ASX:SDI
SDI Ltd
Investment Summary
The fund managers believe SDI Ltd. (SDI) is facing some short-term challenges, with sales down 1.5% for the first half of the fiscal year, primarily due to currency fluctuations and the winding down of its lower-margin Amalgam product. However, they are encouraged by the company’s ability to grow gross margins from 61.5% to 63.5%, indicating operational efficiency. Despite weaker-than-expected sales, the fund managers believe the business has a stronger second half ahead and continues to trade at an attractive valuation (9.5x earnings), maintaining their position in the stock.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Manager
Mereweather Capital
Date
31 Jan 2025
Price
$0.98
Medium
Monthly Report
Commentary
Mereweather Capital Inception Fund continues to hold its position in SDI Limited (SDI) despite a weaker-than-expected trading update for the first half of the fiscal year. While sales were down 1.5% year-on-year, primarily due to currency fluctuations and the ongoing phase-out of the lower-margin Amalgam product, adjusted sales grew by approximately 2%. More encouragingly, gross margins improved from 61.5% to 63.5%, helping to offset the sales decline and likely resulting in flat profits compared to the previous year. Although the sales growth was below historical levels, the business is expected to benefit from a seasonally stronger second half. With the company trading at a relatively low multiple of 9.5x earnings, the Fund remains confident in its long-term prospects and continues to hold its position in SDI.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.