SML - Synlait

[Minimoke]

I'm not even sure why SML would go with SAP. Its a massively complex product for what is pretty much a simple milk processor.

[Ferg]

I'm not even sure why SML would go with SAP. Its a massively complex product for what is pretty much a simple milk processor.

Agreed.  There are very good alternative systems nowadays like NetSuite from Oracle.  It is an online simplified ERP system that seems to have all the necessary bells and whistles for (not just) manufacturers, at a fraction of the cost of SAP.  There are numerous options for add-ins and support.  When comparing to SAP it doesn't feel like you are wading through chest high treacle.

[winner (n)]

All hunky dory with SAP

https://www.reseller.co.nz/article/703487/synlait-beds-down-57-5m-on-premise-sap-rollout-dodging-accounting-rule-change/

[BlackPeter]

I'm not even sure why SML would go with SAP. Its a massively complex product for what is pretty much a simple milk processor.

SAP is the name of the company, not of the product.

The ERP system they are offering can be configured as simple or as complex as your (or whoever is doing and / or paying for the job) heart desires. Same is however true for the offerings of the other companies you mention, though not all of them are as scalable as the SAP suite.

[winner (n)]

Shame that just over a year ago Synlait appointed another Fonterra has been as CEO

Doesn't seem to be working out

Fonterra has beens been any good anywhere else?

[winner (n)]

Doesn't seem to be anybody on the Synlait Exec team in charge of IT

Suppose it's left to the CFO (jeez an accountant in charge of IT) or the Director ofOperations to drive this SAP thing.

The Board seems a bit light on IT knowledge as well though the new appointment Paul has ' extensive experience in planning and operations, finance, and information technology.' ...but then again he's a Fonterra has been as well.

So probably it's all down to the Hon. Ruth Richardson to sort the mess out ...go Ruth baby you can do it

[Hectorplains]

Shame that just over a year ago Synlait appointed another Fonterra has been as CEO

Doesn't seem to be working out

Fonterra has beens been any good anywhere else?

I don't know if you could rightly call him a 'has-been' - did he even set the world on fire at Fonterra? 

Synlait's board is so uninspiring.  Three placeholders from Bright Dairy but they felt the need to bring in Paul Washer , this month, because of his Chinese experience and connections?  Then there's Ruth Richardson - who is now 72 years old and claims the disastrous Dairy Brands amongst her previous governance roles. 

[winner (n)]

I don't know if you could rightly call him a 'has-been' - did he even set the world on fire at Fonterra? 

Synlait's board is so uninspiring.  Three placeholders from Bright Dairy but they felt the need to bring in Paul Washer , this month, because of his Chinese experience and connections?  Then there's Ruth Richardson - who is now 72 years old and claims the disastrous Dairy Brands amongst her previous governance roles. 

You're right Hec ......'has been' probably wrong description ..my bad as a 'has been' generally does refer to somebody who was once great / good.

A bit of worry that Synlait thinks anybody who spent time at Fonterra must be bloody good and worth hiring. 

[Basil]

I don't know if you could rightly call him a 'has-been' - did he even set the world on fire at Fonterra? 

Synlait's board is so uninspiring.  Three placeholders from Bright Dairy but they felt the need to bring in Paul Washer , this month, because of his Chinese experience and connections?  Then there's Ruth Richardson - who is now 72 years old and claims the disastrous Dairy Brands amongst her previous governance roles. 

Agree 100% that the rot with this company starts at the board level and permeates downward from there.
This company fails my investment selection criteria on so many different level's including woeful governance, egregious risk taking (Pokeno), poor management with no track record of growth, highly risky commodity processing company trading at grossly excessive multiples for the agri sector and last but certainly not least, amongst the most excessive level's of ESG extremism on the NZX.  It also has excessive debt and too much reliance on a few key customers.   In terms of not seeing anything I like this runs a very close race with OCA lol

[Hectorplains]

OCA still has its share of devotees (over at the other site)  who are happy to continue to drink the OCA-aid.  It's hard to find a fan for SML anywhere.  I thought they might've turned the corner with the full year announcement but the latest update suggests it's more a case of driving in circles.  Despite Bell Potter's pick, I can't see any reason to jump in. 

[Basil]

Was $7 five years ago so it's halved since then and never paid a dividend.  That's an 'interesting" track record.

[winner (n)]

Jeez Basil .....fancy saying SML has no track record of growth

Last 7 years sale growth has been at 20% pa ...yep CAGR 20%

And forecast about 10% pa over next 5 years

That's pretty good

[Basil]

Sales growth is meaningless without earnings growth.  You know me mate, I am a numbers man.  I let the numbers do the talking and all their endless ESG greenwashing propaganda is just B.S. as far as I am concerned.
Growth company or no growth cyclical commodity processing company?
From 2022 annual report earnings per share
2018 41.55 cps
2019 45.33 cps
2020 41.45 cps
2021 (13.77 cps)
2022 17.62 cps
2023F 25 cps
2024F 35 cps
2025F 39 cps
Forecasted eps is average of analysts' from Market screener
https://www.marketscreener.com/quote/stock/SYNLAIT-MILK-LIMITED-14391761/financials/
No growth agri stocks are worth about 7 times, (account for agri risk) forecasted earnings in my books.
7 times 25 cents is $1.75, half where it sits now.
Academic interest of mine...fascination with corporate train wrecks.
Don't worry about my opinion though mate, no dividends = no interest from me.  Going forward from here I won't own no dividend stocks at any price.  As a matter of principle any company that thinks they are entitled to retain 100% of earnings is a culture of corporate self-centeredness I'm simply not willing to support.   Happy to leave start-up companies and any other non-dividend paying companies to others.

[winner (n)]

Was $7 five years ago so it's halved since then and never paid a dividend.  That's an 'interesting" track record.

Was $13 a few years ago

Really cheap now

[lorraina]

Bell Potter like them.
Synlait Milk (SM1)
SM1 is NZ's fourth largest milk
processor and a B2B supplier of dairy
ingredients (SMP, WMP & AMF), infant
formula (IMF) products and Lactoferrin.
SM1 counts global FMCG companies
among its client base, including the
a2Milk Co (A2M) for which SM1 is the
exclusive supplier of infant formula in
China, Australia and NZ.
FY22 was a year of transition for
SM1, with FY23e set to benefit
from new customers in nutritionals
and stabilising demand from A2M.
The optimisation of capacity from
ingredients towards nutritionals and
valued added products results in a
favourable margin gain for SM1, while
also accelerating deleveraging (prepayments and utilisation of assigned
receivable facilities for IMF). This
combination of operating leverage and
balance sheet deleverage is likely to
emerge as a key driver of future share
price direction. We view the positive
outcome on the USFDA process for
A2M as an incremental positive for
SM1.
Buy, Price Target $3.60