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Nevertheless, today from an investment perspective, and following yesterday's Boris etc., you are in a minority.
Lending is the key to the new build market......no cash- no house......!
Whilst I appreciate things can change, your lack of sentiment for house new build is not shared by thousands of others buying in.
All very good Prof, but here’s the BUT......that is right out of the how to run a long find book chapter ONE. what you haven’t mentioned is the fact SIG sold their module business for £1 - and the market has shifted massively to modular especially the new house build market. Barratt bought Oregon Timber recently to speed up delivery of units....how could Me Francis have not spent some cash on modular. Look at Berkeley’s investment in their Northfleet site...upwards of £40m spent. I still think the know your customer strategy is wrong and they should be acquiring companies with fast delivery technology after all the large housebuilders have colloidal land banks wanting to be built - if the lending to house buyers still exists in three months.......I am still not convinced for Thursday results.....I also see Prof is tempering his price guidance .......interesting...!
Good day yesterday lets see what today brings news tomorrow we should see a nice bounce here today ,I’m sure results tomorrow will be good as building construction continues strong
Expecting a 10% rise today, with 6 or 7 of those % coming in the last 3 hours. Then expecting 20%+ tomorrow. Good luck all, take your positions!
I am spoken for mind - before it goes too far.
Thanks Raleigh -- I really like your posts too.
Bucklerfern -- 2019 was actually profitable. The underlying profit before tax was a respectable 42m.
https://www.sigplc.com/investors/results-centre
This company made a profit even after years of mismanagement.
It was only after 90m of "impairment of good will" and other artificial accounting entries that SIG showed a loss. Now what will happen when covid subsides? That 90m will come back in the books and SIG will show a spectacular profit. So we KNOW that this will catch the headlines at some point.
As for share dilution? This happened, and doubled the shares in circulation. I therefore don't expect the SP to climb back to 120p or 150p. I only expect it to climb back to 60p initially. After a lot of hard work and boosts from the government, I hope for a rise to 100p, but that's only speculation/hope. 60p is far more doable though and will happen relatively quickly (1-2 years at most).
Good luck everyone
Nice summary. Thankyou.
And I notice today that 2 building company directors' wives, with sector foresight , took advantage of depressed prices to buy shares totalling £175k.
One question. Market capitalization and dilution versus share price? Profitability. Oh, that's two.
Once the turbulence from Covid subsides, and unless we have another major macroeconomic shock, SIG sp should climb to at least 60p. Here are some points from me:
-- Over the last few years this share was on average at around 120p. Even in the years when they had minimal profits or (minor) losses, they stayed above 100p. This is because, even at 100p, the valuation was cheap for a company with so many branches in the UK/Continent and 2bn revenue a year. That's why the share rarely dipped below 100.
-- The share fell to 80-90p in February 2020 even though 2019 was expected to yield underlying profits of about 40m.
Why? The reason was that SIG practically ousted their leadership (CEO and CFO together, a rare move) and there were concerns that there's something rotten/irregular in SIG's accounts. Basically, investors got rid of the shares because there was perceived risk at the time that something might be wrong. Yet, it proved that there was nothing seriously wrong with SIG's accounts. They simply ousted the previous leadership because of their uninspiring performance, not because they had done something dodgy. I remember many shorters on this site were trying to scare investors by saying that the audit would reveal dragons. But the audit was done and there was no hole in the accounts. The market would normally elevate SIG back to 100p+ but then COVID 19 showed up and the share fell more.
However, I personally believe that the share price will go above 100p again given time, even after recapitalisation we now have double the number of shares. Why?
-- Because the increased number of shares also brought a lot of money with it (recapitalisation) and also expert investors who make super profits by turning around companies like SIG (look how CD&R transformed B&M for example),
-- Because the new leadership is more inspiring and seems to have a plan,
-- Because the old leadership cut costs significantly before they left (we need to give them credit for something).
-- Because the government launched an insulation scheme and will launch more construction schemes soon. "Build, build, build" is Boris's mantra and that makes a lot of sense macroeconomically.
-- Because there's trillions of stimuli/quantitative easing lying around. Unprecedented liquidity. Not everyone will buy gold (getting too expensive) or bonds (many have negative yields actually!!)). Money will keep coming back to shares. As long as your company has a market and is recapitalised, there's nothing to fear in the longer term.
-- Construction is semi-insulated (sic) against a rise in infections. Cinemas, airliners, hotels and pubs will suffer. Construction will just put masks on and go to work (my deep respect to them!)
Good luck everyone