"Yep this was a surprise in a small way. I expected the result...

"Yep this was a surprise in a small way. I expected the result to be a little more negative than this."

Not sure why, given they had already pre-announced Revenue and NPAT six week prior.


"It's top line growth which is the most comfortable outcome when looking forward.
I'm not totally sure how to view the 3% growth in revenue. It may be quite reasonable given the economic circumstances or it may signal a slowdown coming. It depends, a little at least, upon whether whitening etc is a discretionary service in a tighter economy."

The reason for the modest, 3% Revenue growth is well-articulated: pcp Revenue received a significant one-off boost in amalgam sales due to a competitor exiting the north American market. So FY2023 Revenue growth of 13.5% was abnormally high, and it is off that elevated base that the 3% growth in FY2024 took place. Heck, some might argue that the FY2024 number being positive at all is testimony to the resilience of the top line.

As for your concern about whitening products being a discretionary service in a tighter economy, given Whitening represents ~25% of SDI's Revenue, I can see how that might be of a concern. However, I take my cues from long-term precedent Revenue performance, which spans a number of economic cycles, and it's hard to argue against the evidence of recession-proof earnings based on the picture below:

(Only pandemics have been able to de-rail the Revenue growth momentum).

So, I think if you want something to worry about, then it should be around what I think are some mixed messages around the funding of the new factory (Montrose).

On the one hand, the dividend was increased (albeit in conjunction with a lower payout ratio), which connotes board and management confidence is the capital adequacy for Montrose. Also, on the result call the CFO pointed to peak Net Debt of $38m - which is a number that surprised me, because y calculations had a figure closer to $45m (but even at my higher peak estimate, that would still work out to Net Debt-to-EBITDA of a little over 2.0x, which is fine. And obviously even more fine if we take management's $38m figure at face value). So that's all rather favourable and evidently easily manageable off the balance sheet capacity.

But on the other hand, somewhat surprisingly, in an answer to a question about Montrose's funding, the CFO included equity capital as an option.

The stock is undeniably cheap, but I expect the market's hesitation around risks with a very big project will remain in place for some time, not helped by the notion - however remote - that a capital raising is a possibility. So I think it is likely to remain cheap for some time to come.

On a personal level and as a shareholder of some 14 years, I'd be mortified if they raised capital, if only because it would alter the following impressive picture:



Over that period the company has increased its Revenue five-fold.
(I challenge anyone to find a company with similar Revenue vs Shares Outstanding metrics).

.