Synthomer Plc develops, markets and sells polymer products derived from petrochemical monomers.Its products cover the industries including coatings, building products, gloves, carpets, paper, adhesives, plastics and PVC.
<b><u>Valuation 2017e 2018e</u></b>
P/E ratio (Price / EPS) 19,1x 17,8x
Capitalization / Revenue 1,23x 1,20x
EV / Revenue 1,35x 1,28x
EV / EBITDA 10,3x 9,47x
Yield (DPS / Price) 2,40% 2,67%
Price to book (Price / BVPS) 4,56x 3,98x
FY figures look good with divi up 30% (''dividend covered 2.5 times by the underlying earnings per share'') and revenue climbing from recent acquisitions (PAC) and 'currency tailwinds'.
The analyst presentation, slides and accompanying Q&A webcast gave more detail.
Glove market is growing especially in Asia and Malaysian factory capacity is being increased in 2 stages Q2/3 2018 90kTon and further 60kT later.
The German factory in Worms is also being expanded (debottlenecking!) to give more acrylics capacity.
Todays acquisition announcement is for a bolt-on niche chemical co. Perstorp that will be a 'good strategic fit' with specialist coatings to improve synt offering.
- goodwill is now £300M on balance sheet + £54M acquired intangibles
- debt is climbing (to fund the acquisitions)
- the Malaysian factory has 'pioneer status' with low tax rates ending in 2020. Likely climb in tax costs after this.
- raw materials costs are rising up to 3x in last 3 months (styrene, butadiene) but these costs can be passed on without harming margin. Working capital hovers around 10% of sales and shouldnt rise much.
Overall, growth looks set to continue organically as well as with more acquisitions. Calum Maclean CEO said 'we are ambitious to grow synthomer' - he's on the look out for something big (''larger material transaction'') from a multinational bluechip quality Co. But will be cautious on due diligence and 'will come to market' with well thought through plans as when an appropriate target comes up.
I take that to mean a rights issue rather than raising debt. In this regard there are comparisons with RPC.
My impression is that gloves are a high volume low margin product where they have capacity advantages but SYNTs main strength is in the specialist chemicals segment. They are also serious about R&D:
''To ensure a good understanding of developing technology trends and to underpin the basic science of our product platforms, there is an ongoing program to partner with leading European universities. Funded PhD projects have, for example, looked at new polymer systems, developed an understanding of fundamental film forming and adhesion performance and evaluated novel process technology. As part of the programme, we have recruited two staff members since 2015 with PhDs that were sponsored by Synthomer. In partnership with the Royal Society of Chemistry, we sponsor the award for best Polymer Science PhD thesis from a UK university and support a number of events for young chemists.''
I'm hoping today that the £4 level will be breached. The overcapacity in Asia in nitrile has clearly held the shares back and remains a concern. Nevertheless there are enough positives, especially currency and the Hexion contribution to make this at least a solid hold.
SYNT shares have been edging up nicely. Interims are due in a couple of weeks and should be encouraging. SYNT is a big beneficiary like most chemical companies from lower sterling. Surely next month the share price will be over £4?
"The market is down this week, but LSE:SYNT:Synthomer is up 12%, making it one of the best-performing stocks right now. The latest surge was triggered by Mergers and Acquisitions (M&A) action, with the chemicals company acquiring an ..."
Tempus in the Times today has title 'Columbus opens the door to America'.
He mentions the deal looks a good one but won't move the dial significantly to double earnings as wished for by the CEO. Believes plenty of firepower left to do more and does not expect the next deal to be too far off.
However, he advises to avoid for now as P/E is around 16. That defies logic - I would think the biggest market in the world is now more accessible to SYNT and cost savings from the current deal will be exceeded.
Buzz, exiting South Africa may mean taking a loss but it is the right thing to do. UK companies like SYNT and even Barclays are not well placed to deal with the empowerment pressures which are building up. As regards the acquisition, it looks a good fit, it will generate cash and is easily financed with borrowings.
SYNT is a funny share. It often looks expensive on a p/e basis but if the news is good it performs well.
Selling off the S African business sounds like a loss to me. S Africa has been in a bad way recently and the Rand collapsing in value. In theory their products should have been getting cheaper. So SYNT is selling off assets at a low part of the economic cycle - but they see things getting even worse.
The acquisition of a US business when the £/$ exchange rate is so bad sounds like unfortunate timing. The sum of £156 plus $21m resultant costs needs to be seen in the context of the company's current value of £1,100m. That said they need to find lots of cash to finance the deal. It was not all that many years ago that SYNT was in financial trouble. They recovered and then made a huge special divided. I am wondering if the accounts will be starting to look a bit stretched with this purchase? On the other hand their last acquisition worked out really well SYNT suggest annual synergies of $12m by the end of 2018 - that do not sound to be particularly large. It will be interesting to see what the market makes of it all.
It starts off very well - but end warning that the competition will be increasing in the Far East. It is not all that long ago that SYNC had reduced profit caused by over supply from competitors increasing their volumes. It will be interesting to see how the market prices its future earnings.
Chemicals makers Synthomer (SYNTS) is a buy for Berenberg thanks to potential for expansion in latex glove manufacturing and mergers and acquisitions (M&A).
Berenberg analyst Sebastian Bray initiated coverage of the stock with a buy recommendation and a target price of 400p. The shares rose 3.3% to 340.6p yesterday.
Synthomer is the worlds leading supplier of nitrile latex, which is used for the manufacturer of disposable gloves. The disposable market has shown a compound annual growth rate of c.8% over the last decade and we forecast growth of 9% per year to 2017 as healthcare provision in emerging markets improves, he said.
Synthomer also enjoys market-leading positions in speciality chemicals geared to construction in fast-growing parts of Asia and the Middle East, and is implementing a cost-savings programme of c.£9 million a year by 2016.
He added that the company has stated ambition for large M&A, with at least £660 million available for deals.
Synthomer has performed well over the last few months and has re-rated significantly We believe there is more to come."
Having sold out at a good profit way too soon with SYNT, I have watched the price continue to climb with huge dividend payouts. One of the main drivers has been the improved latex market in the Far East boosting profits. For the sake of those whom I have advised here before, I think that it is worthwhile recognising that the slowing Chinese economy may well have a knock on effect on the Malaysian economy and in particular the price of latex. If demand does not keep up with the forever increasing supply, then SYNT may well find that margins start to shrink and profits fall, With the threat of global slowdown probably limiting SYNT's european demand, I am wondering if the price of SYNT could come under pressure over the next few months. Perhaps a stop loss might be in order??
Well I see the results as a medium positive considering the economic conditions especially in Europe and the Euro currency pain. I do agree that the SD whilst welcome could have been held off or could have been used to pay down debt. but overall, not unhappy with the performance. In these times of huge uncertainty and with Russia, Europe, Syria, the falling price of oil, plus all the other impact news, Synthomer are performing well in comparison. Happy to hold at this time but I do feel 270p will be a big old barrier to get over and expect the price to sit around 250p. However for me, these are just steady eddies who can give me a reasonably decent divi whilst the potential exists for capital increase if the euro zone improves. DS
I thought that the final results were a bit indifferent with lower turnover and profit compared to last year. As expected the dividend had been increased, but what surprised me was the special dividend of 7.8p a share on top of the 7.8p a share ordinary dividend. They still have significant borrowings and it was not all that many years ago that SYNT was financially exposed to its large borrowings. Personally I think that the special dividend is unwarented and that they should first reduce the borrowings further. Does my memory fail me or did not the FD change - is this a sign that he is a weak FD who has given in to pressure to pay out money to share holders despite the borowings? No doubt some in the city will like the dividends, but I am uconvinced that it is wise to pay out too much too soon. ..but then I am a bit cautious. As I said in my last post, I no longer hold shares in SYNT, despite holding them for many years and having far too many only a short time ago.
Recently sold out at a good profit. What happens - the price then shoots up. Considering that not all that long ago I was topping up around the 180p level, this is a significant rise. I thought that the price had gone too low, but I do not see an real change apart from a lower price of oil. If they can hold their prices then their profit margins should hold up. On the other hand, a price fall with lower volumes and the same profit margin would give lower overall profits. Europe is still struggling and China's growth is easing back, so I decided to take profits whilst the going was good. Longer term I can see the increased dividend making this share progressively more attractive, so I am watching in case the price retraces.
The lower price of oil is helping reduce raw material costs, I guess this is implying that production costs will be lower so hopefully positive on the bottom line. Not a bad update considering the general mayhem in many other sectors.
Just sold 1.5k at 239.5360p a share. The irony was that I was logged in hoping to buy back some shares after their recent surge! Now 230-237p so I am wondering if SYNT had been tipped in a magazine/ newspaper and the price rose due to a bit of buying in a thin market? ..but the quote is all over the place eg now 236.8-237p,237.1-241.4, 238-241.4, 238.1-238.2, I thinl the pricing is reflecting a comment that i made previously. Now 230.2-238.3p, 230.5-241p, 230.5-238.1.
Conclusion - a bit of selling pressure pushes the buy price to about 231.9, a bit of buying moves the buy price to over 240p. The best price to buy/sell is now about237p. but if one times things wrong then one can get quoted an awful price. Now 239.1-245p...
I sold a few today at 12;28 and got 234.4880p a share. Yes at a small profit!! I was hoping that the share price might rise near to close of play, as today is the last trading year for 2014: some fund managers buy in some shares into their holdings to give slightly inflated share prices so that they can quote better fund performance for the year. So there was indeed an increase in the share price at the end of the day, but I am surprised that the closing price is supposedly 237p a share - a price that does not reflect the buy/ sell spread (234-236p) at close of play.
The next question is where do I see SYNT going in 2015? I perceive quite a mixed bag of changes:-
The £ has fallen quite a bit compared to the $, but The £ has fallen in value compared to the Euro - so remittances in £ will be up and down depending on the source of the profit.
The price of oil has fallen significantly - so manufacturing costs and input prices should have fallen - but what will happen to profit margins and demand? This will be a full year with the synergies from the earlier 'merger' now fully worked through.
The Euro zone is still in the doldrums so demand will be restrained for another year.
Malaysia should see further increases in demand for latex gloves (eg Ebola demand) - an increasing but still relatively modest component of SYNT's turnover.
Interest rates will probably remain low so borrowing costs should be similar to before.
Finally there is the prospect of a higher dividend payout in line with guidance from the company. Once that starts to feed in, the shares may appear to be more attractive to income seekers.
Where will the share price be at the end of 2015. My best guess is about 260p. ie about 10% higher than the current price.
"A fall in European and North American demand has caused speciality chemicals firm LSE:SYNT:Synthomer to rethink pre-tax profit guidance. Its shares are down by 7% in response, giving up all the recent gains, driven in no small part by significant ..."
A bit disappointing to hear that demand is slightly down. However I feel that the mark down was too much based on the current trading and strengthening margins. I saw a spread with a buy price of 192p first thing this morning. But like the games where you tick here for a pay rise - it was not there when I tried to buy at that price and got quoted 194.6p. I believe that 190p is a support level and virtually a one way bet with the director buying heavily at that price. With debt well down and a progressive dividend policy, I still rate this share highly.
Well the update is not great and I suppose does fall into the "profit warning" bracket. Some consolation for me is that the director purchases recently provide some comfort. I would guess he must have known two weeks back the pending news but still bought approx 500m at 189p to 192p. So I take from that a small comfort that either things will improve or a bid is in the pipeline. DS
Synthomer acquires full ownership of Eka Synthomer
Synthomer plc today announces that it has acquired the remaining 50% of Eka Synthomer owned by Akzo Nobel, its joint venture partner since 2011, for a total consideration of Euro 5 million.
Eka Synthomer is based in Finland and produces and sells high quality styrene-butadiene latex products for the paper and board industry mainly in Nordic countries. It is one of the leading paper latex producers in Europe.
Commenting on the transaction Adrian Whitfield, Chief Executive, said:
"This transaction is consistent with our strategy and represents another logical step in the consolidation of the European SBR latex market."
SYNT seems to be going through another erratic phase at the moment. Saw 225-230p very briefly just now. Now 215.2-216.7p I saw some wild swings a couple of weeks ago. I guess if one is quick one can sneek in. A couple of weeks ago I saw this happening, bought on the low swing and an hour or so later sold on an upward swing. It looks like the MM trading system went into panic mode after having a few buy orders this morning. Now 215.4-215.8p. No, the price is very volatile with the buy price doing its usual jump at the slightest sign of interest 215.4-219.8p to be followed by a gradual reduction.
Dato' Lee Hau Hian has been very busy buying more shares to add to his huge holding. A had quite a long chat with him a little while ago- he is a really nice guy. He was very enthusiastic about the prospects for Synthemer's nitrile business in Malaysia - what he is doing is putting money where his mouth is. No doubt he was attracted by both the fall in the share price and the additional reduction due to the fall in the value of the pound. He presumably is of the opinion that the nitrile business is now much better than earlier in the year - the fall in the profits from Malaysia was one of the reasons for the fall in the share price. I suspect that this director's buying is putting a floor of about 190p for the share price.
I don't know relatively speeking how important the ebola crisis is in terms of demand for gloves, but it must be becoming significant since the number of patients is sky rocketing.
Currently 214.5-214.8p. Clearly I could have bought more cheaply! I am a bit surprised by the recent fall as my analysis implied that SYNT was undervalued at higher levels. I will be tempted to buy yet more if it keeps on falling as I have confidence in the company (having held shares in it for a long time now) and there is a good prospective dividend. Now has anyone spotted a pitfall before I go wrong again?
It appears that trading in SYNT was briefly paused just now as it went to auction. That also explains why there is huge uncrossed trade. Just prior to auction SYNT was 229.5p. It is a useful recovery from the 222p region, but I am hoping for a bit more..
Typical. I say 'buy' than a few hours later and the share price fell to 221.1-222.3p. So just picked up another 1500 in the hope that things will work out. I think that is my quota for now, so I now want the price to go up!!
I previously dismissed ebola as being too remote and small scale to influnce SYNT's trading. However ebola has since become much worse and importantly the shortage of medical equipment has resulted in Malaysia planning to send 20m pairs of gloves (11 container loads!) to W Africa:- http://www.bbc.co.uk/news/world-africa-29209457
This is excellent news as it will help mop up spare capacity in Malaysia and result in firmer prices sooner than would otherwise have been the case. Interesting to note that Malaysia manufactures 60% of the world's supply of rubber gloves.
Another price dip - just bought 1631 more at 224.29p. Today's fall in the value of the £ just makes me think that the overseas remittances will now be even higher in £ terms and consequently the case to buy has improved. I also sense an improving international environment, albeit with Japan still in the doldrums.
Crumbs, price has now bounced a bit, now 224.3-226.4p.
Well the share dropped a bit just now, so I decided to put some money where my mouth is and have just topped up with 2.5k at 226.076p. Not sure why there is a fall as the turnover is quite light and the market as a whole is relatively high. Aha the spread just jumped 226.2-227.6p - was this a dealer rattling the cage and pushing the price down?
Likewise, in the UK the construction business is doing well, but hampered by shortages in materials - that to me equates to strong demand for Synthemer's products and firm prices:- http://www.bbc.co.uk/news/business-29030604
Agreed elsewhere in Europe there are problems, but there is talk about some reflationary measures there to address them. So overall I am feeling reasonably confident that Synthemer has a bit more of a recovery in the share price still to come. I hope so as I bought quite a few at lower levels!
Investors in Synthomer (SYNTS) could be in line for further capital returns from the chemicals company, even as it announced an increase in its interim dividend, according to Jefferies analyst Joe Spooner.
Mid cap stock Synthomer was the biggest riser on the FTSE 250 yesterday, jumping 8% to 224.5p as investors digested the news of a 3p interim dividend, up from 2.4p the year before.
On first view, we think that still leaves good scope for one-off capital returns to come (subject to future bolt-on acquisition and capex activity), said Spooner.
The company reported a fall in pre-tax profit to £45 million for the six months to the end of June as increased competition in Asia hurt performance. Profits for the year are expected to be in line with levels last year.
Spooner has a buy rating on the stock, and a target price of 338p."
"LSE:SYNT:Synthomer has not had it easy. Economic stagnation in the chemicals company's core European market, a price war in the Asian rubber glove industry and a strong pound has hit profits hard. Last month, management warned that full-year ..."
"Despite unveiling a 7% drop in underlying pre-tax profit, shares of specialty chemical maker Synthomer (LSE:SYNT) jumped by as much as 8% to 225p in early trade, after the announcement ofÂ substantial boostÂ to the interim dividend and ..."
Oh dear, looks like half of my message got chopped! What I had said was the current dividend policy is now a factor of 2.5 on earnings. The full year results are now predicted to be similar to last year. Last year's final dividend was 3.6p and year EPS was about 20p a share. This means a full year dividend of about 8p. Taking off the 3p for the current interim dividend means that the final dividend should be increased by about 40% to 5p a share. At 225p a share this equates to a dividend yield of over 3.5%. With prospects improving the dividend should grow over future years. The other key thing was that debt has again been significantly reduced - hence the ability to pay a higher dividend.
I 3.6p was last year with the full year results, then assuming and EPS of about 20p, then tis gives a total dividend of about 8p.
So far this year we have had an interim dividend of 3p declared (previously 2.4p). So this implies that the final dividend of 3.6p will be increased by nearly 40% to 5p a share. With the current share price well up today at 225p, this translates to a yield of over 3.5%.
The nitrile business is still relatively small beer - so the improved European outlook is the key message. That said, today's news of low inflation in China implies continued expansion there and in turn increased demand for nitrile products and profit margins. I therefore anticipate that the share price will remain supported for a little while.
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