We would love to hear your thoughts about our site and services, please take our survey here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
For most investors, it will be the next report and outlook from the company that sets the mark, not stargazing. A dose of immediate reality. But, you know, carry on in the best traditions of bulletin boards.
Showing some promise.
Carl - I agree with you that profits (margins basically) is everything.
But what if SiG manages to trade at ratios similar to Kingspan's? They have a very expensive network of branches too... why not really?
After all, this is a case where the biggest supplier of insulation meets a massive need for more buildings and more insulation to existing buildings. At the the same time the leadership (Francis and CD&R) is inspired and dedicated to boosting margins. Meanwhile, unprecedented liquidity through QE has inflated all asset valuations and many investors such as pension funds will be seeking steady and solid investments (as opposed to risky tech gambles).
You may well be right that 200p is the ceiling. Or I may be right that the ceiling will be moving up, as we rise.
Let's give this 5 years and see where we are. All Multibaggers I know needed time and patience.
Carllapos....agreed. Kingspan are a manufacturer and are very good technically, which means they have very strong specifications. These specs are difficult to break and as such they get to dictate the price. SIG, by comparison, just sell stuff and that stuff can be bought from many different distributors and merchants, and the price is invariably driven down for that reason. Distributors sell on relationships (with suppliers and customers) and thankfully, SIG seem to be bringing in new or returning people with those relationships. Most comparable distributors will have an EBIT of circa. 5% (the best comparison would be Encon, who sell into the same market sectors and an almost identical product range) and 5% should be their benchmark for success.
*their. (Hate myself when I do that) ha ha
Prof, I’m bullish here and I find most of your posts very helpful. But with this one I think you’re getting a bit carried away! Ha ha. SIG has never been anywhere near those numbers and working on turnover alone is crude at best.
Whilst both companies deal in similar products and actually there GP runs at similar margins of circa 25%, kingspan run a decent EBITA margin of around 10%, which SIG would struggle to come close to with an expensive branch network etc.
Kingspan has always run at a high PE ratio too.
If you look at Travis, I’d say this is arguably a better comparison as a business model. They have a market cap around 50% of their turnover and run at an EBITA margin of around 4%, which is actually very good.
So yes there is big headroom here, but I’d say it’s about a 3rd of your figure and that is still being optimistic.
Bozomurky - please forgive the discrepancy in my numbers. I had a slightly different calculation in my head and type a different final conclusion.
What if the revenues here are not limited to 2bn but rise to more than 2.5bn in the next five years? After all, historically, SiG achieved 2.5bn or more. Now that the EU and the UK will be retrofitting insulation everywhere, SiG will be recapturing market share (Kingspan partly discredited, new parents, new business approach etc) and new builds will be more and packed insulation.
We now have a market cap of about 0.45bn.
Do your numbers and invest as you see fit. I did.
Gla
Murky you are forgiven.
Either way we are way undervalued and way overdue our rerate.
Let's see if rishi can light the fuse for us.
Forgive me but isn’t 6bn/0.5bn=12 and 8bn/0.5bn=16, not 20?
Let's see what the budget brings Tomo. It will definitely be good for the real estate market, construction and possibly insulation in particular. The UK government needs a platform for growth and publicity. Construction historically has been that platform.
My biggest concern here is that CD&R will grab this on the cheap. They only need another 21% to control the company. I suspect that most retail investors will hand over their shares for 50 or 60p and happily run elsewhere.
Three weeks after the budget we'll have the trading update and expectations forward. That will be great news and it's even more important for SIG than the budget.
Exciting times!
Seems a lot of good is expected for the construction industry tomorrow
https://www.pbctoday.co.uk/news/planning-construction-news/spring-budget-2021-predictions/89589/
Thanks for that brief analysis Prof!
I just opened up a stocks and shares junior ISA for my daughter, based on that analogy I think its worth putting some Sig in it for very long term, even if it does not reach 20x even 2x from here is great ! AB
Just topped up again - only good things can come now
Prof. I like those numbers. A whiff of profit and we will be on our good way.
Kingspan currently has revenue of about 4bn and capitalisation of about 12bn. That's very normal. Market capitalisation is typically 3-5 times your revenue.
Sig on the other hand has revenue of about 2bn but market cap of... less than 0.5b. This is ridiculous.
Once Sig is out of the woods, start re-capturing market share, acquire small businesses and get profits as Francis indicated... then their market cap should be similar to Kingspan's. That's a market cap of 6-8bn. That's 20x of where we are now.
With good management, in a few years from now, the sp could be 20x.
That's 760p.