Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Getting CD&R on board was a success for SIG. It is not just the 80 odd millions that CDR injected into SIG. It is also the fact that they now have two seats on the decision-making table. CD&R are turnaround experts and SIG could genuinely benefit from their insight.
In addition, CD&R seem to invest heavily in the construction sector and that may lead to synergies and strategic alliances between various businesses. It remains to be seen if these synergies (if they exist at all) will transform into profits.
In any case, I am happy that CD&R are with us and that boosts my confidence about SIG. Who knows... in the end they might even buy our shares for 50-60p!
GLA
I fully agree with your perspective Carllapos.
I think there's a reason the new CEO is rather silent/pessimistic so far. His September presentation was agony to watch. I think he wanted to emphasise how bad the situation he inherited is. So, when he turns this round to profitability he can turn and say: I got a desperately bad situation, fought hard for 12-18 months and saved it. He'll then inflate his success/profits/prospects and... possibly ask for another bonus. He's not far from retirement.
I hold about 112,000 shares and I do think this will be going to the right direction, given time. I think that when the market gets convinced about their profitability, this will catch up with the rest of the market and some more on top. I've always expected that to happen in 2021. I'm happy to wait a year for a 100% rise from where we are now.
GLA
*dividends.
tut tut tut
Blackpooler: I share your frustration, I thought we'd be higher by now.
SIG has risen quite a lot though. I bought shares at 17.6p in the spring and now it's nearly 100% on that. Also, you need to factor in the share dilution. Currently we have double the number of shares we had. The share has not done great but hasn't done too bad either.
Will it rise to 50-60p then? Only if SIG can return to profitability. Shares are moved by fundamentals, news and dividents in the medium/longer term.
I believe that SIG will indeed return to profitability in 2021 and the share will rise substantially. I honestly believe that the trading update next week will be better than expected (and I bet accordingly, I don't sell now). If the trading update next week is worse, this will go back to 20s for a few months though.
What do you believe?
Many thanks to everyone for their contributions. Special thanks to Raleigh for his excellent posts.
Thinking long-term, I think SIG has done great this year. In a year where most businesses and sectors of the economy have taken a hit (and a lot of debt), SIG managed to:
-- Re-finance successfully. They have too much cash in the bank. Essentially, while others increased their debt, SIG reduced their debt massively.
-- Attract global experts CD&R who now have two seats in the decision making table. These people might even make us an offer for our shares, we'll see...
-- New promising board
-- Brought expertise back (dozens of talented people came back)
-- Small acquisitions (and as I said, they have a lot of money in the bank...)
-- As I predicted, Brexit is sorted successfully. This is important for a corporation split between the UK and EU.
-- Positive impact from government measures, insulation grant, new infrastructure bank, relaxing regulations and many more. In fact, construction will be the government's preferred platform for growth.
SIG is not perfect and they have a lot of work to do to recapture their lost marget share, remotivate their people and ultimately make big profits (and give us our dividends!).
But I do believe that from now on, every trading update will be better than the rest. 2021 will be a good year for us. I hold all my shares and expect better and better news from SIG.
Have a great year everyone!
In a bad day for all shares, SIG finished higher. Possibly investors moved funds from travelling/pubs/leisure to SIG.
Markets are moved by News. And here I believe that:
--> The trading update will be good. Thy must be very busy. Construction has not and will not stop
--> Brexit will be sorted soon. Once they stop playing the "deadlines" game and realise that fishing is 0.1% of the GDP on either side of the channel
--> The bottleneck in Dover will get sorted once way or the other (maybe the French will get the mutated virus and realise there's no point blocking traffic... haha
GLA
If this article speaks truth, Kingspan management may be heading to prison:
https://www.theguardian.com/uk-news/2020/dec/17/director-grenfell-firm-quits-evidence-outdated-fire-tests-kingspan
I'd be more likely to take sound advice from SIG after all this...
I know very little about how construction works but I wonder:
Now that the tragedy at Grenfell towers exposed the cowboy-management practices by Kingspan... who is the market going to turn for professional advice? Who has decades of experience, a good name and loads of branches to visit?
The danger of using the wrong materials is not just business reputation but there's also legal liability in some cases.
That all plays well for SIG. As Francis said: SIG is not (just) a distribution company. It's a SOLUTIONS company.
Jubberjim -- If you expect that many buildings will need upgraded insulation etc (to which I fully agree with you), then one way or another this will mean more sales for SIG. Who pays for this is not too relevant as long as someone pays. There will be increased demand for SIG's products for a number of reasons (green economy, government initiatives for building, contruction as a way to boost jobs etc). Also, SIG is getting their act together and will be reclaiming their market share (new boards, CDR in etc).
And finally... Brexit will be sorted within the next 10 days at the latest. No need to fear anything there either...
With a positive trading update, we're looking at a massive hike in SP.
GLA
In a No Deal scenario, all Sectors of the UK economy will suffer. However, building and the housing sector in particular just cannot fail in the UK economy. This country desperately needs accommodation and housing is at the heart of the UK economy.
Here's an article written by a colleague I know personally, explaining why UK real estate is critical for UK prosperity. Building will continue and, in fact, may even receive more and attention:
https://theconversation.com/rishi-sunaks-stamp-duty-cut-is-not-about-helping-first-time-buyers-but-shoring-up-the-whole-uk-economy-142443
We will continue both building and eating.
A no-deal Brexit will bring havoc to the UK economy and for that reason it's very unlikely to happen. The automotive industry and manufacturing in general will relocate to the EU to benefit from a 500m market without tariffs (this won't happen in a day but it's inevitable), the educational sector will suffer, the building sector will suffer because costs will go higher for everything (including a lower pound, hindering imports) and... fishermen will suffer greatly too (they export 65-85% of their catches to the EU). No deal is off the table really and that's what we see now, with one extension after the other, taking us to Christmas.
On the other hand, the EU has made it ultra difficult for the UK to accept a deal. They basically demand that we follow the new EU rules without a place on the decision making table, without a Veto or voice anywhere. We'll be little more than a client state basically and we couldn't even sign a trade deal with the US.
Also, a Deal on EU terms would be effectively the political end of those Brexiteer buffoons who misled half a nation with their half-baked ideas and blatant lies (I remember them saying that 80m turks are about to descend to the UK -- Liars: the whole population of Turkey is just about 80m and Turks do not have free entry to the UK anyway and will never have).
I'm not sure how they'll break this impasse but I know that a free trade deal is at the best interest of this country and I've placed my bets there.
GLA
Construction grew at another 1% in month. That's faster than the headline figure (average) for the UK economy (0.4). It's now just 6% lower than before the pandemic (February).
My belief is that there will be a Brexit deal and we will not crash out of the EU market. The deal is 99% complete and it's in everybody's interest to sign something positive, without tariffs at the borders. They already agree on nonregression (damping down) from where we are now and disagree only on how they'll be enforcing future regulations.
I personally believe that they'll find a formula of cross-retaliation or something like that and they'll sign. You don't crash your economy now over mere fears about the future.
Everything else is bargaining tactics abroad and posturing for internal consumption in their respective countries.
GLA
Raleigh -- I'm not out, there will be good news about Brexit soon and SIG will jump. Then, there will be more good news from the trading update and SIG will jump more. It's silly to sell SIG just before these jumps.
In fact, if SIG falls below 30-31p, I'll sell other shares and invest another 12-19k here.
I'm not singling out SIG of course. The whole economy and most companies in it will suffer after a No Deal brexit. For many reasons. That's my whole point with Brexit, everything suffers. In my post below I mentioned the automotive industry, the university I work in, construction in general, the financial services.
I don't blame the average brexiteer person for this economic madness -- most people have never even heard of Current Accounts (so they only focused on the Trade deficit). But I do blame the leading brexiteers for all this. And I blame the leading remainers for their lack of effort to defend common sense.
As I mentioned, there will be a trade deal soon. The deal is 99% complete. They'll compromise a little more and then SIG will not have a 5% surcharge in tariffs or a lower pound working against it.
Good luck my friend
Raleigh -- I'm really sorry to be negative here but I'm not sure SIG can afford a 5% cut in their margins due to WTO-style tariffs. Plus the lower pounds, making imported material more expensive (another cut in margin effectively).
I am confident that there will be a trade deal within the next few days/weeks and SIG will rise to 100p in 2021 or 2022.
I am not shorting SIG, I'll just wait for good news from Brexit and the trading update. I think we'll enter the 40s soon.
GLA
JH - I laughed when I read that BoJo will build a wall and ask Sturgeon to pay for it. I'll be using that line over the next few days!
There will be a deal soon. I believe that. They're almost there and it's good for everyone.
The opposite scenario is not good for us. The british pound will fall and stay low with a No Deal. What will happen to SIG's profit margins if they import their material from abroad? They will need more pounds to buy that material in foreign currency. Can they sell higher in the UK to make up for it? What will happen to real estate investment in the UK when the UK is a more isolated place? My guess is less activity/demand by international buyers.
More widely... Brexit is turning our European friends into mere acquaintances and competitors. These countries were committed to us and valued the UK amongst them. We had a Veto and could block any move that harmed our interests. A massive bloc/market of 500 million educated and largely affluent people (the US is just 320m) and we were at the core of it.
Now, they'll be taking their direction and we'll just be hoping they won't clash with us . For example, our financial system works as a massive tax haven - will they be accepting this for long? Our uni degrees are granted after just 3 years whereas theirs require 4 years. Will they accept degree equality it for much longer? My university depends on foreign students for income. Japanese car makers will still invest in us or will they just switch to the EU directly?
We're losing clout and markets with Brexit.
Soon, our Scottish brothers (excuse the melodramatic language here) will be just friends. If they are not very competitive, we could help them become. They could make loads more of green energy up there for example. And then we let NI and Wales go too? And possibly Cornwall too? That's all shortsighted I think.
GLA
Please excuse my typos and occassional grammar slips. I meant:
"They won't let Brexit happen"
Brexit is nearly sorted, don't worry about it. They have written a 650 word trade deal and even came to a compromise ofer fishing rights. There's the outstanding issue with the pace of regulations but they'll come to a compromise about it too, soon. This issue is mostly about mistrust and fear from both sides.
They won't let that happen though. There are many days left till the 1st of January and they will come up with a formula. They may just give a few weeks extension too... no real hurry. Creating urgency and giving deadlines to one another is part of the process.
Those who studied economics also understand that a No deal brexit will be a very bad thing for the UK economy and -to a lesser extend - for the EU economy too. The government will tell you that Brexit is no big deal and the opposition will tell you that the government is wrong.
But this is what serious, impartial and independent economists have to say:
https://www.thetimes.co.uk/article/bank-of-england-governor-andrew-bailey-says-no-deal-brexit-worse-than-covid-g2pk2crjx
Brexiteers lied and lied through their teeth. And even with a deal, the UK will soon be a smaller in every way conceivable -- even literally, Scotland won't hang around for much more.
Thankfully, we have construction. This is the best way out of the recession and the only thing BoJo will be able to boast about. The UK is desperately short of housing and infrastructure. Tories AND Labour both agree to that and they'll do a lot to sort it out.
GLA
Generally, I think the UK markets are undervalued. US, Chinese and Japanese markets hit one record after another but we're still lower than pre-covid levels. Once Brexit is sorted, big international money will rush in looking for deals. Hope they'll spot SIG too.
I agree that some UK valuations have jumped ahead of their fundamentals but these are few. SIG remains ridiculously undervalued for its branches, capital in the bank etc.
With brexit sorted and a good trading update, this could surpass 50 and climb (slower) towards 100 or more in 2021 or 2022. If the trading update is bad (which I don't think will happen), we will hit 50+ a little later in 2021. That's all.
Every day I hope that this will fall a little more so I can top up... no luck yet.
Brexit is nearly a done deal. They won't ditch lucrative sectors of the UK economy for any fishing rights nonsense (0.1% of the UK economy). EU and UK are just posting threats for last minue concessions from the other side.
A brexit deal will lift SIG because the company is split between the UK and EU.
SIG will see a very serious rise from a positive trading update, in January. I'm not in construction but from what I read/hear, the sector is doing well. However, if the trading update is negative, this may fall back into the 20s.
GLA