Ann: Investor Presentation-SDI.AX, page-8

"I like the 'vibe' of the new CEO. She seems more focused on shareholder returns."

@alnby

I also discern a bit of a more "modern" feel: the engagement of an external (and no doubt, pricey) Investor Relations outfit [1], the conference call for investors, the pro forma Q&A paper.

However, at the risk of sounding contrarian simply for the sake of it, I kind of liked it when things were done in a far more under-the-radar manner.

It's a bit selfish of me, and I'm acting in my own self-interest in saying that I actually don't care for the company to be raising its profile in the market.

I think that it has been because it has been a relatively unknown, unresearched company (combined with its lack of stock liquidity) that has resulted in the stock undergoing significant sell-offs from time to time, these occasions providing great opportunities to add to holdings.

I wonder if this seemingly proactive engagement with the market has to do with the fact that the stock is trading at the heavily discounted sort of multiples that it is [2], and management wishing for a re-rating.

I hope that isn't the motivation here; because this is, for most intents and purposes, essentially a private business masquerading as a public one. So I can't understand why the managers of this company - who own most of it on a multi-generational basis and are therefore unlikely to be sellers of their interests - would care two hoots about two market value of their business. I certainly don't think it affects how they do their jobs on a day-to-day basis.


[1] I wonder what's behind the Investor Relations function being transferred from INSOR to MarketEye. With NED Gerry Bullon being an INSOR principal, presumably the prior arrangement didn't past muster on some or other revised scrutiny on related party arrangements.

[2] One thing that strikes me the most about SDI is what sort of crazy multiple the market afforded the stock the last time its demonstrated the sorts of growth that it is today (namely around 25% to 35% pa during FY02 to FY04 due to the A$ fallingl by by almost 40% during that period). During the course of 2004, the stock priced average almost $2.00, despite the company generating the same EBIT today as it did back then (and $2m more (18% higher) EBITDA). And today the company has zero net debt; back then its net debt was $10m.

So, today EV/EBITDA is 5.1x; in 2004 it ranged between 15x and 20x (at the share price peak of $2.40 the multiple was 22x)

Same company.
Same people.
Same industry.
But today with far greater scale in manufacturing and distribution capability, better and more diversified product mix, as well as having an added 12 years of R&D investment.

Capitalising today's earnings and capital structure at a multiple merely half of 2004's average of around 17.5x, (i.e., 8.5x to 9.0x) would result in a share price between $1.20 and $1.30 a share.

I guess that, if nothing else, this gives some idea how much upside there might be to the share price if Ms Cheetham's re-rating objective (if that's even what it is) succeeds.