Synthomer Share Discussion Threads

[wigwammer] 23/11/2023 22:23

Ah. So the EV is not "north of a billion" at all. Thought not and thanks for correcting... In reverse order - of course, the enterprise value of the company is higher than its market value. Nobody stated otherwise and it is true of all company's with net debt. But 0.4x EV:Sales puts SYNT amongst the lowest valued majors in the sector. Your negativity is highly consensual and may well be priced in... Nobody stated that trading "within expectations" would result in price appreciation, in fact when meeting expectations one should expect little price reaction at all... Poor management has been a disaster, I suspect their hands are now tied by lenders. If you don't understand why this can be favourable for leveraged companies - take a look at McBride over the last 12 months... And I think me and WB will be taking "the moat" and you can keep your superstar management... "When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact". ATB

[al101uk] 23/11/2023 21:52

To offer something a little different:

The investment case I can currently see for Synthomer would be to assess the company as an option on it succesfully mitigating the issues it currenly has and coming succesfully out the other side.

If it sold off half of it's business by revenue and only managed a 5% margin on what remains, you could see the shareprice double from here on an upturn. That seems like a fairly pessimistic version of success.

But it's not my thing, so I wouldn't like to hazzard a guess at the probabilities.

[al101uk] 23/11/2023 21:41

EV=Market Cap+Total Debt-Cash

At interims, they had cash of £232 million
They had Debt of £995 million
Plus £74 million of pension liabilities
and they currently have a market cap of £330 million

I made that north of a billion.

The rights issue has reduced that below a billion since then, so lets adjust that to £880 million. I dumped my shares a while ago so I'm not following as closely as I might and when I saw the £200 million plus payment of debt in the results I put it down to the placing rather than the disposal and didn't look any further. It changes very little.

That's £880 million of enterprise value for a company that had revenue of £1 billion in H1 and managed £49 milion of operating free cashflow. The company is "washing it's face" with share holder cash, it's certainly not throwing off cash at an operating level.

In the companies own words the placing was to stave off a situation where they breached their debt covenants (read the going concern notes in the H1 results), that's hardly the sign of a great business and my point was that the company has a long road to travel before it gets back on it's feet and it needs good to great management to get there imv. There is no evidence that management are up to the task right now.

I've responded to your criticisms of my post, care to respond to any of mine?

To summarise:

1. You didn't take WB's comments in context.
2. Poor management in Synthomer would be a disaster for the business.
3. Trading "within expected boundaries" doesn't warrant share price appreciation given what those boundaries are.
4. Synthomers valuation is far higher than it's market cap.

and I'll throw in:

5. Having creditors breathing down your neck is not a positive for a business trying to restructure.

[al101uk] 23/11/2023 14:52

wigwammer,

Always worth looking at the context of a WB comment like that. One of his main criteria when investing in or buying a business is the quality of management because 99.9999% (recurring) of businesses cannot be run well without quality management. I think Synthomers management have proven that their company certainly isn't one of the vanishingly small number of companies that can.

Synthomer currently have an enterprise value north of a billion pounds, a far cry from zero, unfortunately most of it is debt. They also boast revenue that declined 12%, a profit margin of -5.83% and a return on equity of -15%.

The trading update shows they are trading "within expected boundaries", but those are set out as:

Subdued volumes
Limited visibility
Challenging macro conditions
No expectation of any improvement in 2023.
Risk of modest further slowdown in activity (surely that would be 2024?)
Only "RELATIVE" strength and resilience of their speciality businesses

Meanwhile management talk of restructuring the business which doesn't come for free particularly with debt levels where they are.

I think there is a good business that has value burried somewhere inside sythomer. Management have lost it and until they realise that, admit it and start to take the measures necesary to get it back, the company is uninvestable. They talk of their restructuring as if it's all part of the plan to move to a higher margin, less cyclical business... it isn't. It's a sticking plaster that is required as a result of massively overpaying for a business and financing that acquisition in the worst way possible, right at the top of the cycle.

Synthomer needs, not just good management right now, they need world class management.

[wigwammer] 23/11/2023 12:21

"You should invest in a business that even a fool can run, because someday a fool will." Warren Buffett... Given the valuation and market positions, even a fool should be able to make the valuation rise from here over the medium term. Furthermore, the fools won't have half the leverage they used to, now the lenders are casting a closer eye. Then again, one may have the unusual view of believing that a company with weak management always has zero value.

[wigwammer] 23/11/2023 10:56

The low trading volumes are remarkable for a company the size of Synthomer - with £2.2bn+ revenues. Rather reminiscent of pre RI days, large uncrossing sell trades each day after the bell. It is almost as if institutional buyers have gone on strike. Why might that be? Is it that ONCE AGAIN Synthomer have poorly communicated with the market at large? Certainly for a company that claims that trading is within expected boundaries, the resulting drop in price is rather hard to fathom.

[tayle] 15/11/2023 13:17

Since they knocked the divi on the head, that's all they have delivered dodgy no hope statements. Give that women another 20% pay rise !!

[blackhorse23] 15/11/2023 09:58

Bought GNC today

[blackhorse23] 15/11/2023 07:19

Dodgy trading statement

[libertine] 14/11/2023 18:03

November 15th Q3 trading statement

[hamhamham1] 09/11/2023 14:38

I didn't edit my post?
What from and to?

You are a bitter old 'rent a troll' fukwit :)

[hamhamham1] 06/11/2023 20:00

Darrin. Maybe. But I only weeny slice of portfolio in here, if drops a lot I could double up, if it looks OK to do, if not, at these levels am happy to let it play out.
You pays yer money...

[darrin1471] 06/11/2023 14:42

ham: from your sharecast link:
"Synthomer was a classic early cycle share"
"weaker volume outlook in 2024 for the construction-and-coatings linked component of sales."

About 40% of SYNT revenue comes from coatings & construction solutions. IMO this cycle is different from the GFC as interest rates were slashed during the GFC and today we are only just entering a period of "for higher and longer" interest rates. If the narrative remains higher and longer then construction still has a way to fall and the cycle has several years before it turns.

[hamhamham1] 06/11/2023 08:39

Nice start, ahhh the nay sayers... ;)
(and cue downtick by MRF)

[hamhamham1] 05/11/2023 08:30

You are going to miss out on a broad market rise over next 2 months. Watch and see...

[hamhamham1] 05/11/2023 08:26

MYF, what is the net asset value here, do you know?

[libertine] 03/11/2023 15:57

And Sell!!!

[mirabeau] 03/11/2023 14:57

that is one hell of a director buy

[blackhorse23] 02/11/2023 08:19

Out now & going to buy GATC

[turvart] 27/10/2023 00:08

Ok thanks for the information pal.