SMX - SMS Management and Technology

[Klogg]

Re: Half Year Results - SMS Management and Technology

The only thing that has me rattled about DTL is the 10 for 1 share split... I just don't understand the reasoning behind that move. While the company said "the split is intended to benefit shareholders by increasing the liquidity of the company's shares and increasing the affordability to retail investors" this got me thinking something was a foot… I assume that retail investors would look for value rather than affordability. Anyway… that put a dampener on my outlook of DTL.

As for SMX… The biggest concern I have with them is that they are currently holding onto there staff while project uptake has been slow, it seems like they haven’t been able to redeploy some of there billable staff. The only question that is in the back of my mind with this one is… how long can this continue…

I don't own the stock and am only speaking here from my 6years experience in the I.T. projects space.

This, in my view, is quite a smart move as many consultancies are now competing with each other for quality staff. Contract rates are increasing rapidly because of the demand in I.T., and consulting agencies can't keep up with this and continue their profit margins... So, they keep their staff on the bench and re-deploy when they can.

In my mind, it's the equivalent of holding an asset that is temporarily underperforming, but you know will be in high demand in the near future.

 

[clinta44]

Re: Half Year Results - SMS Management and Technology

This, in my view, is quite a smart move as many consultancies are now competing with each other for quality staff. Contract rates are increasing rapidly because of the demand in I.T., and consulting agencies can't keep up with this and continue their profit margins... So, they keep their staff on the bench and re-deploy when they can.

I certainly understand the logic...but they can only be benched for so long. I'm just hoping the projects start getting approved so they can retain the staff...

I guess that's the issue with government clients... they always drag there heels in decision making. then at the last minute want it completed in no time flat...

 

[Muschu]

Not a good day today!

 

[Ves]

This one got hammered yesterday.

From the AGM address it looks as if they will earn between $12-14 NPAT for the first half of 2013. In 2012 this figure was $15.2 million.

The most interesting part of the details given to the market is the part where they are continuing to invest for a turn-around in the second half of 2013. It is either that they are too stubborn to change their cost-structure or that there is some green shoots (or sentiment change in their clients) still showing themselves.

Interesting times.

disclosure: Not holding - but an interested onlooker.

 

[skc]

This one got hammered yesterday.

From the AGM address it looks as if they will earn between $12-14 NPAT for the first half of 2013. In 2012 this figure was $15.2 million.

The most interesting part of the details given to the market is the part where they are continuing to invest for a turn-around in the second half of 2013. It is either that they are too stubborn to change their cost-structure or that there is some green shoots (or sentiment change in their clients) still showing themselves.

Interesting times.

disclosure: Not holding - but an interested onlooker.

On the same day that UXC provided a positive update. The word is that SMX's major client of Cathay Pacific in HK has been cuttting back expenses. Those major clients can easy put $1-2m dent in the NPAT if you can't easily re-deploy your personnel

 

[Ves]

On the same day that UXC provided a positive update. The word is that SMX's major client of Cathay Pacific in HK has been cuttting back expenses. Those major clients can easy put $1-2m dent in the NPAT if you can't easily re-deploy your personnel

Probably not too far from the truth, there is some evidence of such happening (without naming actual contracts they are losing revenue) in the AGM address, in particular the few times they mention the Asia / HK region.

 

[Klogg]

For anyone thats interested, it appears that DWS took a bit of a battering (not quite the 25% that SMX did) just by association.

 

[Ves]

Interesting development (maybe only because it agrees with my thesis on these IT companies) that SMX is buying back their own shares, which I assume is because they think that they are cheap, and potentially a sign that they think the bottom of the IT spending / investment cycle is getting closer.

I was looking at SMX the other day, back of the envelope type stuff out of interest (ie. scribble), not as cheap as DTL in my opinion, but not overly expensive by my rudimentary calculations...

It's good to see the company are putting some money at stake to go with their repeat proclamations that we are nearing the bottom. This possibly gives it some substance.

 

[Rainman]

... It's good to see the company are putting some money at stake to go with their repeat proclamations that we are nearing the bottom. This possibly gives it some substance.

I started buying into SMX in mid-2014 because I thought it was the bottom. I was wrong. That said, there is worse management around. SMX's management appears to be acting sensibly by buying back its stock in the low $3 range. It has plenty of cash to do it with.

My humble tuppence worth.

 

[peter2]

IT companies seem to be the sector of the moment. Good news from ASZ, DTL have produced huge gaps up in their prices. MLB has been on fire.

TNE is currently in a corrective pullback and I'm watching the chart closely for a buy signal.

I want to mention SMX as another contender for consideration. Price seems to have started to climb off it's two year lows (support?).

 

[piggybank]

I want to mention SMX as another contender for consideration. Price seems to have started to climb off it's two year lows (support?).
View attachment 63543

Peter2 congratulations on your call. Up 11% presently after the 2015 results were announced to the market earlier today. Here is one of the announcements:- http://www.stocknessmonster.com/news-item?S=SMX&E=ASX&N=427856

 

[peter2]

Thanks. SMX finished the day +19%. I've sold 1/2 and waiting to see what happens next. Last report (Feb 15) was also good (price spiked up) but then dropped down quickly. I've been concerned by the thin MD on this one ever since I bought the initial parcel and this trade only went into one lucky portfolio.

IMO this sector (IT) is a good one to stick with as companies seek to create productivity gains by improving/upgrading their IT systems.

 

[notting]

Sector has really struggled over the last 18 months or so and their have been a couple of explosive days for a few of em recently.
It would be good if the PC business took off again.
The smart phone and dumb pad thing is popping I reckon, it would be good for the desktop to reemerge as the genuine machine, as it is.
I have a stake in this and missed the action today.

 

[peter2]

SMX: I was waiting for a buy setup, after the abc corrective move back to the prior BO level (= support). It didn't happened so I'm still waiting. Now it looks like I'll be waiting for a buy signal from a much lower level.

Three months ago the news/outlook was good, price jumped up. Now it looks like the outlook has changed pretty quickly. The reduction in quarterly sales due to the corporate reorganisation didn't seem that bad to me.
Glad I'm not relying in fundamental data to make trading decisions.

 

[VSntchr]

SMX: I was waiting for a buy setup, after the abc corrective move back to the prior BO level (= support). It didn't happened so I'm still waiting. Now it looks like I'll be waiting for a buy signal from a much lower level.

Three months ago the news/outlook was good, price jumped up. Now it looks like the outlook has changed pretty quickly. The reduction in quarterly sales due to the corporate reorganisation didn't seem that bad to me.
Glad I'm not relying in fundamental data to make trading decisions.

SMX is one of my favourite IT stocks to trade and I was waiting for a break over $5.00. It seems the AGMs have not been kind to stocks in this sector, after they mostly all posted good FY results not so long ago.
I'm actually on the otherside of your comment regarding the drop in EBITDA. 1H15 was already a pretty weak number looking back historically...so to not be able to hold ground with that is pretty negative, especially when the share price has been on a tear...

 

[Wysiwyg]

The exit at any price is an anomaly. At a guess, price could drift aimlessly until nearer the half yearly report or another trading update. XIJ (I.T. sector) has trended upward most positive since the August crash.

 

[piggybank]

Unfortunately this is the second time I have written this as my computer crashed a few minutes ago and I lost what I had written down. Never mind, such is life. Since the last posting, the price as continued to fall hitting another 52 week low today of $1.70 (4%).

As you will see from the monthly chart below, there is now a high possibility that if it goes below the $1.50 mark it could then go as low as 30-40c - only time will tell.

DIVIDEND INDICATED GROSS YIELD - 13.87%
P/E (ttm) - 7.69
EPS (ttm) - 0.22

​

 

[Ves]

As you will see from the monthly chart below, there is now a high possibility that if it goes below the $1.50 mark it could then go as low as 30-40c - only time will tell.

That's definitely possible in the medium/long-term from a fundamental perspective. If I recall, the net tangible assets (ie. stripping out all the goodwill) are around 30-40 cents per share.

If the profitability of the business keeps reducing to a rate that converges with the firm's cost of capital, then there is no reason why that price level could not eventuate.

I could be wrong, but from where I sit it seems like SMX's original business model has slowly been eroded (both by technological change and increased competition). Their cash cycle has also increased in length (ie. it takes them from the time they start doing the work, until they bill it, then receive payment).

It's possible that the business has been mismanaged in the last few years (which often happens to roll-up / acquisition driven organisations) and the new CEO has been brought in to clean up the mess.

They are completely restructuring this business in the medium term, and from the language in the AGM, it will be a completely different beast going forward.

I don't think it's past metrics are really that relevant at all.

In the past they were "predominantly reliant on short term project based business" (system design, ie. it's lumpy and reliant on the business cycle) but now they are trying to win more (larger) multi-year contracts and longer term annuity based operational deals (especially in the cloud space).

I think that SMX looks superficially cheap, but I'm not exactly convinced that their strategy will be as successful as their past endeavours and there's a fair bit of risk in that.

 

[peter2]

SMX used to be a great little trading stock and obviously a favourite of a few value investors. It's sad to see that mgt have stuffed this business.

Three huge profit downgrades over the years show up on my charts as little bombs. Three strikes and the management are deemed to be ineffective. The price break down below 3.00 was also another death nell for me.

I need a little skull and crossbones icon. Wait a minute, I've got one of those also.

 

[Rainman]

I think SMX looks like an interesting turnaround candidate here. I mean, how much worse can it get? Although, as the great Peter Lynch said, it is always darkest just before pitch black.