Sigmaroc15 Apr 2021 21:59
Its a Simon Thompson IC tip......he tipped it again today...
ARTICLE copied here >>>>>>
SigmaRoc (SRC:83p), a group pursuing a buy-and-build strategy in the heavy building materials sector, has issued yet another earnings beat.
Adjusted pre-tax profit surged 45 per cent to £12.2m on 76 per cent higher revenue of £124m, buoyed by the contribution from acquisitions and positive tailwinds driving end-market demand, especially across repair, maintenance and improvement (RMI) and infrastructure products. EPS of 4.5p was 9 per cent higher than house broker Peel Hunt had forecast.
Moreover, SigmaRoc has just announced the earnings accretive acquisition of four plants in Belgium which produce 250,000 cubic metres of concrete each year and make a net profit of €1.5m on sales of €22m. The €13m cash consideration is being funded from the proceeds of December’s £10m placing. The board are also extracting value from the October 2019 acquisition of CDH, a major quarrying and dimension stone company located in Belgium.
In addition to annual production of 1m square meters of Belgian Blue Stone, a high value decorative stone, CDH produces 1.5m tonnes of standard construction aggregates. Production and commercialisation of CDH’s aggregates has previously been undertaken by global building materials group LafargeHolcim which has quarrying activities co-located at CDH’s site. The inefficient royalty agreement between the parties was due to end in February 2023. SigmaRoc has now taken full control of LafargeHolcim’s production assets at CDH for nil consideration. In return, CDH will supply the group with 1.5m tonnes of aggregate per year until the end of 2024 under a take or pay agreement, earning a production margin in the process. The new arrangement is expected to boost SigmaRoc’s annual cash profit by €1m.
Analysts have taken note of the robust trading outlook, contribution from acquisitions and CDH's new arrangement with LafargeHolcim. Clyde Lewis at Peel Hunt increased his 2021 pre-tax profit and EPS estimates by 10 per cent to £17m and 5.1p, and although largely maintaining his 2022 forecasts at £19m and 5.6p, respectively, he expects further deals to drive estimates upwards over the next 12 months. Even without further earnings accretive acquisitions, the forward 2022 price/earnings (PE) ratio is only 15.
SigmaRoc’s shares have produced an 80 per cent return since I suggested buying, at 46p (Alpha Report: ‘A general election winner’, 12 December 2019), and my new target price of 100p (from 85p) factors in the latest earnings upgrades. Buy.
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