SAI - SAI Global

[chennyleeeee]

Just been looking at this company quite recently. I dont see much wrong with it but I would just like some more opinion before I decide to put money on this one I think..

I got word of it because commonwealth bank is a substantial share holder and I appreciate the good record they have with selecting good investment opportunities.

CHEN

 

[3 veiws of a secret]

Well my computer lighted up in the last half hour seems somebody is deep sea trawling any share that springs up on the buyers ledger ......Me thinks it might be JP MORGAN ??????.....interesting veiwing!

 

[3 veiws of a secret]

To say I'm confused or just seriously confused is an understatement....yesterday this share was traded like wildfire ( compared to other days) ...and today the share craps itself 42 cents! can same fallen angel explain!

 

[sptrawler]

This has been a really good performer, back to pre G.F.C prices. Just recieved share offer for capital raising apparently extending their footprint in U.S.A. Hope they don't get burnt like others who venture offshore, lots of sharks out there.

 

[So_Cynical]

I have been a watcher of SAI since 2008 and really regretted not being brave enough (and not having enough money) to enter during the GFC at around the $2 mark...but everything comes around and so with today's full year results announcement and the resulting sharp share price decline (9.5%) i decided to seize the day.

In with the super fund at $3.89 and already in small profit...which is always nice.

Things to like about SAI

• A Mature global business operating in over 30 country's.
• A 9 year history of YOY revenue and dividend growth.
• A history of slow and careful growth by acquisition.
• Manageable debt and maturity's, Net gearing 36.4% interest cover 6.8x
• MC 805M, Cash 44M

Big picture i reckon compliance, standards and corporate services are great Businesses to be in, as Asia and the BRIC country's grow so does their Businesses and there need to met global best practice standards..over time compliance legislation grows, it never diminishes and so there's like a built in growth (demand) component to SAI business.

SAI is a great addition to my super fund..and dividend to come, the last big cap raising was done in 2010 at $3.60 so there should be support at around this (current) level...all things considered, IMO.

4 year chart and link to today's results announcement below.

http://www.asx.com.au/asxpdf/20120815/pdf/42811c9lyd7nyf.pdf
~

 

[prawn_86]

First look at now, but it does seem interesting SC. Will do some digging over the wekeend hopefully

 

[RottenValue]

Dont know about this one - flat EPS of 21 cents and a ROE of 13% doesnt inspire confidence

Any chance it was always overpriced and may now work its way down to around $2.50 over the months ahead?

I know the company, having suffered through their audit process and actually expected that they would be doing better as not sure who their competition is.

 

[So_Cynical]

(15th-August-2012)

In with the super fund at $3.89 and already in small profit...which is always nice.

SAI is a great addition to my super fund..and dividend to come, the last big cap raising was done in 2010 at $3.60 so there should be support at around this (current) level...all things considered, IMO.

23 days later and im out at $4.41 for a 12.86% profit. with the dividend and franking credits closer to 16%

If only they could all be this easy. When SAI fell like a stone that day i didn't hesitate and was full of confidence...with so many other stocks im just no where near as confident and that's starting to piss me off.

Gems like SAI don't come around often enough....anyway as per my LCEAA strategy i have left my profit in with a slightly larger amount of capital for long term growth and dividend yield.

 

[Smurf1976]

This is one of very few companies I can think of where:

1. The law effectively requires that people or businesses involved in a number of trades or professions purchase products of this company.

2. So far as I am aware there is no competition.

I can't actually think of a more stable business than that. Who else has a guaranteed market and no competition?

 

[Ves]

This is one of very few companies I can think of where:

1. The law effectively requires that people or businesses involved in a number of trades or professions purchase products of this company.

2. So far as I am aware there is no competition.

I can't actually think of a more stable business than that. Who else has a guaranteed market and no competition?

They have also made acquisitions in the past, so I would say there are definitely other firms in related or the same industry.

And because of this, if you look closely at the financials a large portion of the financials are due to Goodwill.

It looks like they are a consolidator of sorts trying to become the big fish in the pool.

Without looking closely I couldn't tell you if they paid too much for these firms they purchased, but Return on Capital looks pretty good if you take the goodwill accounting entries out. It actually looks really profitable, but I would need to compare this over the duration of the business cycle. It seems they have lots of recurring revenues. Something to look at definitely.

However, it looks like it is already trading on a premium earnings ratio, so if it doesn't grow quickly (as analysts are expecting) it will get hit pretty hard.

 

[Ves]

Debt is a bit of a red-flag to me.

$251 mil on the balance sheet as at 30-June-2012

Some coverage ratios:

Debt is about 2.5-2.6 times EBITDA

EBITDA is around 6.6 times the interest payable on the debt

I am using EBITDA in this case to strip out the depreciation and amortisation (non-cash entries). If interested, you could use the Operating Cash Flow and take off maintenance capex (of course you need to calculate it) instead, which might be even more accurate.

Not the most comfortable IMO - in fact I would say downright risky if they take a big earnings hit. Check the debt covenants if you are still interested.

They seem to have a history of funding acquisitions from increasing debt & tapping shareholders for Funds. In 2004 they had a NPAT of 6.6 million. In 2012 it is 42.4 mil.

To get to this point shareholders equity (cap raisings + retained earnings) has risen from 61 mil to 366 mil. Around 6 times. Debt has gone from 3 mil in 2004 to 251 mil (and growing by the looks of it!) in 2012.

By my calculations, and I understand that NPAT and equity calculations (or accounting figures in general can be rubbery figures at the best of times) has risen by 36 million in 8 years. To achieve this, using the figures I came up with above there has been 550 million thrown back into the business. That's a return of only 6.5% to date!

At best I would say this is a business that has very little, if any organic growth, and requires acquisitions to fuel earnings. It is OK if they pay fair value (or are fortunate, less) but history shows that the majority of corporate transactions end with this desired result.

I'm not surprised that the market prices this as a growth stock (the market seems to like businesses who make "Exciting" acqusitions and tell tales of building corporate empires) but for me the merits of such a business model, when they actually exist, are far outweighed by the risks.

 

[So_Cynical]

In on Today's dip for my second bite of the SAI Cherry @ $3.99 hopeful of course that this trade will be as successful as my last SAI trade....notice today's WBC change in substantial holding notice, Westpac sold its position down a little.

 

[So_Cynical]

In on Today's dip for my second bite of the SAI Cherry @ $3.99 hopeful of course that this trade will be as successful as my last SAI trade....notice today's WBC change in substantial holding notice, Westpac sold its position down a little.

Trade completed with today's exit at $4.40 (9.3%) net profit..2 trades in 6 months for a net profit of over 20% with a dividend to come. just to easy.

As the chart shows SAI is ranging as i expected and thus offering opportunities, my position (remaining shares) is now over 50% free carried, and my superfund balance is loving it..this locking in some profits strategy is showing the potential i thought it would, my closed trade profit is more than triple what my open profit is.
~

 

[Ves]

Well done on your trades. I will be interested in the next report - to see if the capital structure is holding up. Looking forward to the next few years, to see how my analysis holds up. I think I will learn something right or wrong.

 

[So_Cynical]

Well done on your trades. I will be interested in the next report - to see if the capital structure is holding up. Looking forward to the next few years, to see how my analysis holds up. I think I will learn something right or wrong.

You didn't have to wait long, SAI got hammered on Thursday after releasing their half year report.

http://www.saiglobal.com/AboutSaiGlobal/NewsRelease/ASXAnnouncements/2013-02-15.htm

Profit down 14.9% as expected and previously announced, revenue up 6.8% costs have grown faster than revenue, but that's to be expected occasionally with a business like SAI

“whilst reporting a reduced profit on higher revenue is disappointing the reason for the reduced profit lies in higher costs; costs which have been added to build a stronger and more profitable business for the future. We expect 1H13 to mark the end of the contraction in our operating margins and expect to return to profitable growth in 2H13”.

I found it strange that the market reacted so badly to the half year report, the difficulty's were well flagged and the market kept informed...having watched the SAI share price closely over the last 8 months or so, i have often been surprised at the SP moves given general sentiment and sensitive news.

A big volume spike on Thursday followed by another big volume day on Friday, 24m shares in 2 days, about 12% of the company changing hands...arguably a great opportunity when a lot of people start to feel uncomfortable holding SAI, or any other good company.



Anyway in with the Superfund again at $3.70 for SAI trade #3

 

[pixel]

Nice recovery;
I traded the last leg-up, but took profit yesterday - maybe too early, Harry says.
Still believe a retracement will provide the opportunity to get back in for less - $3.60 perhaps?

 

[So_Cynical]

(16th-February-2013)

Anyway in with the Superfund again at $3.70 for SAI trade #3

Out today @ $4.45 and got the last divi as well as the previous...3 outa 3 ain't bad.

SAI is still a business that i like and want to build a position in, luckily for me the SP is cooperating and ranging beautifully, giving opportunities to enter with confidence and exit with profits and an increased free carry and dividend stream.

13.18% trade profit, 5.3% in dividends and franking credits = 18.5% in a little over 7 months.

 

[So_Cynical]

The Dividend announcement to come in early February will move the share price i would think, i suppose the sentiment for a dividend reduction is stronger than the pro argument and that's reflected in the current SP, still easy to imagine a positive/neutral surprise coming and a pop in the SP...chart looks good for an entry based on my previous 3 trades.
~

 

[So_Cynical]

Take over offer.

Pacific Equity Partners PEP offering $5.10 to $5.25 per share, submitted on May 15, SAI board working with PEP on furthering the proposal.


http://www.asx.com.au/asxpdf/20140526/pdf/42ptz1xcqynx1x.pdf

And the CEO has been sacked.

http://www.asx.com.au/asxpdf/20140526/pdf/42ptv3zylyp719.pdf

 

[McCoy Pauley]

A company I've been interested in (we use their services during my day job), but it looks like PEP's offer has flushed out other interested parties, based on the company's ASX announcement this morning.