Sapan Gai, CCO at Sovereign Metals, discusses their superior graphite test results. Watch the video here.
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Looks a bit on the expensive side compared to usual prices.
The size and pace of acquisitions is certainly stepping up - that's the third major acquisition this year.
Looks excellent value too, being earnings-enhancing and with SDI gaining historic £0.4m EBIT for £2.65m net of the freehold property. Plus presumably synergies with the rest of SDI's companies and growth post the covid-affected results in 2021 which gave rise to that £0.4m EBIT:
Https://uk.advfn.com/stock-market/london/sdi-SDI/share-news/SDI-Group-PLC-Acquisition-of-LTE-Scientific-Limite/88716749
on very good volumes and ended the day strongly with a 50,000 share buy at 158p and around 33,000 shares bought at the full 159p offer.
All sounds very positive in the write-up, particularly as regards ATIK, Sentek and Autocol. Plus confirmation of the large firepower for further acquisitions.
Impressive new NED appointed today:
Https://uk.advfn.com/stock-market/london/sdi-SDI/share-news/SDI-Group-PLC-Board-Appointment/88691945
A must-read from a long-term investor in SDI:
Https://martinflitton1.wixsite.com/privatepunter/post/sdi-well-on-track-22-07-22
The new issue of Shares Magazine out yesterday tipped SDI as one of its two weekly Great Ideas to Buy, saying it was "underappreciated" and "investors with an eye for the longer-run recovery of the economy and stock market should invest now".
This was tipped/printed before yesterday's update and upgrades, so many of the figures quoted are now out of date and are even better value post-upgrades! But there are a couple of nice snippets which resonate:
"It also helps that the group concentrates on industries where regulation is high, competitive moats can be enforced and capital investment is less likely to be impacted by economic downswings.
Not only does SDI’s growth stretch back multiple years, has been high-quality growth. Gross margins typically run at around 65%, high for a manufacturing business, while returns on equity and investment of around 22% to 25% beat industry averages."
IMO - a bit too much of risky optimism is built into this sp target update.
I mean their growth and consistency is impressing but considering medical sector hype it might be worth approach this in a conservative way.
Finncap have updated - they have a 265p target price. They conclude (note the large amount of firepower for acquisitions):
"Valuation
SDI Group is a premium stock, built over the past eight years as it has successfully and consistently gone about its business. This premium valuation is merited through the combination of good organic growth in its operations with accretive acquisitions. Management has consistently added value through the introduction and integration of new businesses into the SDI stable, providing it also with the capital and capacity to drive incremental organic growth (22% in FY 2022, 19% in FY 2021 and 4% in 2020).
Acquisitions are unmodelled. With the constant prospect of additive acquisitions boosting the underlying operating fundamentals, the valuation is consistently grown into. Given the M&A arbitrage that exists between the purchase price (c.4-9x EV/EBIT) paid historically and the current trading multiple, if its recent acquisitional track record is a guide to future performance and value creation, any acquisition is likely to give rise to further EPS accretion and an uplift in the target price.
Together with internally generated free cashflow of £7-9m, the company has the firepower (£20m loan facility, £16m of which is currently undrawn, and excluding £10m accordion) to acquire up to c.£4m of EBIT, which would imply c.£16m of EBIT in FY 2024, some 33% above current forecasts.
SDI currently trades on FY 4/2023 EV/Sales, EV/EBITDA and P/E of 2.5x, 10.6x and 16.3x, respectively, which includes the benefit of the follow-on OEM Atik camera contract. This represents a substantial discount to its peer group (Judges Scientific), which is seen as a comparable investment with a similar and proven buy and build strategy. Judges Scientific currently trades on FY 12/2022 EV/Sales, EV/EBITDA and P/E of 4.8x, 19.7x and 25.5x (Figure 15).
We are making no changes to our target price of 265p, at which price the stock trades on EV/EBITDA of 18.0x FY 2022, rising to 21.3x FY 2023 (Figure 14). We expect SDI to generate free cashflow of £7.4m in FY 2023, rising to £9.0 in FY 2024, which would imply a FY 2023 free cashflow yield of 2.7% rising to 3.3%. At the current price, the FCF yield is 4.9% rising to 6.0%. Contrast this with Judges Scientific, which is expected to generate £18.4m of FCF, and trades on a 4.0% FY 2023 FCF yield."
Progressive have issued a new note and have raised their forcasts, with EPS rising to 9.1p this year based on £11.2m adjusted PBT, due to what looks like a lower tax charge:
Https://progressive-research.com/company/sdi-group-plc/
"Upgrading FY23E and introducing FY24E
SDI has started FY23E with good momentum and, with travel restrictions having been lifted, further geographic expansion is likely. We have increased our FY23 estimates, raising revenue to £57.9m from £53.1m and adjusted EBITDA to £13.9m from £13.7m. We introduce FY24 estimates with revenue at £60.2m and adjusted EBITDA £14.4m. The Covidrelated orders at Atik were considered one-off, however sales have continued at a high rate into FY23. Although no longer one-off, it is likely that at some point demand for PCR equipment will normalise at a lower level, and we have incorporated this into our estimates. We also haven’t assumed a contribution from potential new acquisitions, which offers upside to our estimates.
Summary and outlook
The group is in a strong position financially, with good operational cash flows and a solid order book. Management continues to seek targeted acquisitions, funded by cash flows from existing businesses and its £20m undrawn facilities, coupled with access to a further facility if required. The record FY22 performance demonstrates the continued growth potential from a diversified group of niche businesses. We believe that SDI is in a strong position to continue to deliver its successful ‘buy and build’ business model, with good opportunities to consolidate the highly fragmented markets that the group targets. Results with acquisitions so far have been exceptional, delivering strong financial returns and operational synergies.
The outlook remains positive with further organic growth and acquisitions uplift expected, demonstrating continued commercial demand for the niche technologies that SDI provides. We look forward to further positive updates as SDI has entered its current financial year (FY23E) from a position of strength."
Not even thinking about selling now..worth over £2
Fantastic results, well ahead of even the most recently increased expectations.
PBT at £11.9m compares to Progressive's latest forecast of £10.5m
And 8.7p EPS thrashes the upwardly revised forecast 7.9p EPS.
The outlook is very confident and has also been upgraded once again through to April'23. Knowing SDI's management the new current year number will likely once again prove to be extremely conservative and will be upgraded several times.
I note the comment that SDI expect "to acquire additional businesses" (plural) in this financial year.
For those who missed yesterday's RNS, the prelims are out tomorrow, with an InvestorMeet presentation on Friday:
Https://www.investegate.co.uk/sdi-group-plc--sdi-/rns/notice-of-results-and-investor-presentation/202207191420040154T/
I'm looking forward to them. We already know that revenues and profits for the year will "materially exceed current market expectations" - and that "we expect FY2023 to be the Group's best year yet, also ahead of current market expectations".
Bought some today
New Atik scientific camera product has launched successfully - more inroads into the PCR testing market?:
Https://www.linkedin.com/feed/update/urn:li:activity:6945021788191932416/
"The debut of ChemiMOS at Analytica in Munich, has so far been an exciting success. The Atik team are looking forward to plenty more discussions over the coming week."
This is the new product for "for long stare scientific imaging":
Https://www.atik-cameras.com/news/atik-cameras-launches-chemimos-a-new-cooled-cmos-camera-optimised-for-long-exposure-imaging/
Question: given that SDI are "the AIM quoted Group focused on the design and manufacture of scientific and technology products for use in digital imaging and sensing and control applications" would these bright prospects imply that more generally the tech sector that has been hammered is actually pushing on quite well underneath? Any thoughts?
The price is down 3.6% today on just £42k of trades! Sellers are getting mugged by thr MMs.
Based on Edison's forecast 8.4p EPS this year SDI are now on a current year P/E of only 17.6, which is tremendous value in SDI terms.
Especially as (1) we know that SDI guide their broker forecasts very conservatively, and (2) only last month SDI said:
"we expect FY2023 to be the Group's best year yet, also ahead of current market expectations".
I note that JDG now trade on a current year P/E of 28.2. If SDI were on the same rating the share price would be 237p.
FYI Techinvest advised to continue buying SDI at 171p in their last but one April issue after the acquisition of Safelab.
They concluded:
"The acquisition of Safelab is another step in SDI's growth strategy, and the second significant acquisition of the financial year, demonstrating again the opportunities to acquire in sectors related to the group's existing portfolio.
We believe there are many further opportunities for SDI to consolidate the highly fragmented markets that the company targets. Results with acquisitions so far have been exemplary, delivering strong financial returns and useful operational sunergies. Continue to buy."
SDI were one of the "Great Ideas" in yesterday's new issue of Shares Magazine, but I suspect today's bounce is more a reflection of the better markets and people taking advantage of low prices given the superb recent news flow.
Here's the article......
"HAVING DRIFTED LOWER amid a wider sell-off for growth and technology stocks, a stellar trading update on 6 May has helped give science kit maker SDI (SDI:AIM) a boost.
SDI is a collection of businesses which design and manufacture sensing, digital imaging and control equipment used in sectors such as life sciences, healthcare and art conservation.
In a record result for the business, sales are expected to be approximately £49 million for the year to 30 April 2022, versus £35.1 million in 2021. SDI is guiding for organic sales growth in excess of 20%, which would be an improvement on the previous year’s 19% organic growth.
Adjusted pre-tax profit is expected to be at least £10.5 million, up from the previous year’s £7.4 million. Analyst consensus estimates stood at £9.65
million adjusted pre-tax profit on £46.65 million revenue in advance of the update.
FinnCap responded by raising its 2023 revenue and adjusted pre-tax profit estimates by £2.5 million and £1 million, respectively.
SDI expects another record year in the 12 months to 30 April 2023, also ahead of
previous expectations.
SHARES SAYS: ?
The recent share price performance does not reflect how well the business is doing. Keep buying."
Here's a new article about SDI from the Armchair Trader, with an interesting perspective on the continuing potential for Atik's PCR testing going forward.
In these markets SDI are looking even better value now considering they're trading ahread of expectations and have already upgraded expectations for the year to April'23:
Https://www.thearmchairtrader.com/scientific-digital-imaging-sdi-share-price-forecast/
I would recommend anyone to follow this guys blog. SDI and other Cambridge based gems highlighted on a regular basis.
Excellent new write-up and interview with the CEO by the Private Punter.
Great in particular to hear that SDI have "a foot in the door with new potential OEM’s regarding Atik's cameras"....
Plus SVS which was making £0.7m EBIT on recent acquisition is already potentially making £1m profits now.
And SDI "have a number of potential buys in the frame" using their cash.
These guys do not let the grass grow under their feet for long.
Here's a direct link:
Https://martinflitton1.wixsite.com/privatepunter/post/cash-in-the-atik-07-05-23
Progressive Equity Research have issued a new note today:
Https://progressive-research.com/research/record-year-expected/
They see 8.4p EPS for this year to May'23. I calculate that JDG are on a current year P/E of 28.2 at present. If you apply this to SDI then SDI should be trading at 237p.
But SDI's EPS has been growing at a far greater rate than JDG's, which would therefore easily justify Finncap's 265p valuation.
Here's Progressive's summary:
"Record year expected
SDI Group has published a trading update for the year ended 30 April 2022. Revenue for the full year is ahead of our, and market, expectations, with management now expecting £49.0m for FY22, up 40% on FY21 (£35.1m) and £2.1m ahead of our forecast. The update also states that adjusted PBT is expected to be in excess of £10.5m (FY21: £7.4m), ahead of our forecast of £9.8m. This statement, alongside recent acquisitions, shows management’s ability to deliver record results despite the intermittent Covid recovery and inflationary supply chain pressures. We have adjusted our FY22 and FY23
figures to reflect this good news, and look forward to the final results in July as an opportunity revisit our FY23 estimates and introduce FY24 forecasts."
"We believe SDI Group has demonstrated its ability execute on its buy and build strategy, consistently beating market expectations by some margin over the past few years. It has delivered a positive trajectory in terms of revenue growth, including organic growth, delivering an EPS CAGR of 30% over the past five years. We expect further EPS growth of 33% in FY22, with a forecast ROCE of 26%. As end markets return to normal and acquisitions deliver, SDI appears well-positioned to continue to grow underlying organic revenue and profitability, with management expecting to deliver “another record year” in FY23."
Certainly a nice surprise this morning.
A very strong update given the inflationary pressures and material shortages, particularly as most other companies are being hammered on results/TU's at the moment. SDI have seemingly shrugged them off no problem which is promising for the years ahead if inflation does hang around. And yet again another beat on the forecasts, which is why I have confidence in SDI management. They always set targets that are demanding but that they think is reasonable, and they always tend to beat them anyway which is the way I like it.