The world's largest listed metal recycler Sims Metal Management Ltd (ASX: SGM) has today reported its interim results.
Despite having a market capitalisation of over $2.3 billion, over 250 facilities that employ around 5,700 employees globally and boasting 60% of revenues from operations in North America, Sims which operates both metal and electronics recycling businesses is not a particularly widely-followed stock.
This scenario could play to the advantage of enterprising investors given that Sims looks to be turning the corner after a difficult period. Here are the group's latest results –
- Revenue slipped 5.7% to $3.4 billion
- Underlying earnings before interest and tax increased 16.2% to $149.3 million
- Underlying net profit after tax surged 53% to $64.4 million
- Underlying earnings per share jumped 54.7% to 31.4 cents per share (cps)
- Interim fully franked dividend of 16 cps
- Net cash position of $49 million
Should you buy?
Management provided commentary on the outlook for the reminder of the financial year which suggests the business will continue to face headwinds particularly given the steep decline in iron ore prices which in turn has negative consequences on the pricing of scrap metal.
Despite the ongoing tough operating environment that Sims faces, fund manager Perpetual Limited (ASX: PPT) is one investor who appears to have confidence in the company, with the fund manager recently increasing its substantial shareholding from 12.7% to 13.7%.
The market also reacted positively to the result, sending the share price up over 8% to $11.51 by lunchtime. However, based on current forecasts for full year earnings per share, the stock probably looks fairly valued with a reasonable amount of margin improvement already priced in. At present, Sims could be one for the watch list and could become interesting at a lower price.
