Venture: Small Cap Industrial
Issue 10;
A dirt cheap cyclical stock.
Speedy Hire (SDY)
Speedy Hire’s stated mission is:
“To be the most efficient and sustainable hire business in the UK and Ireland: digital and data driven, optimised through operational excellence and powered by our people.”
They basically rent out the many different machines you tend not to own. They have 68,000 customers and 3,375 staff, with most operations in the UK and Ireland, although they do have a joint venture in Kazakstan.
SDY is cyclical and dirt cheap. The shares have fallen around 70% since the pandemic despite the business managing to deliver growth. We have seen this before. Before the financial crisis in 2008, they had too much debt going into a recession, and business slumped. There was a discounted rights issue, but they survived. This time, debt is lower, and the company is delivering free cash flow. In the below chart, I show enterprise value to sales over 25 years.
Cyclical and Dirt Cheap
SDY had a positive earnings revision with upgrades from the two active analysts at Peel Hunt and Liberum. The target price is 70p, which is twice the current price. There has been a steady stream of buying from insiders, and major shareholders include GAM, Aberforth, Polar, Dimensional and others. It’s a reassuring bunch.
The shares trade on 6.8x ’24 earnings, and the dividend yield is 7.3%. The balance sheet is okay, but if interest rates have peaked, then it will be in good shape.
Risk
Other than the pandemic and the slowdown in construction, the debt will have weighed on the price. A weaker economy is already priced in, and so the remaining risk is that rates haven’t peaked. I deem this to be high risk.
Venture Update
Gold is likely to break out before too long. The miners should do well.
Please let me know your thoughts by emailing me at charlie.morris@bytetree.com or tweeting me @AtlasPulse.
Many thanks,
Charlie Morris
Editor, Venture
Venture is issued by ByteTree Asset Management Ltd, an appointed representative of Strata Global which is authorised and regulated by the Financial Conduct Authority. ByteTree Asset Management is a wholly owned subsidiary of CryptoComposite Ltd.
General - Your capital is at risk when you invest, never risk more than you can afford to lose. Past performance and forecasts are not reliable indicators of future results. Bid/offer spreads, commissions, fees and other charges can reduce returns from investments. There is no guarantee dividends will be paid. Overseas shares - Some recommendations may be denominated in a currency other than sterling. The return from these may increase or decrease as a result of currency fluctuations. Any dividends will be taxed at source in the country of issue.
Funds - Fund performance relies on the performance of the underlying investments, and there is counterparty default risk which could result in a loss not represented by the underlying investment. Exchange Traded Funds (ETFs) with derivative exposure (leveraged or inverted ETFs) are highly speculative and are not suitable for risk-averse investors.
Bonds - Investing in bonds carries interest rate risk. A bondholder has committed to receiving a fixed rate of return for a fixed period. If the market interest rate rises from the date of the bond's purchase, the bond's price will fall. There is also the risk that the bond issuer could default on their obligations to pay interest as scheduled, or to repay capital at the maturity of the bond.
Taxation - Profits from investments, and any profits from converting cryptocurrency back into fiat currency is subject to capital gains tax. Tax treatment depends on individual circumstances and may be subject to change.
Investment Director: Charlie Morris. Editors or contributors may have an interest in recommendations. Information and opinions expressed do not necessarily reflect the views of other editors/contributors of CryptoComposite Ltd. ByteTree Asset Management (FRN 933150) is an Appointed Representative of Strata Global Ltd (FRN 563834), which is regulated by the Financial Conduct Authority.
© 2024 Crypto Composite Ltd
