Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Just remember that few shares go up in a linear, predicatble way.
This is a multibagger and I believe that it will eventually exceed 80, 100p, 200p.
But long-term. There are good weeks and there will be good weeks. I suspect there might be some shorting to be done here if the price over-jumps the fundamentals.
Let's all stick to this long-term and find out how high it will go. If any falls come, they will inevitable be followed by even higher (but not as steep) rises.
GLA
I have no idea about who or what writes these things but it's shallow and misleading. Every investor who reads this board has a better idea about SiG than these "gurus" who sell advice on the internet...
They just use obscure metrics and numbers to dazzle people. People see numbers and they thing all this is scientific, objective and smart. In fact it's just myopic nonsense.
https://simplywall.st/stocks/gb/capital-goods/lse-shi/sig-shares/news/sig-lonshi-share-prices-have-dropped-71-in-the-last-five-yea
They really have no idea what they're talking about. They tweaked an older article about SIG and posted this as new. No word about the green billions, recap, new board, patents, 220m in the bank, net debt just 5%, branches reopening due to demand etc...
I wonder who would pay money for this shallow nonsense.
40s is the new 30s as they say...
I might add: 50s is the new 40s too. Soon.
It's getting established at over 40p. With good results coming in a few days it will be established higher.
Gla
Madmick -- thanks for spotting my misunderstanding about Kingfisher, nobody else on here did. I confused the two kings... I'm an academic, not into construction myself (and it shows sometimes).
Also thanks for providing an expert construction view on SIG. I hadn't realised they had such a dominant position in the insulation market.
The big picture and my rationale here is this:
--> 15 billion of revenue on insulation will eventually flow to SIGs tills (5bn is offered by the government and all this will need to happen by legislation). And that's just the UK. The EU will be spending 600 billion to green their economy and a few of these billions will be reserved for insulation. If SIG had revenues of just 2bn in the past, that will sure multiply (progressively, over the years, not in a day).
--> the Grenfell disaster (where people burned alive) has made everyone more aware of the pitfalls of using the wrong insulation. Big construction companies and smalled construction companies will now be consulting SIG even more. SIG are the experts in their field and have a long history behind them and nearly 500 branches.
--> The grenfell disaster will allow SIG to boost their margins too. They don't just offer a discounted product --> They offer insulation SOLUTIONS and guidance. That's where the (bigger) money is. That's Francis's startegy and it makes a lot of sense to me.
--> Finally, SIG is changing as a company, for the better. They will be in a position to capitalise on this seismic change in insulation. New board, new talent back, re-opening branches, their own patents, CD&R experts on board (two seats) and about £220m in the bank to make any changes they need to do and invest in whatever they need to invest.
We will just sit back and enjoy the ride to 50p, 60p, 80p, 100p and then eventually 200p and 500p if things turn out great (but that will take years).
My only worry is that CD&R will make us an offer for a mere 50p, 60p or whatever and they'll grab this before it gets the chance to fully flourish for us. Let's see... that's not certain by all means, it's just a likelihood.
gla
And: "Reinvested earnings do not make up a significant portion of the assets"
Seriously?
CD&R came along with 90 odd million of an investment. There has also been a recapitalisation by all other shareholders. All that money is "investment" and it's a massive percentage of their market cap (over 200m). These 200 million allow Francis to re-open closed branches, invest in brand new branches, get the old talent back, invest in new patents etc.
Check this out:
https://professionalbuildersmerchant.co.uk/news/sig-opens-london-warehouse/
For a company with market cap of under 500m, there's been TOO much investment if you ask me...
Seriously, these stocko gurus need to come back to uni and study some more.
Madmick:
I'm very glad to hear that SIG are by far the greatest provider of insulation. I understand that they have a very big presence in other building materials too.
I know that Kingspan is not just a manufacturer of insulation. They own B&Q which has a very substantial presence in insulation and they service tradespeople too. Here's a link:
https://www.diy.com/departments/building-supplies/insulation-damp-proofing/constructional-insulation/insulation-boards-cavity-slabs/DIY754045.cat
And this is precisely the issue with insulation: After the Grenfell tower (where nearly 80 people were burned alive and there's a criminal case in the courts about the insulation material used), my personal guess has been that many traders will stop shoping at B&Q and other similar outlets and go shop to SiG. Why? Because SiG are true experts and it's best to get some proper advice on what to use. Even the Grenfell tower architects didn't know what they were doing with insulation from what I understand. SiG have been around since the 1950s and have true expertise on the field.
Please don't listen to stockopedia for any predictions and advice on shares. They are full of nonsense and obscure metrics that seek to dazzle people and add an air of "science" where there actually is no science. Up until a couple of weeks ago they had completely wrong data about SIG. For example, they mentioned that SIG had 600m shares whereas in fact they had 1.2bn shares.
And now they claim that SIG's liquid assets are not a significant proportion of their total assets? That actually made laugh. SIG have over 220m in the bank, in cash. That's a liquid asset and it's very very high for a company with market cap under 500 million.
I'm not an expert in Altman's ratios (he was an academic in the US) but I do know that they are purely descriptive and not predictive. What that means? It means that they have absolutely no predictive power when you re-capitalise, change your board, the UK/EU governments are splashing out in insulation/construction, when you have new patents or your old talent decides to come back to the company.
Altman's ratios look back and tell you what's there. They don't look forward.
SIG is a great investment opportunity and a multibagger precisely because the market has priced it as a failing company BUT all indications show that they will recover, will recapture market share and produce big profits (in the years to come, not tomorrow. Although the market will price that in before these years actually pass).
Jeffff asked about any reason not to buy SIG. Yes, there are:
1. It can take years for the SP to reach its previous levels -- perhaps there's a quicker multibagger elsewhere?
2. I'm pretty confident that SIG will stop being loss-making BUT I'm not entirely confident that their functional profit margins will ever exceed a low percentage. What that means: The sp will definitely rise but we don't know by how much
3. Wider market do
*bid byt CD&R.
Not Bit.
With good news coming soon and a possible bit from CD&R in March... 50p is still half of what it should be.
This company is on the up. With minimal net debt (£5m), revenue of 2bn and market cap of less than 0.5bn, talented new board, their best people coming back, patents, benefitting from a green surge (insulation) and a construction focus in the UK and EU. And many other positive points which I discuss in more detail here:
https://www.reddit.com/r/StockMarket/comments/ltmsqf/potential_mutlibagger_catalyst_in_march_2021/
Don't sell this. It's a multibagger. Eventually it will be over 200p (but this will take a few years of patience).
gla
Madmick -- you're very right that eventually we will have a very big recession.
Business cycles generally comes from the Keynesian camp of economics. Before that, Marx did a lot of deep thinking here too. These two schools of thought basically say that -for many many reasons - crises are inherent and inescapable in capitalism.
Keynesians, neokeynesians and New Keynesians focus on animal spirits (I'm actually doing research on herding these days), sticky wages, insufficient aggregate demand, uncordinated investment/savings in the system and many more, oligopolies/monopolies and many more.
Marxists focus on overproduction and dwindling profits as a cause for recession (very relevant these days). They also stress the role of capitalist.resource wars (to find Weapons of Mass Destruction... haha).
Then we have the role of supply side schocks. Such as the oil recessions in the 70s. Or protectionism and trade wars after Brexit.
And of course other external shocks such as the nature we strangle and even pandemics. And many other theories and reasons for worry.
The obvious thing most recently is that governments, households and corporations have taken a lot of debt and the West is facing all sorts of structural/trade headwings. Dwingling profits and massive costs. In the UK we also managed to shoot ourselves on the foot with Brexit (cutting ourselves from our biggest market on the planet, with no solid plans to replace it quickly or ever).
My point is: We will have a massive recession. But with all these things running in parallel and even combining... it can happen much faster than we think. Government intervention is nearly spent monetarily and running out of ammo fiscally -- we can't rely on it for too long.
Mintflavour -- Good questions!
Now, first of all a take over bid by CD&R is just a likelihood, not a certainty. It may never happen. Perhaps CD&R want to invest their billions elsewhere rather than take this over.
If they make a bid, it will not be mandatory for us to sell our shares. The exception to that is if they get over 90% of shares of the company, in which case we are obliged by law to sell our shares.
You will not be in a position to sell and get back in reallly. Why? Because as soon as CD&R announce that they want to buy your shares for 60p on the 1st of April, loads of people will be buying SIG shares now and the price will very quickly hit... 60p! Why? because people will have an incentive to buy SIG for, say, 57p and then sell it to CD&rR for 60p, making a very quick and risk-free 5%. Up to 59p people will be buying SIG shares (in reality it's a little more complicated than that because there's also risk that the deal will fall through, time-discounting, alternative yields etc). But let's say the price will be very close to the bid price.
Will we sell? I don't know yet. For a ridiculously low price (60p for example) that SIG will likely hit anyway in late 2021 or early/mid 2022, I'd say no. For a higher price (over, say 80p), I will consider it to be perfectly honest with you.
Pros and Cons if you don't sell?
Pros: CD&R will throw their full (and massive) weight and skill on this company and any shares still circulating could be worth gold and diamonds after a couple of years.
Cons: If you don't sell you're with a company whose new management is not perfectly aligned with your interests as a shareholder. In economics we call this Moral Hazard. For example, CD&R could strip this company of its assets (sell them cheaply) to other companies they own/created and then SIG will be left a company with little cash and many liabilities. In that case you've lost your money. Normally, this doesn't happen because if Francis for example sought to sell this company cheaply, he'd be vetoed by the board (blocked) and then sacked. If CD&R control 51%, they can do anything they want and nobody can sack them.
good luck
I wouldn't want to be out of SiG in the next few days and weeks... with good results indicating profitability in 2021 this will jump to at least 50p. Markets try to think ahead and so many investors will jump in before the actual results.
And then we have CD&R posibly making an offer for our shares, for a price with a hefty premium to where we are now.
If you short this, you may well pocket a 3% extra but you take a risk for massive profits lost in case the SP jumps.
The Strategy:
Stay in. Don't short this. Enjoy the ride to 200p in the years to come (unless CD&R grab our shares for 60p in March -- I'll be cross if that happens).
gla
Great find Raleigh! ?hanks for sharing.
This scheme is important because SiG would benefit massively from this. They're the biggest provider of insulation and this scheme is very specifically about insulation, for everyone, subsidised and so 2/3rds cheaper. In addition, early indications were that households were thrilled about subsidised insulation.
It was very clear in my head that some kind of solution/relaunch needed to be in the 2021 budget but I guess the government needed more time for this. They're getting criticism from Labour for not being green enough and as Kier's popularity rises (he's solid, for a change), they'll seek to do something to stop this arrow.
I expected some kind of a remedy for this issue: https://www.openaccessgovernment.org/uks-green-homes/104560/
They tried it, didn't work, so they will need to re-launch and improve at some point. I thought the moment would be now... But no. News for this will come though.
The important thing here for those who noticed:
The slightest expectation for good news send SiG 20% up in the space of a week.
Imagine what will happen when the news about actual profits in 2021 come to the market...
25th of March.
The budget was a disappointment for construction and particularly insulation...
Never mind, we have the trading update soon. It won't rise linearly this share.
Gla
Well, some may call this stargazing but I call it: "Knowing the potential of your portfolio". Or something like that.
As I predicted months ago, the SP here is not only moved by trading updates (which I agree are most important) but also by budgets (government policies really). Investors look ahead and form predictions, based on all info they have about the future.
SiG is a multibagger. It will take years but we'll get there. It may fall from 40p back to 35p or it may keep on rising to 50, 60p and beyond. Who knows. Also, to be honest, I don't really know if it will end up at 200, 500 or 700p.
What I'm almost certain though, is that given time we'll be at multiples of where we are now. I'm happy to just wait and find out.
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.
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
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!
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.