tag:blogger.com,1999:blog-3396879085933030442.post5213056034019753823..comments2023-10-11T01:24:58.069-07:00Comments on Building our Value Portfolio - Fatcats Finance Club: Meeting # 35 SDI ValuationPaulhttp://www.blogger.com/profile/07423909198861754132noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-3396879085933030442.post-51947618367942149632011-05-11T13:10:44.399-07:002011-05-11T13:10:44.399-07:00[email from Mark]
added my val with some crowded n...[email from Mark]<br />added my val with some crowded notes as a comment. Roy has done his homework and decided no due to the volatility of earnings by the look. I'm actually happy at the current price to buy some - but already have some:<br /><br />My notes (in case you are interested)<br /><br />SDI<br />Seems cheap to me – however their guidance is for between $1 to 2m NPAT – at 1.5m and market cap of $21m – this is about 14x – which is a slightly high PE ratio for this co looking at one year only.<br />Using my model I think the SP should be about 23 cents as a minimum entry price. This is at 6 times adjusted earnings, and adjusted for an average liabilities ratio at about 40 to 50%.<br />At an AUD of about $1 US, and record silver prices, this company is still profitable. If the AUD and Silver prices decline – this could easily earn 4 cps. If at a PE of ten times this would trade at 40 cents. It could probably trade higher if it built up earnings momentum. The co has earned 7 cps in the past = 70c trading price. Co has also traded at $2.40 (adjusted for cap raises).<br />Some positives<br />- Reasonably high adjusted ROE<br /><br />- The debt levels of this co are declining over time – so the level of risk in this business is reducing.<br /><br />- Have their own IP and brands<br /><br />- There is a major shareholder external to the Cheetham family who is a director<br /><br />- Have maintained R and D (at about 3 to 5% of revenues)<br /><br />- Mostly maintain dividends even if small<br /><br />- Cashflow is better than profits by about $1.5m per annum<br /><br />- Exposure to a vanity industry with developing countries getting wealthier.<br /><br />- Diversified away from amalgam fillings<br /><br />- Strong current position<br /><br />- Internationally competitive<br /><br />Some negatives are<br />- Maybe reducing debt is a sign of a lack of investment opportunity?<br /><br />- The MD is approaching 70 years of age. Can a new generation take over and do well?<br /><br />- No remaining Silver hedges in place<br /><br />- AUD may keep going up<br /><br /><br />Wasn't worried by that level of ownership. It is possible that they could do something dodgy and not tell anybody - but they probably wouldn't bother being listed if that was their idea. I think they are listed to provide an exit at some stage. I actually think it is good to have a high level of ownership, except in cases where there are lots of joint ventures with director controlled companies.<br />They will do everything possible to make this business work - skin in the game! They would be showing signs of dodgy happenings by now if they were dodgy, and the director with 8 mill shares would not stand for it - as he would lose out. He gets very little wage from the business.Paulhttps://www.blogger.com/profile/07423909198861754132noreply@blogger.comtag:blogger.com,1999:blog-3396879085933030442.post-52437318470086418472011-05-01T14:57:39.904-07:002011-05-01T14:57:39.904-07:00Mark – checked out SDI.
Seems like a really good ...Mark – checked out SDI. <br />Seems like a really good deal. <br />The main point I took out of reading their reports were: <br />- Highly reliant on Silver (50% of products/revenue) <br />- I wonder how well they will be able to pass on the cost, seems <br />like they were struggling with this point but hard to tell. <br />- Will high silver prices mean that non-silver products will <br />dominate the market, if so will they will be able to response. <br />- Obviously the AUS dollar is smashing them around a bit. <br />Is investing in SDI taking a position that the AUD and silver prices <br />will eventually come down and SDI stock go up?Paulhttps://www.blogger.com/profile/07423909198861754132noreply@blogger.comtag:blogger.com,1999:blog-3396879085933030442.post-31160720856911666212011-04-21T17:08:05.276-07:002011-04-21T17:08:05.276-07:00Hi Roy
I have looked at your Valuation and am a b...Hi Roy<br /><br />I have looked at your Valuation and am a bit confused. You have valued it at 27 cents a share it is currently 17 but your conclusions is that it is not a buy? Could you put a text summary at the top just explaining your logic? I think it might make things clearer - I did it on my ARB valuation which can be viewed onlinePaulhttps://www.blogger.com/profile/07423909198861754132noreply@blogger.com