which consists of 20% M&A growth and 8% organic growth.

I also think it is far too high and management will have to lower its long-term growth forecasts urgently.

I think there will be a few more downgrades to come.

But as rivaldo says, there is no competition here. The market is made up of different opinions and the last few months it seems to agree with me (although that doesn't matter at all).

I'll look at how SDI and the global environment develop and then decide how to allocate my capital.

At the moment I think value stocks like BATS, where the CEO bought heavily today after the TU, are more attractive than growth stocks like SDI.

Long-dated, safe government bonds with yields of ~3-3.5% are also interesting, because if theYC reinvert , long Bonds will profit from this.

We'll see where the train goes... so everyone continue to have a good hand at investing.... WWT

[fuji99] 06/6/2023 13:09

There must be something wrong with this stock. The chart is awful.

[trident5] 06/6/2023 13:04

28% growth = 150fold increase over 20 years, or 12fold over 10 years. So, no sensible investor will be factoring that in.

[rivaldo] 06/6/2023 13:00

I'm merely pointing out the errors in your posts. For you to say "There is no point in telling the same story over and over again" is to absolutely nail the saying "pot calling the kettle black" :o))

You may be right or wrong, nobody knows for sure. Some of your points are valid. As to your proclaiming you've been "right", does the average purchase price of almost all my shares at 9p-10p make me more "right" than you? This isn't a competition. I'll be happy to sell all my shares if I see SDI as too expensive, as I've done recently at CLX, ADF and AVCT.

[worldwidet] 06/6/2023 12:36

And you think 1-2 acquisitions are enough to maintain 28% growth?

SDI needs to make 4-6 acquisitions a year and turn the HAmster wheel faster and faster.

Or switch to larger M&A targets which involves higher risks and higher acquisition multiples and thus worse profitability.

You see there are structural problems. SDI is growing and they are still resting on their past. You think you can keep the wheel turning with 1-2 acquisitions but that is wrong.

There is no point in telling the same story over and over again. The share price is already down 45% and I think 100-110p is a range we could see.

I have been right and the bulls have been wrong so far and lost money.

I don't think SDI is a bad company and I respect Mike Creedon for his work. But the point is to judge if SDI can be a good investment for me at the current price. And I think due to the structural problems at SDI and the worsening economic and monetary risks, at a price of 133p and 30xFCFFY23E valuation the risk premium and therefore the margin of safety is too low.

[rivaldo] 06/6/2023 12:29

FY23 finished over a month ago, so is now historic - the £8.1m FCF is for the current year to April' 24.

FCF for the last three years was £8.7m, £7.3m and then £4.4m last year, which was a one-off year due to increased inventory and working capital for obvious reasons.

Given the expectations of only £6.4m net debt at the end of this year, plus the availability of substantial facilities, I'd hope that the acquisition hiatus will end soon with a further turn or two of the wheel.

[worldwidet] 06/6/2023 12:10

For the record, Finncap forecast £4,4m FCF FY23. The current m/cap is £135m --> 30x FY23E FCF

8.1m is the estimate for FY24.
I think 8.1m for FY24 is a bold forecast and I expect a further downgrade when the recession starts to gain momentum and organic growth is weighed down.

But permabulls like Rivaldo tend to pick forecasts far in the future. The further in the future, the less accurate the predictions.

Concentrate on what is going on in FY23 because this FCF will soon be available to the company to turn the M&A wheel. But the financial power at SDI is not there and the M&A drive is slowing down. Calendar year 2023 so far without M&A...

Slowing organic growth combined with an ever-slower M&A hamster wheel are not good prerequisites for a 30x FCF valuation.

The problem with SDI is deeper, it is a structural problem.

A lone CEO with hardly any shares and a lack of M&A structures to turn the M&A wheel faster.

It is always compared to JDG but this is only possible to a limited extent.

JDG has a management that holds massive amounts of shares and is therefore motivated to continue building JDG.

JDG can steadily increase FCF and afford a decent dividend, which SDI is miles away from.

Halma is a world-class conglomerate that has positioned itself globally and can build on a solid management structure.

SDI is miles away from the structures of Diploma Judges or HAlma.

Mike Creedon needs to start taking SDI to a new and higher level structurally - that is his job, not to single-handedly take care of M&A.

Yes SDI can continue as it has been for the last 10 years. With a chairman over 70 years old and a CEO who is trying to solve everything single-handedly. They will then make 2-4 acquisitions a year and let the company grow moderately. Whether that is worth 30x FCF and what happens when Ford and Creedon retire, let them be surprised...

[rivaldo] 06/6/2023 11:59

For the record, Finncap forecast £8.1m FCF this year for SDI.

The current m/cap is £135m. Therefore SDI's multiple FCF multiple is only 16.6.

JDG are forecast to make £22.7m FCF this year. At 10,250p their FCF multiple is 45.2.

JDG are thus now almost three times as expensive as SFI in FCF terms. And Halma are almost twice as expensive.

[tkamp] 06/6/2023 10:16

WorldwideT's assessment is very accurate IMO

[worldwidet] 06/6/2023 09:11

Halma 38x FCF
SDI 30x FCF

If you think SDI is worth paying 30 times FCF then buy.

I think the risk premium at the current valuation is too low to buy.

SDI lacks a strong management team that is ready to take SDI to the next level.

But SDI executives hardly own any SDI shares, so there is no incentive to take SDI to the next level.

CEO Mike Creedon has done a great job in getting SDI to where it is now but it is urgent to expand SDI's structures and install leaders who are able to think bigger.

It doesn't need a one-man army, it needs a competent M&A team to take care of the M&A business so that the CEO and CFO can take care of the core business and strategic direction. It's about taking the existing business global and opening up new regions.

It is about increasing cash generation and optimising structures to increase FCF release to turn the M&A wheel faster.

As long as Mike tries to manage everything on his own, I see considerable risk.

It is about taking SDI to the next level and I have lost faith that Mike Creedon will be the right man to do it.

I respect Mike Creedon for what he has done and the value he has created for SDI shareholders but I see SDI facing huge structural challenges in the face of the RF environment which has changed massively and which are not yet included in the share price

Let's wait until the share price is in the 100p range.