Sims Metal Management
Beyond the Ticker
Sims Metal Management ASX: SGM
Please read disclaimer at the end of the document
Introduction
Sims Metal Management Ltd is a metals and electronics recycling company. It specializes in ferrous and non-ferrous metals recycling, post-consumer electronic goods recycling, and municipal waste recycling. Founded in 1917, its primary operations are located in the United States (where it is now headquartered), Australia (where the company was founded and its stock listing remains), and the UK.
1.0 Conclusion
Sims Metal has been on an incredible run since the pandemic crash. Coming off the back of a terrible FY20 financial results, FY21 is expected to be more impressive. Sims Metal’s share price is heavily influenced by commodity prices and as the base metals continue to surge I expect Sims to do the same. Sims ticks two of my boxes with an environmentally positive company to add to your portfolio and a safeguard against inflation. - Thomas
Sims Metal has a simple and understandable business model supported by a very strategic and experienced board. With a loss in FY2020, the company share price has recovered very well, increasing in line with commodity prices and has had good quarterly announcements. With the business trending positively on the back of strong commodity prices and support from strong corporate governance I expect the business to continue to trend in a positive direction. Issues I could see the business running into are the interruption to the supply chain, drop in commodity prices or systematic risk events. - Andrew
Sims is definitely something new and interesting to analyse which is what caught our attention in the first place. Their board is something incredible - in that, their level of expertise and industry knowledge is unrivalled. Although Covid-19 did stunt their financials as expected, their recent market announcements more than satisfies investors of their resilience and positive future outlook. I think Sims will do very well in the coming months as long as price action can hold this key level which it's currently situated at now. I rate Sims as a short term hold and long term buy. - Che
2.0 Financial Statement Breakdown
2.1 Majority shareholders
2.2 Directors and Executives
Geoffrey N. Brunsdon - Chair and Non-Executive Director
Mr Brunsdon has been a part of the board of Sims limited for over 10 years, joining in 2009, he has held his role as Chair since 2012. Up to June 2019 he was MD and head of investment banking Merrill Lynch international (Australia). Mr Brunsdon currently hold a Chair position with Metlife and APN funds management.
Alistair Field - Group Chief Executive Officer and MD
Mr Field was appointed as CEO at the end of 2017, Mr Field joined the company in 2015 as MD he has 25 years experience in mining and machinery he has held positions as COO for Rio Tinot’s Alcan’s Bauxite and Alumina division. He holds a degree in Mechanical engineering and an MBA from Henley Business School.
Georgia Nelson - Non-Executive Director
Ms Nelson has been with the company since 2014, she was senior vice president for Edison mission energy, and currently holds directorships with CMI & BLL, two publicly listed companies in North America. She has 25 years experience with a large US electric utility provider Southern California Edison. She has a Bachelor of Science and an MBA from the University of Southern California.
Deborah O’toole - Non-Executive Director
Ms O’toole have been a director with the company since 2014 also, she was the CFO of Queensland Rail, Aurizon and Director of CSIRO, Boart longwear and Director Pacific Aluminum at Rio Tinto. She Currently holds directorships with Alumina, Pacific National CUA and is a member of the Audit Committee of NSW treasury. She has a Bachelor of Laws from The university of Queensland and has done a Advanced management program from Harvard Business School.
Heather Ridout - Non-Executive Director
Mrs Ridout has been with the company since 2011, Mrs Ridout is the Chair of Australia Super. Director of the ASX she is on the board of the Australian Chamber Orchestra and is a member of ASIC’s External Advisory Panel. She was the CEO of Australian Industry group between 2004 to 2012, and she was also a board member of the RBA between 2011 and 2017. She holds a Economics degree with Honours from University of Sydney and in 2013 was awarded the rank of Officer of the Order of Australia.
Hiroyuki Kato - Executive Director
Mr Kato is one of the newer board members, being appointed at the end of 2018. He is the nominated Mitsui & Co., Ltd non independent director. Mr Kato has been with Mitsui & Co for a number of years working in their mining and also oil and gas divisions. He attended MIT Sloan School of Management.
James T. Thompson - Non-Executive Director
Mr Thompson is the longest standing board member from 2009, he was the Executive Vice president commercial for The Mosaic Company, which are listed on the NYSE and has an annual revenue of 7 billion. Mr Thompson was a member of a number of boards AISI (American Iron and Steel Institute), SMA (Steel Manufacturers Institute) and MSCI (Metals Service Center Institute). He holds a bachelor of science from the University of Wisconsin Madison.
Tom Gorman - Director
Mr Gormanis the newest member of the board joining in 2020. He was global CEO of Brambles for seven years, prior to that he was CEO of Ford Australia from 2004 -2008. Currently he is a Director of Worley and Orora Ltd, Mr Gorman holds a Bachelor of Arts in Economics from Tufts University, a MBA from Harvard Business School and a global Master of Arts in International relations and affairs from Tufts University.
Board Rating - 81 /100
3.0 Operations
Below is a breakdown of where and what the bulk of Sim’s operations are based around. Please note a Ferrous metal has Iron in its composition.
4.0 Exposures
Sims biggest exposure which was revealed in FY20 was the lower metal prices impacting intake levels. Lower sales volumes due to low metal prices is the biggest exposure Sims faces
5.0 Technical Analysis
Since the start of 2020, SGM has climbed 191% from its lows of $5.52 before reaching its current price of $16.14 which makes it a standout among large caps. In Early February this year, the share price bottomed out again after embarking on another rally. These lows around the $12 mark can be defined as a double bottom. Since then, the share price has rallied a further 32% and is currently situated right on support.
Point A, B, C & D
The above points illustrate the multiple tests of the upper resistance line and show the numerous failed breakout attempts. The multiple failed attempts have added validity to the line. Price action should be closely monitored in the coming months for any potential breakout through this line.
Pont E, F, G
These points show where price action has failed to fall below thus acting as support. The volume drops off in correlation to the prices should also be noted as a factor preventing prices from going lower. Although Points H and I have created a more relevant support line, Points E,F and G should be noted down in case price action goes lower from its current levels.
Point H
Point H was the commencement of the upper support line and is now the most relevant as well as acting as a double bottom. The double bottom analysis prevailed due to the low volume on either side and strong rally supported by an increase in volume. Since then, price has bounced off the green support line twice giving it validity.
Point I
Point I is where price action is currently situated. The drop in volume in the past days could signal the end of the decline however, if price action continues to fall, there is not much support until the $12 mark. This area should be closely monitored.
6.0 Competitors
7.0 Recent Market Sensitive Information
1HFY21 Results Release – 16th Feb 2021
Sims announces sales revenue of 2,452m which resembled a decrease of 9.5% from prior corresponding period. Statutory EBIT up 173.7m from prior corresponding period to a total of 78.5m. Interim dividend of 12c per share fully franked. Net cash position of 165.4m. Sims shares ended the day up 7.4%.
FY21 Trading Update – 19th April 2021
Sims announces Underlying EBIT for full year FY21 to be between $260m and $310m. The company also received 6.5m from JobKepper relating to FY20 and $7.5m relating to FY21. Due to the rapid and significant financial improvement to date in FY21, Sims stated that they will be voluntarily returning the $7.5m to the Australian Government. The market saw this as a huge positive as shares ended the day up almost 9%.
Trading Update – 15th June 2021
Sims announces “Underlying EBIT for full year FY21 to be between $360m and $380m compared to previous guidance range of between $260m and $310m. Additionally, Sims announced that their business divisions are forecasting to maintain the excellent third quarter right through the fourth quarter. Proprietary intake volumes for 2H FY21 have remained at around 95% of FY19 average monthly volumes compared to 85% in 1H FY21. Sims shares ended the day up 1.38%
8.0 ESG
Sims has received an impressive CSR / ESG rating of 93/100
8.1 Environment
600 000 tonnes of curbside waste was recycled, 8.2 million tonnes of secondary metals have been recycled and 450 000 MWH of electricity has been produced equivalent to 80 000 homes for a year.
8.2 Social
37% of the board of directors are women and only 3 out of 12 ELT members are female.
8.3 Governance
Please refer to 2.2.
9.0 Focus Point
The focus point for Sims is the price of metals specifically Iron ore, with metals prices having a direct link to profitability. Another thing to focus on is the quality of the board that Sims has assembled, good management is unparalleled in terms or generating business success.
Disclaimer
Advice in the Material is provided for the general information of readers and viewers (collectively referred to as "Readers") and does not have regard to any particular person's investment objectives, financial situation or needs. Accordingly, no Reader should act on the basis of any information in the Material without properly considering its applicability to their financial circumstances. If not properly qualified to do this for themselves, Readers should seek professional advice.
Investing and trading involves risk of loss. Past results are not necessarily indicative of future results.
The decision to invest or trade is for the Reader alone. We expressly disclaim all and any liability to any person, with respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance upon the whole or any part of the Material.
