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https://www.investorschronicle.co.uk/comment/2020/11/18/boring-sigmaroc-could-be-about-to-get-exciting/
Boring SigmaRoc could be about to get exciting
https://twitter.com/surprised_trade/status/1322131471667204096
I'm in :-)
This is looking like avery attractive buy ......see good things ahead here!
Think a few are noticing this at last. Been it for a long time now but when I tried to add today could not buy without going NT
SigmaRoc (SRC:51p), a company pursuing a buy-and-build strategy in the heavy building materials sector, is navigating the Covid-19 crisis far better than analysts had predicted, prompting a round of earnings upgrades following a robust set of interim results. I flagged up the potential for upgrades when I last suggested buying the shares, at 41p (‘Targeting value plays’, 3 August 2020).
Acquisitions helped boost first-half revenue by 83 per cent to £54.5m, but the key for me was that like-for-like revenue matched the prior year and on higher profit margins, too, despite Covid-19 disruption. Importantly, the recovery is gathering pace in some areas. For instance, Poundfield, a maker of pre-cast concrete products, reported record revenue in both May and June, and CCP Building Products, a supplier of concrete blocks and aggregates, has seen demand return to normal levels. Analysts at brokerage Peel Hunt have taken note, upgrading their full-year pre-tax profit and EPS estimates by 42 per cent to £10m and 3.3p, respectively.
The acquisition of the outstanding 60 per cent interest in South Wales quarrying group G.D. Harries (GDH) is a smart move. SigmaRoc can implement operational improvements by using its quarry management and concrete expertise, source lower cost materials (especially cement), and expand the customer base eastwards towards Cardiff. Consolidation in local asphalt production looks set to continue into aggregates, thus offering scope for improved profitability within the industry. GD Harries controls around 14 per cent of asphalt production in South Wales.
SigmaRoc has bought out GDH for an enterprise valuation of £26.5m, equating to a reasonable 7.6 times annual cash profit. Factoring in GDH’s contribution, and the stronger recovery, Peel Hunt upgraded its 2021 pre-tax profit and EPS estimates by 7 per cent to £15.5m and 5p, respectively. On this basis, the shares are priced on an undemanding forward PE ratio of 10, prompting me to tweak my target from 60p to 65p, having first suggested buying, at 46p (Alpha Report: ‘A General Election winner’, 12 December 2019). Buy.
Thanks for posting the video, my key learning from this was that the GD Harries acquisition paid for from free cash will positively impact on earnings per share. With the cash flow they generate they can acquire more businesses without any dilution. It will be interesting to see how they improve the G D Harries business over the coming months, as they have have been involved in the business for some time now.
No need to chase the price up , but this is an excellent medium to long term holding.
It’s got the best management in the whole of the building supplies section and will continue to pick up successful profitable small to medium sized companies in that industry that larger operators are not interested in as being “ too small “.
A first class “ lock up “.
I rate this company too. The management appear to be very focused. The annual report is an impressive read, especially the CEO's commentary.
Been a holder for a few months now . Bought in the mid-40s and suffered for a few weeks as the price came off, but I think the strategy is good and the Chairman knows the industry inside out.
Lots to look forward to I think.
I am very happy with my investment in this company. Been in it for over 18 months . It is quite satisfying when a plan comes together..
Thanks for sharing seeingtom, interesting Sir Peter Tom who set up Aggregate Industries and Breedon now has a big stake in Sigmaroc, he certainly bought at a fantastic time, but then he knows this industry inside out. I wonder if we will see the GD Harries 60% finalised by the end of August, the books look strong enough to do this and the logic of taking on the business still looks sound?
Very much worth a view of this update to understand the diversity of Sigmaroc business, resilience to market changes and growth opportunities.
https://www.proactiveinvestors.co.uk/companies/news/925477/sigmaroc-s-max-vermorken-reports-strong-earnings-and-revenue-growth-in-first-half-925477.html
hmmm, seems rude not to have a top-up since the sp has dipped below the directors buy-in price too!
sailintosunset indeed the sp is not reflecting the value of this business, as they release more results I hope investors understand the value of this company.
The Sigmaroc option to buy the remaining 60% stake in G D Harries ends on the 31st of August, so I anticipate news of this within the next few weeks. G D Harries has been very resilient through Covid, and I expect the management team to make significant improvements to the operations as they have done with all the assets they have acquired so far.
And nice to see the directors putting their own cash in to shares again today.
Good point Smeeno
And this is a solid business - with s 2020 PE ratio of only 10.0x and currently about 50% discount to the value of its reserves.
It is nice to see some good news for a change. I hold these and intend to for some time..
It is worth comparing the results yesterday to that of Breedon. Breedon were badly affected by their operations closing during lockdown, whilst Sigmaroc have remained resilient and even sent out good news on a new road for the Belgian asset adding value to their business long term. Sounds like there are more improvements and acquisitions in the pipeline.
The Group has delivered results ahead of its own expectations given the challenging trading environment.
This one is taking a battering today, down over 8% as I write this. Volumes don’t seem very big so maybe a MM tree shake ?
Disappointed to see this back to the original issue price, even after a significant recovery since March. The volumes have been low for the past 4 weeks, or so, but with Ronez flat out, and the other subs out of lock-down, the fall in SP is difficult to understand.
The selling price fell way too much, a recent trading update showed they still had positive cash through April. Infrastructure spend is going to be important to the economy, the assets and markets the company operate in whilst being building materials have excellent niche markets and different to each other in many ways. Also there has been a fair amount of decent coverage of them as an investment as below.
https://www.telegraph.co.uk/investing/shares/six-fast-growing-aim-stocks-buy-now/
https://www.investorschronicle.co.uk/comment/2020/06/15/four-small-cap-situations-offering-outperformance/
Suddenly some interest here +7%.
Any particular reason or news?
If it's not insider trading what's your problem?
There's no pleasing some people. What would you prefer - a poor update and directors selling??