SND - Saunders International

[So_Cynical]

Saunders international Ltd is the leading Australian specialist in the Design, Construction and Maintenance of Bulk Storage facilities for the Water, Petrochemical and Infrastructure industries.

I figure there's alot of upside to SND with very little risk, SND is a niche business with over 50 years experience, its a business that's difficult to duplicate especially in a small market like Australia.

SND don't just make new tanks etc, they have a dual revenue stream being the principal provider of storage tank maintenance services to 6 of Australia’s 7 major operating petroleum refineries.

I brought a few today @ 30 cents as that has previously been a profitable level to buy at and figure that 1 half decent (new contract) announcement would be SP positive.

• Market Cap: 23,610,000
• Shares on issue: 78,700,000
• Cash: 14 mill
• Debt: 0
• Annual revenue above 55 million
• Pays fully franked dividends twice per year
• 52-wk Low: 0.22
• 52-wk High: 0.40
• Top 20 hold over 82% (2008)
• First listed: Dec 2007

Annual report 09: http://www.asx.com.au/asxpdf/20090824/pdf/31k8h8qs1cs0qp.pdf

Saunders site: http://www.saunders-international.com.au/

My opinion only ...of course. DYOR & MYOD

 

[So_Cynical]

I brought a few today @ 30 cents as that has previously been a profitable level to buy at and figure that 1 half decent (new contract) announcement would be SP positive.

The SND share price hit 34 cents today on some unusually large (for SND) volume...and that was my cue to exit 12% above my entry of a few weeks ago this is a great little company so im happy to leave a little in (and profits) for the long term dividend returns and exposure to the SP upside.

I think SND is a great example of a low vol (safe) stock that's trending sideways beautifully...regularly presenting retrace trades for those with patience and time.

 

[So_Cynical]

Investor presentation released to market today...and full year report yesterday.

http://www.asx.com.au/asxpdf/20100824/pdf/31s256nm919d0b.pdf
http://www.asx.com.au/asxpdf/20100823/pdf/31s1j6t7jwd1vz.pdf

Highlights include.

• Net profit after tax up 20% (year on year)
• Revenue down 20% (year on year)
• Earnings per share up 17.5% (year on year approx)
• Dividend up 50%
• work in hand approx 33 million
• No debt
• 20+ million in cash (approx 25.5 cents per share)

Saunders share price hit a 22 month high today (50c) on the back of all that good news, positive outlook and great numbers....i really need to have more money in this one, im spewing i missed out on buying a few more in the last dip in June, i had a buy order sitting there for a week and just couldn't get filled..it was a light volume fall and i wouldn't pay the extra 2 cents a share to buy at market.

Hate it when i make the right decision but just don't throw enough money at it...anyway lots to like about Saunders, its just a great business to be in, so glad i left alot of my initial entry in.
~

 

[adds4]

good company with a strong order book, strong cash balance of 20m+, and a market cap of 45m. In essence the business is only really valued at 25m, or around 30 cents a share, pays a 4 cent dividend, and has earnings of 5.2 (2009/2010), so a pe of 6 (excluding the cash)

 

[So_Cynical]

I added to my SND holdings late Friday afternoon, paid 0.455 so should get a yield close to 11% gross going forward...for anyone interested i have linked to an investor presentation from Feb of this year.

http://www.asx.com.au/asxpdf/20120224/pdf/424lg7n45vtj8m.pdf

SND have no debt and 15 million in cash...0.45 should be support.
~

 

[So_Cynical]

I added to my SND holdings late Friday afternoon, paid 0.455

SND have no debt and 15 million in cash...0.45 should be support.
~

Well SND still have a hunk of cash and no debt, and 0.45 was support of some kind....the SP dipped below a few times but those dips were usually just a couple of trades, anyway SND traded at a 12 month high today up 11.5% on news that they have 2 new contracts worth 21 million.

Puts my open trade from May in serious profit in fact 27.24% profit and im letting it ride :grinsking we could see a new all time high close above 0.60 soon, just a couple of cents more will do it...3 year chart below.
~

 

[So_Cynical]

(2nd-August-2012) Puts my open trade from May in serious profit in fact 27.24% profit and im letting it ride :grinsking we could see a new all time high close above 0.60 soon, just a couple of cents more will do it...3 year chart below.
~

With Today's release of Saunders full year financial report she went over the top to close at a record all time high of 0.635 up 11.4%

I know im talking to myself here with only 570 shareholders on the register. im just so happy im one of them, i seem to remember some astute investors posting in another thread a while back, saying how it was so important to avoid low liquidity micro cap stocks.


Highlights

• Net Profit up 136%
• Final Divided 3 CPS Fully Franked
• Special Dividend 5 CPS Fully Franked
• Cash 17 mill (approx 21.6 CPS)
• No Debt
• Work in hand 40 mill

I have 2 parcels

• (Oct 2009) 0.30 CPS ~ Profit 110.27%
• (May 2012) 0.46 CPS ~ Profit 38.12%

With the coming dividends my gross dividend return on my original investment (parcel) is around 76.1% :venus: in just 3 years.

http://www.asx.com.au/asxpdf/20120821/pdf/4284prs64x7272.pdf

 

[herzy]

Congratulations SC - seems like a fantastic find. Can I ask how you found it originally? Such a shame it's had a great run up - sounded great back in 2010, will have to have a look myself now...

 

[herzy]

With Today's release of Saunders full year financial report she went over the top to close at a record all time high of 0.635 up 11.4%

I know im talking to myself here with only 570 shareholders on the register. im just so happy im one of them, i seem to remember some astute investors posting in another thread a while back, saying how it was so important to avoid low liquidity micro cap stocks.


Highlights

• Net Profit up 136%
• Final Divided 3 CPS Fully Franked
• Special Dividend 5 CPS Fully Franked
• Cash 17 mill (approx 21.6 CPS)
• No Debt
• Work in hand 40 mill

I have 2 parcels

• (Oct 2009) 0.30 CPS ~ Profit 110.27%
• (May 2012) 0.46 CPS ~ Profit 38.12%

With the coming dividends my gross dividend return on my original investment (parcel) is around 76.1% :venus: in just 3 years.

http://www.asx.com.au/asxpdf/20120821/pdf/4284prs64x7272.pdf

Had a quick read and wanted to point this out:

- although profits are up 137%, this seems to be almost entirely due to much lower legal costs than last year (~3.75 million in legal costs pretty much accounts for the 137% increase)

- arbitration settlement was successfully appealed, so we can expect increased legal costs (and therefore a significant decrease in profit) next quarter

- revenues are down 17%

I'd be interested in your thoughts.

 

[So_Cynical]

Had a quick read and wanted to point this out:

- although profits are up 137%, this seems to be almost entirely due to much lower legal costs than last year (~3.75 million in legal costs pretty much accounts for the 137% increase)

- arbitration settlement was successfully appealed, so we can expect increased legal costs (and therefore a significant decrease in profit) next quarter

- revenues are down 17%

I'd be interested in your thoughts.

Legals costs for FY12 were 0.75 mill and for FY11 were 3.6 mill ~ so last years profit was heavily impacted by the legal preceding's and this year profit wasn't....this is a small company dealing with contract work and occasionally there are disputes, this happens with all contract based businesses.

The arbitration settlement unfortunately didn't met with favour from the court so that settlement is now up in the air again...what will be will be, certainly some SP downside risk there.

 

[herzy]

Yeah - shame to miss out on the special divvy, and would have been nice to hold a few months ago, but at this point in time I think I'll pass. Just because sp seems inflated due to high earnings which aren't actually there - and I foresee increased legal costs with renewed litigation, which will impact earnings. Maybe I'll buy post next quarter report, and they report profits down 200% on last! Will watch with interest, seems like an interesting little company.

 

[herzy]

On the plus side, I like that 95% of their customers are repeat customers. On the downside, I don't like that there are 8 customers...

 

[galumay]

I have been doing a bit of research on this one, I dont like that the payout ratio is over 150% for the last 2 years, thats a recipe for disaster i would have thought!

 

[McLovin]

I have been doing a bit of research on this one, I dont like that the payout ratio is over 150% for the last 2 years, thats a recipe for disaster i would have thought!

Having a quick look at it. They have a lot of cash, way more than they need. Their franking account has ~$4m in it, so they're probably trying to give the cash back to shareholders in the form of FF dividends as the franking credits allow.

They manufacture storage tanks, any idea why their capex is so low? Maybe I need to look at more years but in the last two years they only invested $300k in PP&E.

 

[So_Cynical]

I have been doing a bit of research on this one, I dont like that the payout ratio is over 150% for the last 2 years, thats a recipe for disaster i would have thought!

Its a recipe for something if its maintained at those levels, SND has a lot of cash and no debt so there can be no disaster based on the payout..once they don't have the money to pay it, well they will have to reduce the payout, i assume you have looked at the 2012 annual report? did you look at page 40?

3 Shareholders own 59% of the company, 2 are still on the board and the founder and largest share holder Desmond Bryant is retired, these 3 guys get over 59% of the dividend payments...so we can assume that these guys like paying dividends and can also assume that they are in no hurry to kill the golden egg laying goose.
~

 

[galumay]

I think the other thing is as Herzy pointed out, they have a tiny customer base. I reckon its just one of those funny little companies that fly under the radar due to their small cap and have found a profitable little business niche. As So_Cynical points out its illiquid and tightly held by the directors, a nice little earner for those in the know!

 

[So_Cynical]

I think the other thing is as Herzy pointed out, they have a tiny customer base. I reckon its just one of those funny little companies that fly under the radar due to their small cap and have found a profitable little business niche. As So_Cynical points out its illiquid and tightly held by the directors, a nice little earner for those in the know!

Nice little earner for me with an average price of 38 cents per share...the last dividend was a 27.35% gross return, never mind the 114% open profit.

No way i would be buying it now though...the horse has bolted.

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Thing is you have to look at these company's for what they are, what they do and where they operate..SND has a tiny customer base because the services they provide are niche, the industry's they service are operated by a handful of company's, but the thing is these industry's are vital and are not going to go away and the assets must be maintained for safety and insurance purposes.

 

[galumay]

Nice little earner for me with an average price of 38 cents per share...the last dividend was a 27.35% gross return, never mind the 114% open profit.

No way i would be buying it now though...the horse has bolted.

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Thing is you have to look at these company's for what they are, what they do and where they operate..SND has a tiny customer base because the services they provide are niche, the industry's they service are operated by a handful of company's, but the thing is these industry's are vital and are not going to go away and the assets must be maintained for safety and insurance purposes.

Thanks for sharing, as per my other thread, I am learning fast that there is an enormous skill to assessing and researching stocks, so many different factors to understand. I guess everytime i add another small learning I am getting closer to being able to make an informed decision!

 

[McLovin]

Nice little earner for me with an average price of 38 cents per share...the last dividend was a 27.35% gross return, never mind the 114% open profit.

No way i would be buying it now though...the horse has bolted.

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Thing is you have to look at these company's for what they are, what they do and where they operate..SND has a tiny customer base because the services they provide are niche, the industry's they service are operated by a handful of company's, but the thing is these industry's are vital and are not going to go away and the assets must be maintained for safety and insurance purposes.

Good buy. At 40c you were basically paying ~$13m for a company generating EBIT of $5.7m.

 

[So_Cynical]

Half year presentation out today, again no surprises...Interim dividend up 100% to 0.02 CPS

http://www.asx.com.au/asxpdf/20130221/pdf/42d5kv2814x7jh.pdf