Sdi Share Discussion Threads

[nchanning] 03/10/2023 10:22

Yeh 1 thing we agree on is that Mike really should be dropping 100k on some shares now

[fuji99] 03/10/2023 10:22

The share price behaviour is like if the market is expecting a profit warning.

[worldwidet] 03/10/2023 10:12

If at share price 88p not a single one of the executives buys massive amounts of shares, then SDI is completely out of the question as an investment for me with this management!

[worldwidet] 03/10/2023 10:07

1. the FCF collapses
2. debts have almost tripled the interest burden
3. 12 months without M&A
4. no liquidity for M&A
5. executives sell shares massively
6. deep recession looms
7. interest rates have risen from near 0 to over 5%.


Have fun with illiquid AIM stocks in the coming 6-18 months.

My opinion

I think I was right in what I have been writing here for a year.

[nchanning] 03/10/2023 10:06

And if you do DCFs on a stock in a recession if you model a 50% decline in year 1 followed by a partial recovery in year 2 and complete recovery in year 3 , it really doesn't change the value of the stock that much as recessions are nearly always accompanied by a fall in interest rates and a change in the discount rate . You're buying a long term stream of earnings ...Acquisitions are likely to be done at far more favourable prices in a downturn too . Hence why the official announcement of a recession is usually the best time to buy stocks In any case I think 50% fall In EPS is far too pessimistic for SDI . Customers in life sciences, astronomy , higher education , engineering R and D have much stickier budgets than consumers

[worldwidet] 03/10/2023 10:02

Just forget about the management's outlook.
The management gave a TU and a few weeks later, surprisingly, half the value of a subsidiary was written off.

The next 6-18 months will be a tornado through the balance sheets of the companies.

If you are so convinced of SDI and its management, buy shares!

The management is not doing it, it will have a reason. Or do you think you know more than the management?

[nchanning] 03/10/2023 09:57

Talking adjusted EPS , 7.2P forecast for this year and recently confirmed in the trading statement

[worldwidet] 03/10/2023 09:46

EPS 23 -> 4p

If EPS falls 2p in the coming recession as you expect, that would be a 50% drop!

You're cutting it pretty close but an EPS drop of 1-2p would easily take the share price towards 60p.

Let's just wait and see what the coming recession will do to SDI's business and the huge amounts of goodwill on the balance sheet.

I hope the bulls are starting to understand why management has no appetite for SDI shares.

SP 91p and the executives are still not buying shares like crazy.

It could be a bloody painful road ahead if the big institutional investors keep dumping their shares into an illiquid aim market to further adjust risk budgets.
I would like to buy at 90p but I no longer have confidence in the existing management. As long as the CEO doesn't buy massive amounts of shares, and here I'm thinking of £200-300k worth of shares, I won't buy here. I want to see a new management buy into the business in a big way and then link up firmly with SDI to get SDI back on track!

[norbert colon] 02/10/2023 12:27

You said that at 100p and then at 80-90p and then at 80p! I enjoy reading your bear case posts despite the repetition.

[fillspectre] 02/10/2023 12:06

I am afraid WorldwideT's calls about the share price going down have proven right so far. My gut instinct was to sell out when Mike Creedon sold the bulk of his holding. I didn't - but have sold out as the share price declined. I wasn't impressed with Mike's answer to my question in the Q&A. I will possibly re-invest in SDI at a later time if we are in a different place.
When WorldwideT stops repeatedly posting may be a different time to look although I am now tempted to stay out of AIM altogether (aside from SCE). Fils

[worldwidet] 02/10/2023 10:06

For selling his shares at 165p, the CEO should get Best Stock Trader Award 2023.

I currently have no interest in owning SDI shares. I want to see changes in management first and see a viable structure of how SDI will meet the mighty challenges. At 50-60p, the margin of safety might be large enough to consider an entry.

We will see what happens.

[norbert colon] 02/10/2023 10:03

So might you I expect. :)

[worldwidet] 02/10/2023 09:59

95p and the executives are still not buying shares.

Wait and see, they might buy at 60p.

[isa1m] 29/9/2023 12:13

Anyone pick up anything useful at the AGM? It looks like there was some selling during proceedings.

[worldwidet] 29/9/2023 11:47

Good investors recognise when a paradigm shift has taken place and a decade-long cycle of interest rate cuts has come to an end.

A good investor recognises when the framework conditions have turned 180 degrees and the management and corporate strategy are overwhelmed by the new situation.

We are not talking about a short recession like in 2020 after Covid and central banks that then bring the interest rate close to 0 and flood the markets with money.

What happens in the next 1-3 years will have an impact for the next decades.

Feel free to say today that I am exaggerating with my pessimism. But look at the bond markets because they tell you what will happen.

I would advise investors to sit on a mountain of money and buy a few ounces of gold and see what happens in the next few years. I think it's going to get pretty ugly.

Just my humble opinion and I don't make recommendations as a matter of principle.

The SDI share price seems to prove me right.

I'm out of here again and will take my time to see what happens.

[nchanning] 29/9/2023 11:35

A good investor doesn't extrapolate short term noise into a long term model . Anybody who looked at SDI's performance in COVID and thought wow look at the incredible organic growth perhaps that can continue made a big mistake . Likewise anyone who looks at negative organic growth during a recession and extrapolates that is going to get it horribly wrong ...

[worldwidet] 29/9/2023 11:24

"That should get you 10-15% EPS growth , allied to 5-10% organic growth . 20% compounder trading at 13 times earnings"


You still live in the past and do not want to recognise the present and what is coming.

The insight will come... Wait 6-18 months and you will realise the reality....

[nchanning] 29/9/2023 10:47

A mountain of debt ? SDI probably sitting around 1 x debt to EBITDA right now . As far as acquisitions go , last year SDI used the Covid windfall and some extra debt to do 3 years of acquisitions in one so yes this will probably be a fallow year . After this year , a reasonable expectation would be for them to average around £7m of acquisitions a year for the next few years . That should get you 10-15% EPS growth , allied to 5-10% organic growth . 20% compounder trading at 13 times earnings

[worldwidet] 29/9/2023 08:53

SDI is sitting on a mountain of debt with declining FCF and massively rising interest costs.

SDI has hardly any liquidity and for the current FY, with very good will, ~7-8m FCF will be generated (which I think is unlikely in a deeper recession).

Without taking on more debt, SDI can invest £7-9m in M&A (assuming they don't pay down debt).

What does SDI get in return? Another chip shop like Monmouth where you have to write off half the value after acquisition?

How is SDI going to finance two more acquisitions this year?

Organic growth is collapsing and the M&A wheel is almost coming to a halt.

You better be prepared that in a 180 degree changed environment SDI will develop differently in the next 10 years than in the last 10 years!

[arregius] 29/9/2023 07:17

Mike is taking a prudent approach, we have 2 acquisitions to be done but interest expense is high so we need some time to pay those i agree. But that doesnt say we cannot keep acquiring. When its prudent we will keep that up. As we have 2 already that should ve been done by now

[worldwidet] 29/9/2023 06:55

Excellent?

The CEO is doing what they always do.

They said the same thing just before they had to write off half the value of a subsidiary.

Why is it good when others are doing just as badly?

With every new acquisition, the debt increases and with it the interest burden because SDI does not have enough liquidity to keep up the necessary pace of acquisitions.

The CEO doesn't even bother to talk about M&A anymore because it is obvious that SDI has a problem with M&A.

The existing business is no longer generating enough FCF to turn the M&A around.

The management is fully occupied with keeping the existing business halfway running.

The massive interest rate increases will only eat into the economy completely over the next 6-18 months and with every month that interest rates remain high, the damage will become greater and greater.

Prepare for the next write-offs at SDI and wait for prices at 60-80p.

The worst is yet to come... My opinion...

[rivaldo] 29/9/2023 06:22

Excellent - SDI have confirmed that they expect trading for the current year to April'24 to be in line with expectations.

It's encouraging that they already feel confident enough to state this halfway through the financial year.

And it's also good to see relative to the adverse trading statements being issued by so many other companies in the current market.

SDI are on a P/E of 14.4 falling to just 13.1 for the year starting next May. And this will fall further with any acquisitions prior to the year end.

[worldwidet] 21/9/2023 15:09

~12 months without M&A ... The CEO talks about bureaucratic problems. Damn, does SDI want to acquire a company in North Korea?

SDI has no liquidity - that's the bitter truth!

[fuji99] 14/9/2023 10:18

WorldwideT: "Not even the CEO trusts his managers with more responsibility. Instead of using his own managers, he relies on external managers provided by intermediaries." - If management is just playing the role of "passengers" in the company the future of SDI will be cloudy and uncertain. They could also just sell it at any price giving them a profit and move on elsewhere to repeat the same process again. If a manager doesn't have any roots in a company he is just an opportunist looking at maximizing his own profit as quickly as possible. There is no long term for such "managers".