Sika's Pullback Looks Like A Real Opportunity

 

I’ve followed Swiss construction chemicals specialist Sika (OTCPK:SXYAY) for some time, and there have been a few constants over that period – strong management execution, ongoing reinvestment into technologies that further environmental/sustainability goals, and a high valuation. Nothing has changed about the first two, but the shares have fallen about 25% from their peak and more than 10% since the price at my last update.

Sika is no “bargain” today in the classic sense, and I do have concerns about further derating, as well as some nearer-term concerns about disruptions to commercial construction growth. Beyond that, though, I see a long runway for growth as sustainable construction materials continue to gain share and Sika leverages opportunities in both developed and developing markets. A high single-digit organic revenue growth rate is not a conservative estimate, but I do see an opportunity here that I haven’t seen in some time from a valuation perspective.

 

Read the full article: 

Sika's Pullback Looks Like A Real Opportunity

Sika Leveraging Stronger Construction Markets, And Well-Placed To Leverage Green Urbanization For Years To Come

 

As a global leader in specialty chemicals used in construction, Sika (OTCPK:SXYAY) (SIK.S) is an invaluable bellwether for the state of global construction activity, and the company is most definitely seeing strong activity across its global footprint. Cost inflation is an issue, but it is one that management believes they have in hand and that will be relatively well-contained from this point on. Longer term, the company remains incomparably well-placed to leverage opportunities in greener construction on top of the ongoing trend in urbanization.

Sika shares are up modestly since my recent update, and the shares continue to remain quite pricey by conventional means. I’m not going to make an “ignore the valuation and just buy” call, but I will note that few companies in any industry have the long runway of global growth potential that Sika has, not to mention healthy margin leverage, so there is definitely a credible argument for scarcity value here on top of the above-average growth.

Read more here: 

Sika Leveraging Stronger Construction Markets, And Well-Placed To Leverage Green Urbanization For Years To Come

Sika Riding On Its Leverage To Greener Construction

 

Quite likely one of the best-run companies I follow, Sika (OTCPK:SXYAY) (SIKA.SW) shares have “only” kept pace with the broader industrial sector since my last update on the company, as well as keeping pace with BASF (OTCQX:BASFY), while Saint-Gobain (OTCPK:CODYY) has done a fair bit better and RPM (RPM) a fair bit worse. Keep in mind, too, that “only” keeping pace still means that the shares are about 30% higher than they were at that last article.

Sika is already seeing a strong post-pandemic recovery, with particular strength in Asia (NASDAQ:CHINA) offsetting a more sluggish recovery in the U.S.. As the year rolls on, I expect good underlying demand improvement, and I love Sika’s long-term exposure to greener building trends in non-residential and infrastructure, leaving the company well-placed to take advantage of government programs aimed at promoting a greening of those end-markets.

Price/value remains a problematic issue if you’re a more value-oriented investor. I believe Sika could generate organic revenue growth double that of global GDP, with M&A adding in more on top of that, and I likewise see room for more operating leverage. Even with those assumptions in place, though, the valuation is very much in growth stock territory.

 

Click here to continue: 

Sika Riding On Its Leverage To Greener Construction

Sika Flexing Its Strengths, And The Street Has Taken Notice

I’ve said it before, including in reference to Sika (OTCPK:SXYAY, SIK.S), but it bears repeating - low valuation doesn’t make stocks go up and high valuation doesn’t make them go down. While Sika hardly looked cheap when I last updated my thoughts on the company, solid execution through the pandemic, increasing expectations of green building retrofits, growing optimism on margin targets, and increased Street coverage have all contributed to another 40% or so move up in the share price.

I can’t tell you that Sika is cheap by any fundamentals-based approach. I can say, though, that this is an uncommonly well-run company with significant growth opportunities in all of its core markets, as well as meaningful margin leverage potential. With “green building” now a hot secular trend, I don’t think valuation multiples are all that important to the stock for the time being. I do believe “the time being” is a key caveat though; while I do believe that Sika is an excellent company with a great future, I do also believe that valuation matters over the long term, and it’s hard to see how this stock re-rates substantially higher.

 

Read the full article here: 

Sika Flexing Its Strengths, And The Street Has Taken Notice

Sika's Growth Slowed Significantly In Q4, Making Valuation More Of A Concern

I’ve said it before and I’ll probably have to keep saying it until I stop writing – valuation, in and of itself, doesn’t often move stocks. To that end, while I thought Sika (OTCPK:SXYAY) (SIK.S) was expensive back in July, I’m not surprised it’s held up reasonably well (more or less in line with BASF (OTCQX:BASFY) and Arkema (OTCPK:ARKAY), behind RPM (RPM), better than Saint Gobain (OTCPK:CODYY) and inline with the Swiss market). This is, after all, one of the best specialty chemical companies I know, and the company’s presentations at its October capital markets day made a strong case for exceptional performance for at least the next five years.

Sika’s fourth quarter revenue disappointed investors, but was in line with my expectations for the most part. I am concerned that 2020 could be a tougher year for non-residential construction (it will almost certainly be slower), but I’m not betting against Sika’s ability to continue to gain share through innovation while also driving higher margins. The problem is that that’s already in the share price, and I can’t really see how these shares offer above-average potential.

Read more here:
Sika's Growth Slowed Significantly In Q4, Making Valuation More Of A Concern

Sika's Excellence No Longer A Secret

It’s been a while (almost two years) since I last wrote on Sika (OTCPK:SXYAY) (SIKA.S), but almost everything that has happened since then has strengthened my view that this is an excellent, if fairly obscure to American investors, specialty chemical company with significant long-term growth potential and a prudently aggressive management team.

With the shares up more than 50% (on the Swiss exchange), Sika shares have significantly outperformed peers and rivals like BASF (OTCQX:BASFY), RPM (RPM), GCP (GCP), and Arkema (OTCPK:ARKAY), so much so that I do worry that the shares have gone too far relative to the weak/weakening underlying trends in construction and autos. This is a stock I’d love to own at a better price, and I’m not entirely convinced I’ll get one, but I think this is a risky time to buy a company with stretched multiples and weakening underlying markets.

Click here to continue:
Sika's Excellence No Longer A Secret

Sika AG's Specialty Chemical Businesses Continue To Outperform

Swiss specialty chemical company Sika (OTC:SXYAY) (OTC:SKFOF) is an interesting company in many respects. A leader in construction chemicals and a meaningful player in adhesives and sealants, with a strong position in autos, Sika has not only established a strong portfolio built on highly-focused R&D, but also established a strong business with a strong run of improving margins and returns since 2011.

"Interesting" is not an unreservedly positive word, though, and so too in this case. Sika's ADR volume is minuscule, and the company's low share count means the per-share price is quite high and likely out of reach for many individual investors. What's more, there's a dispute between the independent members of the board and an insider group that is wending its way through the Swiss court system.

Sika's shares have been relatively strong over the past few years, but the shares still appear to have a little bit of upside from here. With opportunities to meaningfully grow its business in North America and benefit from emerging market infrastructure growth, there are still opportunities for outperformance from here, but a lot is riding on shareholder-friendly resolution of the ongoing legal issues.

Read more here:
Sika AG's Specialty Chemical Businesses Continue To Outperform

H.B. Fuller Benefiting From Addressable Market Expansion

As the second-largest participant in the relatively fragmented adhesives market, there are certainly some positive characteristics to H.B. Fuller (NYSE:FUL). Fuller has historically been good at "sticking to its knitting" and focusing its resources on those markets where it had a strong position, and the company should be able to achieve meaningful operating margin improvements in the next few years from greater manufacturing and operating efficiency. Better still, the company's more recent turn towards engineered adhesives gives the company better exposure to some of the more attractive growth markets within adhesives.

Although Fuller's shares have lagged the local market performance of its major competitors (Henkel (OTCPK:HENKY), Sika (OTC:SXYAY), and Arkema (OTCPK:ARKAY)), it's hard to call the shares undervalued, as the price already seems to discount high single-digit/low double-digit growth in free cash flow and EBITDA. On the other hand, industry M&A has established a double-digit multiple on EBITDA as "reasonable" and H.B. Fuller's pivot toward faster-growing segments of the adhesives market could deliver better results than presently expected. On balance, I think Arkema is a more interesting pick today, but H.B. Fuller would be worth reconsideration on a pullback.

Read more here:
H.B. Fuller Benefiting From Addressable Market Expansion

A Growing Specialty Mix And Improving Acrylics Bode Well For Arkema

France's Arkema (OTCPK:ARKAY) (AKE.PA) is far from unusual in trying to shift away from commodity chemical businesses in favor of specialty businesses with higher margins and less competition, but the company has nevertheless done a good job of making that shift. I believe that at least 70% of the company's earnings can now legitimately be said to come from specialty businesses, and it has the opportunity to buy its way toward an even richer mix.

In addition to the better growth and margin potential of specialty businesses like adhesives and sealants, Arkema's commodity acrylics business could be looking at a cyclical improvement in the coming years. Looking at the cash flow potential of the business, the shares look as though they could be 5% to 10% undervalued, which I believe is enough in this market to merit a closer look. I would note that Arkema's U.S. ADRs aren't as liquid as an investor might like though, and so I'd suggest at least considering the Euronext-listed shares.

Read the full article here:
A Growing Specialty Mix And Improving Acrylics Bode Well For Arkema

Investopedia: W.R. Grace - Maybe The Most Valuable Bankrupt Company Going

While individual/personal bankruptcy is pretty straightforward, the same cannot be said for corporate bankruptcy. Airlines go through bankruptcy seemingly about as often as most people buy and sell cars, while in other cases bankruptcy is the end of the story – whatever assets are worth something are sold off and the company ceases to be.

Then there's the case of W.R. Grace (NYSE:GRA). Technically in bankruptcy, Grace did not go into bankruptcy because of any flaws in its core business, but rather the rapidly-accelerating and virtually uncontrollable costs of settling asbestos litigation. With a valuable catalyst business, a stable coatings business, and a construction products business leveraged to a recovery, Grace is most definitely a going concern. On the other hand, a better-than-60% jump in the stock over the past year and a nearly 20-fold increase from the 2009 lows seems to already recognize the ongoing value in this business.

Please follow this link to continue:
http://www.investopedia.com/stock-analysis/061813/wr-grace-maybe-most-valuable-bankrupt-company-going-gra-alb-dow-rpm.aspx