SDI Ltd

ASX:SDI — Company Profile

Last Close Price (+0.8%)

$0.595

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#91

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Strawman
Strawman
Added 3 weeks ago

A specialist developer and manufacturer of restorative dental products, SDI has been listed since 1985. Sales have steadily grown over the years, and today SDI generates over 90% of its sales offshore, to more than 100 countries.

Growth has been hampered in recent years as demand for traditional amalgam fillings -- which 5 years ago accounted for half of total sales -- has continued its structural decline. That's a trend that is set to slowly but inevitably continue, though with amalgam representing a quarter of sales today, that drag will lesson over time.

Offsetting this decline has been strong growth in more premium, higher margin products, for which SDI has successfully developed and brought to market. Importantly, they have a concerted R&D effort that will see 4 new products launched this year, with 1-2 new products a year expected going forward.

The balance sheet is quite strong with no net debt. Free cash flow has been rising and the dividend very well supported. The business has not needed to raise cash in the past 20+ years, and funded all growth internally.

CEO and Chairman (founder) own around half the business. Shares are fairly thinly traded.

Not expecting strong growth, but I expect this will be a larger (and more valuable) business in 5 years time. A great one for the bottom drawer -- especially if you like reliable dividends -- at the right price.

See my forecast page for valuation

 

PennyPincher
PennyPincher
Last edited 6 months ago

  • Rapid decline in amalgam sales offsetting any growth in composites/glass inomers/whitening/dental equipment
  • Competition is leading to reduced pricing/decreasing margins in non-amalgams
  • Poor capital management- long term high working capital, lazy balance sheet  with cash in bank yet maintain debt
  • Nepotism: Company 'run like a private company' for the founding Cheetham family. Daughter handed CEO role by father without consideration for other internal/external candidates.
  • Question capability of new CEO in her role and current CFO
  • Large remuneration for Executive/Chair, and long history of related party payments (e.g. 'consultancy payments to Chair over many years). Poor long term returns for non-family shareholders
  • Underperforming regions- UK, South America, US an ongoing problem. Over-promised, under delivered.
  • Current factory needs improvement

Strawman
Strawman
Added 9 months ago

The business historically focused on amalgam, but has steadily been shifting it's product mix into higher value, proprietary products -- mostly aesthetics & tooth whitening. Amalgam is arguably in a structural decline, especially in richer, developed countries. This will act as a drag on sales in the coming years, but that will diminish as amalgam becomes a smaller and smaller part of the mix. As of H2 2018, Amalgam was around a quarter of total sales

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