Synthomer Share Price (SYNT)

One should be wary of buying shares NT has blogged about. The MM's can then see you coming....

and his most recent update yesterday:

"The summer is about the only time I would ever "average down" which I am usually against, Synt was tricky because there was a massive rights issue giving new shares at a much lower market price of 240p to help fund a giant acquisition. In effect an enforced average down . I've learned from many past similar events that the share price falls initially down towards an issue price and then gradually rises. So all stops were off and I bought some more in addition to the rights shares. What then usually happens, happened... and shares are on their way back.

I checked out NT's most recent blog:
"Synthomer (SYNT) announced a massive placing and a huge buy of another company.
It is enormous for the company and it's going to be transformed. I would expect the shares to gradually rise and I'll definitely take part in the 1 for 4 share offer at 240.
In the meantime I have added some more, I would think another 100p will be added into the price by winter"
So he's bought at 394, 389 & 354 & will "definitely take part in the 1 for 4 share offer at 240", this will make his average around 350 if he didnt use the stop loss and assuming he gets 1 for every 4 he currently owns.
Pretty pleased with my buy in at 286 now in comparison

The naked Trader bought these at 350p ish and probably sold with stop loss. With IC tipping them too.

Fundamentally these are pretty good. Low pe of 8.6, peg not too bad at 1.15. High return on capital and EPS growing. Debt is £214m but easily manageable. Growing profits, the company looks pretty good.
The downside I see is a hard brexit will hurt the company margins and that is looking likely. With the share price being in decline since for the last month, and a slow start to the year for the company I see investors selling their 1 for 4 placing shares at 240p for a quick profit. Currently the share price is being held up by support and the bottom of an upward trend line so if it does bounce, this should be the spot. But my hunch is it will eventually break that support as investors sell their placing shares and worry how brexit will affect the company. I think a bargain price could well be the next support down at 237p.

http://www.chartupload.com/viewer.php?file=75276313668243981358.png

Synthomer’s (SYNT) first-half results missed analyst forecasts as a mixed trading spell for its performance elastomers (a polymer with elastic properties) brought sales and profits down for the period. Weak demand for the specialist plastics group’s styrene butadiene rubber (SBR) latex in Europe, as well as slow trading in its functional solutions segment, contributed to a difficult first quarter, although sales in the subsequent three months were in advance of the comparable period in 2018. Analysts at Credit Suisse had forecast group sales of £821m, around 8 per cent ahead of the group’s first-half performance. Conditions in the SBR market are expected to remain challenging, although this should be offset by gathering demand for nitriles (specialist organic compounds).

The group continued to build production capacity, a process that should be helped along by the £654m deal to acquire US-based Omnova. The acquisition, which was approved by shareholders last month, will add 13 assets, eight of which are in the US, a country where Synthomer has historically been asset-light.

Working capital rose by £41.4m and held at around 10 per cent of sales. “Typically we see an investment in working capital in H1,” said chief financial officer Stephen Bennett, “because the sales activities in May and June are higher than the sales activity in November and December.” Synthomer also boosts working capital in response to raw material price rises, although these were a bit lower than they were towards the end of last year’s first half, Mr Bennett added.

House broker Numis forecast full-year 2019 pre-tax profits of £141m and EPS of 32.4p, rising to £182.2m and 34.2p in 2020.

IC View
Synthomer’s headline figures weren’t anything to write home about and its Achilles heel, SBR, could conceivably dampen share price growth in the short term. But the company’s return to form towards the end of its first half is promising, and we’re intrigued by Synthomer’s prospects in the US, as well as the benefits of its surging capacity. Buy.