I have been looking at this company now for over 1 year! I believe I have a fair understanding behind the fundamentals. I must admit that I didn't place much hope for SSM until I researched the guys behind the re-invigorated company. When I say fundamentals I mean from the perspective of earnings and balance sheet.
SSM has been a victim of very poor management in the past to say the least and hence has seen it's share price fall from over $2 in late 2007 to current levels of 40 cents.
The company has had a very bad few years through the GFC as a result of poor management coupled with the effects of the GFC. Since the GFC, the company has effectively taken on a new board of directors with the aim of re-building the company. Thus far they have delivered but the market has forgotten them.
In my opinion, this company has been recently left behind by the market. The company has re-affirmed profit guidance for $34 million EBITDA for 2011 which I believe will be around $16 million NPAT. On this kind of NPAT the company is trading at a PE multiple of just over 7. Yes 7!!!!!!!!!!!
I can only assume with such a turnaround in profitability the NTA and cash flow will have also improved markedly.
The bonus with SSM is if it wins work or flow on work from the NBN with it's JV partner Lend Lease (Syntheo). On any news that SSM has won work with NBN, SSM should be re-rated significantly.
Nevertheless, my industry sources have said to me that SSM doesn't need the NBN contract work, that it has plenty of it's own. So, basically NBN work will be cream.
I might not have the timing right for SSM's re-rating but I am supremely confident that once the market makers and bots disappear from trading SSM we will see a significant bounce in the share price.
I also expect some of the smaller fund managers to enter into SSM purely based on earnings and the stellar job the new Board has achieved since taking over the reins.
By the way, I really like the Long Term Incentive Plan they have in place for the senior executives. It gives me a lot of confidence that the new guys are here to grow the company rather than just be salary suckers.
We will find out SSM's future when they release 2011 results next Thursday (25th August).
Go SSM!
:) Nic
SSM Price at posting:
39.1¢ Sentiment: LT Buy Disclosure: Held
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