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I fully agree with Raleigh's points below. Please let me add another 4 points that I think are relevant here:
1. The macroeconomic environment is important. Brexit, monetary easing and the fiscal climate can give at least another 20% at any SP level. So, 100p in 2021 or 2022 could easily become 120 or 130p if the UK markets were more loved.
2. There are indications that SIG are already busy and confident. Acquisitions and re-opening branches due to strong customer demand point at something. And they'll get even busier with green initiatives, more projects from the infrastructure bank, 20bn for building social homes and many more.
3. SIG is a "safe" bet (as far as the stockmarket can be safe anyway). SIG have a lot of money in the bank and little debt. They can invest in themselves, implement their turnaround plan and ride out any small bumps along the way.
4. Even in times of mismanagement (for example, in 2019) SIG made some profit (which was then reversed due to accounting tricks on "intangibles" such as "goodwill impairment"). Let's think how much profit their 500 branches will be generating when the company improves + the extra initiatives/investment mentioned above. Just the return of the £80m"goodwill" taken away will catch headlines.
I personally believe that when the markets get convinced that SIG wlll be delivering a decent profit margin, the SP will go back to at least 130p (divided by two, to account for the extra shares). Hopefully even more... to account for what happened in between: Brexit sorted, loads of capital in the bank, CD&R on board. restructuring and more.
Patience and real change on ground bring multibaggers.
GLA
Found this in another board -- announced yesterday.
https://www.linkedin.com/posts/sig-distribution_we-are-delighted-to-announce-that-in-response-activity-6737667273420537856-EHIe
"We are delighted to announce that in response to customer demand and showing our commitment to specialist sectors, we will be reopening a redeveloped Cambuslang branch!
You may be aware that this site closed in 2019 as part of our consolidation into the Eurocentral site, reopening this redeveloped site will mean we are better equipped to handle and service the Technical Insulation, Construction Accessories, HVAC and Structural Insulation markets in Scotland.
Underpinning this growth opportunity David Hope has further strengthened his team in Scotland with the recent appointments of Cathie Mitchell – Branch Director (Cambuslang), Ricky Masson – Branch Director (Aberdeen) and Russell Paterson – Branch Director (Eurocentral), who will be instrumental in ensuring that we offer our customers a best in class service."
Now... where is that trading update? Can't wait.
GLA
https://www.theguardian.com/politics/2020/nov/25/von-der-leyen-eu-willing-to-be-creative-to-seal-brexit-deal
Investors may be wary of a company which operates by 1/3+headquarters in the UK and 2/3rds in the EU.
The actual differences between the UK and the EU are not major though. It's mostly about fishing rights, an iconic but insignificant sector of the economy and also the rate of progress in social/economic policies (basically, the EU want to make sure that the UK will not race to the bottom to attract funds - that is potentially way more important that fishing rights but eventually they will find a way round it).
Any deal will fundamentally be bad for the UK because it does not include much about Services - the main export of the UK. However... SIG is not trading services but actual goods and even a limited trade deal will be fine here.
Other than that, things work well for SIG and construction more generally. I couldn't ask for much more. Regulations are eased, Green schemes extended, Billions of Govt money pour into construction and the UK infrastructure bank will facilitate even more billions from the private sector.
This share is still massively undervalued for what it is and once the markets get convinced that SIG will return to profitability, the SP will at double here.
GLA
Brexit announcements will arrive soon. Funds will flow in the UK economy. The UK markets are too low compared to nearly all other stockmarkets.
Pandemic is defeated (it just doesn't know it yet) and confidence returns.
Reports for construction point at busiest months in years. And they will soon get busier.
The old ceilings are not relevant anymore. We're at the beginning of the next leg up. It may fall or may rise very short term but generally it will be going up.
GLA
I fully agree with Raleigh and 2reincarnate (I assume it's the original account, not an impersonator). Very good points.
The market capitalisation is ridiculously low for what SIG is, their fundamentals and their prospects. I think this is a case where the market looks at the profit in the last few years, factors in the recession too and automatically assumes that this company will default.
But if you dig deeper here you'll see a much better picture than the market cap suggests -- successful recapitalisation, selling the Air Handling business for 180m, positive change in leadership, CD&R on board, (too) much cash in the bank and more. I'm confident that SIG will comfortably survive this crisis/recession and will slowly start climbing back to its former glory .
I expect more waves of macroeconomics to lift the share (brexit, fiscal expansion, further monetary easing).
Sector wide, I also expect government initiatives/support for construction and particularly insulation/green products. Building is a priority for this government and the UK society more generally. Raleigh keeps a close eye on developments here and will hopefully keep us informed.
There's also a good chance that SIG will use their 260m in the bank to produce more pleasant surprises such as the recent acquisitions and more/better branches. That will lift the SP too.
The three points above can lift the share significantly but the critical question is: When will SIG start generating profits? Once SIG returns to profitability, then the SP will hit at least 70p. Essentially, it will go back to at least the 2019 evaluation (130p - pre share doubling). I expect the market to be persuaded about 2021 SIG profitability in a year from now, at the end of 2021. If we hold till then, we'll more then double our investment from where we are now. SP maybe 70-90p.
From then on, I'm not really sure what's going to happen. There's a good chance that SIG will keep rising and rising as a result of their new strategic direction and CD&R involvement. SIG is a giant and has just woken up. If that happens, then we could be looking at stellar yields. The investor below is experienced and successful. He invested in SIG and expects it to hit 200p at some point in the next 3 years. He gave this interview after the underwhelming results of September and please note how easy he is about it. He's a guy who hunts multibaggers and he knows it will take 2-3 years for epic turnarounds to happen.
https://www.youtube.com/watch?v=KDXUH_kHZJc
GLA
I just read this: https://simplywall.st/stocks/gb/capital-goods/lse-shi/sig-shares/news/sig-lonshi-share-prices-have-dropped-81-in-the-last-three-ye
It says we're clowns. " We prefer leave it to clowns to try to catch falling knives, like this stock."
So, turnaround experts CD&R, Golman Sachs, IKO and numerous pension and investment funds (plus those who invested millions in the last few days, whoever they are - no RNS yet) are all "clowns".
Here's why I'd fail a student who wrote this:
1. Only looks back, not forwards. Looks at the past 3 years but does not mention/know of the prospects. New board or Green economy/insulation schemes or relaxing of building regs or knowledgable new backers and other forward looking evidence are not mentioned anywhere.
2. Factual mistakes. Mentions that SIG made losses in 2019. Wrong. SIG actually made profit in 2019 (despite the epic mismanagement) but moved into loses because of accounting tricks on intangibles (such as "goodwill impairment" of 80m or so). Someone hasn't done their homework properly...
3. Failure of basic logic: They acknowledge that every year from now on, SIG will have more revenue than before. So, then dummies the "goodwill impairment" reverses to positive. 80m are now added back and SIG appears to generate massive profits.
https://www.investopedia.com/ask/answers/010815/how-does-goodwill-increase-companys-value.asphttps://www.investopedia.com/ask/answers/010815/how-does-goodwill-increase-companys-value.asp
Someone hasn't done their homework properly...
4. Polemic language and arrogance. Do you seriously think you're smarter than the smart money who invested hundreds of millions here recently? 70% of SIG is owned by institutions.
I read shallow analyses like that every few weeks at uni. The only difference is that my students don't pose as knowledgeable professionals and stock market gurus (I'm sure all of them lose money. Get excitable and buy at the peaks, sell at the bottoms).
GLA and please do your own research and thinking.
Mike19 -- I agree with you. I consider this a bad management decision and it probably contributed to a loss of customers. You can't have a confused online presence these days.
However... we now have a new CEO who seems like a very smart cookie, the most talented people are back, there's top retail experts and deep pockets CD&R with two seats on the decision-making table (look how they transformed B&M which will soon be entering FTSE250) and this company has 260 million in the bank (a sum comparable with their capitalisation).
They need to fix their internet and... they will fix their internet. They will do another 1,000 things they need to do and customers will start coming back. Green/insulation initiatives in the UK and EU will also help massively.
When customers do come back, we will get back to 130p. This is a great turnaround story and a multibagger (given time, Rome can't be rebuilt in a day).
Many thanks JC.
A
In another board (ADVFN), an ill-intentioned individual makes false claims about tax deferrals and SIG. He mistakenly mentions that SIG owes hundreds of millions to HMRC because of VAT deferrals. His intention is to scare investors (who don't do their research) and nobody there seems to contradict what he's saying.
I cannot post in that board because it asks me for a subscription. Please, can someone from this board copy paste this reply over there. We need to stop misinformation. This company is not covered by big media and so everyone can spread false rumours between retail investors. Many thanks,
In reality, these deferral payments amount to £13m and have already factored in, for the final year predictions in the company.
The following is from Page 6, in the HY results. https://www.sigplc.com/~/media/Files/S/SIG-Corp/reports-and-presentations/2020/half-year-results-2020.pdf
"As at 31 August, the Group had cash resources of £267.5m, with a net cash position, pre IFRS 16, of
£29.2m. Approximately £13m of deferred payments relating to government support schemes will unwind
over the coming months, the majority doing so in H2 2020. The settlement of these deferrals, the
cessation of some historical year-end working capital practices, as well as a carefully managed increase
in stock levels in parts of the business to improve the service to customers and to support the Group's
sales growth, will result in working capital levels increasing over H2. This increase in working capital
will be funded from the Group's available resources".
The tax deferral scheme ended on the 30th of June, it's not ongoing.
https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19#paying-the-tax-that-you-have-deferred
GLA
If anyone from SIG is reading/monitoring this...
This site comes up first when I googled SIG insulation: http://uk.siggroup.com/
And this is the News tab in the site. http://uk.siggroup.com/news
Which hasn't been updated since 2016...
Either update your links (stuck in 2016) or delete the "News" section. This comes up when investors browse your site and gives a bad impression.
I have a lot of confidence in SIG and invested here. SIG is changing and it will rise and rise. There's work to be done and it will be done.
Long day...
Sorry -- the link was ancient. My mistake
2reincarnated -- you're right, markets are forward looking indeed. Perhaps I'm being too cautious here.
It can well hit 100p in 2021 if the macroeconomic climate are right. There's ridiculous liquidity around, in the trillions globally. Central banks do round after round of Quantitative Easing and a lot of that money will eventually be looking for stock market investments...
A
From now on, each trading update will be better than the one before. And with each trading update the SP will rise and rise.
There is massive government investment/pressure for Green/insulation products. SIG have also get their act together - got funding, changed their philosophy, brought their best people back, got retail experts in the board (CD&R) and are now fighting hard for business. They also have 280 million or so in the bank to ride out any bumps and invest in themselves (they acquired a small company recently, they may get more).
The turnaround formula is all there. 100p. It will take a couple of years to get there, but get there we will.
GLA
Bobbybullet -- I'm flattered you're asking but I've never made exceptional money in the stockmarket. So, I'm not in a position to offer much advice, I'm not a multimillionnaire. Having said so, I've never lost money in any market either (except for my very first share, in the 90s).
I think that in the phase we've entered now, markets consider covid defeated by RNA vaccines but also consider that we'll have high unemployment and stagflation, possibly even recession. So, I'd be looking at companies that sell affordable/essential stuff which have been hit hard by the lockdowns (people avoid luxuries in a recession or when they're unemployed).
One such company is SIG -- construction will have to continue anyway and in fact it will probably be the chosen booster to get the UK out of the recession/stagflation (The EU have already announced plans for hundreds of billions worth of investments in the green/insulation area -- SIG operates in the EU by 2/3rds. They may announce more investments too) . Also, I know little about construction but I have done some research and I know that SIG is solid, has minimal debt, has 270 millions in the bank and a net cash position (rare!), is established in its field, has hundreds of branches in various countries and sells many products. There's a new board too and they seem to have energy and a solid plan too. SIG will be 100p by 2022 or 2023.
Another company that could strategically benefit from the recession/stagflationion could be, for example, ABF, in FTSE 100. I feel confident to mention this company to my friends because I'm certain that nobody will lose money if they invest there now. The SP there took a beating because they didn't have an online presence. The company is rock solid though, particularly well run, with little debt and billions in the bank (!). I think you could make a safe 30% there within a year and if they follow with their plans to expand in the US, Poland and countries, we could make way more (but that will take years).
I always try to invest in stuff I understand (I don't understand banks and insurance for example - their products are too complicated for me) and invest most money in companies that have little debt. I'm also a medium-term investor, not a day/swing trader.
Good luck my friend
It's now risen by 13%. Big money comes in constantly. 10% flippers are selling but even more money comes in.
This is not an airliner the day after the vaccine to justify this. Something is brewing here. I guess we'll find out soon enough.
A
More and more good news converge into this share. And more will come soon.
100p. Will get there, just give it some time.
Raleigh, you're the Associated Press for building info. Thank you my friend.
GLA
SIG advertise many posts recently, more than I've even seen.
Looking at the SP today and the big money that jumped in in, I wonder if we'll have some positive news soon.
Gla
Biden elected (markets liked that because it will mean more US govt spending),
Brexit will get sorted very soon,
The UK and EU governments will soon announce their fiscal stimulus packages focusing on construction/infrastructure,
SIG is already ridiculously undervalued. As everyone becomes confident that not only they will survive but they'll actually thrive, the price will be rising. I'm personally not selling till we hit 100p - probably in 2022.
GLA
Brilliant! Construction is the best performing Sector of the economy. By far.