Thanks for your response to my questions.
Just a few points of confusion I had (for clarity, your commentary in bold):
"Net borrowings are zero"...Wrong, they have borrowing of $2.2 mln. Plus many stocks have no debt.
See the word "Net" in there, right at the start?
As in, net borrowings are zero.
Well, at 30 December 2016 they had cash of $3.7m, which I think the laws of arithmetic dictate is a value that exceeds $2.2m.
"Current ratio is at a record 3.7%......Agreed and a good norm is 1%. Tick."
(This one is particularly funny on several levels)
No.
Not 3.7 percent.
3.7 times.
Or 370 percent, based on your somewhat unorthodox choice of metric.
If it was 3.7% then the company's directors would have to immediately bring in the administrators because the business would be technically insolvent.
(Boy, that you obviously don't understand what you've written is as scary as it is laughable.)
"Assets exceed all liabilities by 2.5 x.....Agreed it's a plus but it's historical and you base so much of your analysis on looking in the past(big mistake) when Mr Mkt looks to the future.
OK, so let's look to the future then.
Given the trend in Current Assets-to-Total Liabilities (refer below), what will this figure look like in the future then, which causes you to say the company is on the way to dying? (bearing in mind that it has never been lower than a still-comfortable 1.0x... In other words Current Assets alone have always exceeded Total Liabilities.. note not Current Assets exceed Curent Liabilities, but Current Assets alone exceed ALL Liabilities).
SDI's CURRENT ASSETS - to - TOTAL LIABILITIES
DH2003: 1.4
JH2004: 1.4
DH2004: 1.2
JH2005: 1.1
DH2005: 1.1
JH2006: 1.2
DH2006: 1.2
JH2007: 1.2
DH2007: 1.0
JH2008: 1.1
DH2008: 1.2
JH2009: 1.2
DH2009: 1.3
JH2010: 1.3
DH2010: 1.2
JH2011: 1.1
DH2011: 1.1
JH2012: 1.2
DH2012: 1.3
JH2013: 1.3
DH2013: 1.5
JH2014: 1.5
DH2014: 1.5
JH2015: 1.7
DH2015: 2.2
JH2016: 2.4
DH2016: 2.5
So, there's the history.
But you say that's all meaningless and that its all about the future.
So, for your ease of use, below are blank spaces for the future figures, the ones that make you believe the company is going to the wall.
If you fill those in, then we might be able to understand a bit better where you are coming from:
JH2017: [@stocktrader's projections in here]
DH2017: [@stocktrader's projections in here]
JH2018: [@stocktrader's projections in here]
(Add more if you want)
"Operating cash flow exceeds the Capital requirements by more than double'....Agree again but see my reply to previous statement."
And again, given your opinion of the company busy dying is based on future, not historical, numbers, what forecasts of Operating Cash Flow to Capex are you using?
(This time, to save you having to read too much, I'll include only the past few periods, and then will - again - leave blanks in the forecast period for you to fill in for us)
SDI's OPERATING CASH FLOW [$m] (OCF-to-Capex ratio in brackets)
DH2012: $2.2m (OCF-to-Capex = 5.8 times)
JH2013: $5.4m (4.6 times capex)
DH2013: $2.6m (1.9 times capex)
JH2014: $5.1m (2.9 times capex)
DH2014: $2.0m (1.2 times capex)
JH2015: $5.3m (4.8 times capex)
DH2015: $1.1m (1.3 times capex)
JH2016: $7.7m (5.0 times capex)
DH2016: $1.6m (2.1 times capex)
JH2017: $X.Xm (X times capex) [@stocktrader's projections in here]
DH2017: $X.Xm (X times capex) [@stocktrader's projections in here]
DH2017: $X.Xm (X times capex) [@stocktrader's projections in here]
(Hint: To help you check your forecasts, note the seasonality, where June halves are a lot stronger than December halves. Meaning that the net cash position at 30 June 2017 will be even stronger than at 31 December 2016... unless, of course as you are suggesting, the company ends up in administration before then.)
"Where do I see $OZ in 3 , 5 or 10 years time?". ...Wrong time frame.
If the $OZ stays here or rallies strongly(see above highs) over the next 6-18 months then SDI remaining un hedged will no longer be listed. Simple.
This is a particular little gem.
When the A$ was over 1.00 - some 40% higher than its current level - for an extended period between Dec 2010 and June 2013, the company was still profitable and generated free cash flow in every single financial period and even paid dividends in every single year, all the way through that period.
Moreover, the silver price was almost 3 times its current level and the company had $11.0m of Net Debt then, compared to its net cash position today.
So, given all those...uh... facts, what do you believe is the thing(s) that will make the company cease to be listed over the next 6-18 months?
Maybe the A$ is going to 2.00 to the US dollar? Or 5.00?
Is that what is going to happen?
"Sales are flat over last year.No growth, one of the key metrics all analyists say is paramount"
Not in constant currency terms, they aren't. Even with an even far crappier-than-normal amalgam result, they are up 2.9%
Profit drops from $3mln to $2mln, a 33% drop is alarming by any standards unless one is married to the stock , when everything is forgiven.
33% profit drop? Why, that's nothing.
When the A$ has risen in the past, profits have fallen by as much 40% and 50%.
But in the year that has followed each of these instances, profits have recovered by a multiple of those prior year % falls.
Cash and cash equivalents are $3.6 mln just 6 months ago they stood at $6ml...more alarm bells.
Read back earlier in this post and you'll learn that the company typically generates around 80% of its Operating Cash Flows in the June half, meaning that cash at June balance dates is always a lot higher than at December balance dates.
Again, for context, as opposed to the making of assertions by sucking things out of one's thumb, this cash balance seasonality is backed up by the facts below:
SDI's Cash and Cash Equivalents, period end ($m)
DH2011: 1.4
JH2012: 2.7
DH2012: 0.9
JH2013: 3.7
DH2013: 2.6
JH2014: 4.0
DH2014: 2.9
JH2015: 5.0
DH2015: 3.6
JH2016: 6.0
DH2016: 3.7
Note a few things:
1. The clear JH vs DH seasonality
2. The June and Dec period-end balances are going up in an unbroken trend
3. And that isn't because borrowings are being increased; borrowings have declined by over $7m over that period.
3. And, to boot, the dividend has increased at a rate in excess of 50%pa over that period.
Their "Golden Egg' Amalgam has been smashed and CEO Sam (incidentally on a measly $550,000) admits it's a concern and they need to find new products. How long will that take and at what great expense? Many a Co's downfall trying to reinvent itself.
I remember reading in an Annual Report of several years back (2004 or 2005, I think it was) when there was already talk about the decline in Amalgam sales.
While you might have only just cottoned onto it now, this trend in declining amalgam sales has been something that has been in-train for well over a decade. Amalgam might have been SDI's golden egg in the 1980s, maybe, but I think it has long ceased being so.
In terms of them needing to so desperately find new products, as you believe, can you say what products you think makes up the 70% of non-Amalgam Revenue that is growing at an average rate in excess of 8% pa today?
On a more Macro level the Retail industry is indisputably screwed and more pain is sure to follow.
"Screwed", huh?
Funny, that's not what the executives of the retail shares - such as NCK and BRG - are saying.
And the market seems to agree with them, judging by their most recent profit results and share prices in recent months.
I won't bore you with TA as you freely admit you don't understand it but I can assure you it's overwhelmingly pointing one way.Unfortunately for you, in my experience(I forget how many years) about 20% swear by it.
Oh, I'm always keen to learn new things.
So, to start me off learning about TA, while swearing about something is one thing, can you name any of the 20% of people who have actually generated superior risk-adjusted returns on a sustainable basis by doing so?
So, a few questions arising from your "comprehensive post" (actually, fact-backed questions on just about every point you've sought to make).
I'll stand by for a response, should you choose to do so.
PS. As for your appeal of, "However, I do ask you and your many followers to be more civil in the future.", while I can't speak for others, maybe if you post less histrionic drivel and less wild and unsubstantiated conjecture, the response might be different. Maybe, I dunno.
(I must say, this is a bit like the class bully spoiling for a fight, then crying when he ends up with a bloody nose.)
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