Sims group

Sims is the metal basher (recycling company).

Perhaps the best way to start is with this broker note, it sums it up quite nicely. That was RBC.

UBS were similarly confounded.

Revenues did indeed look fine.

But margins were very weak, as such EBIT essentially fell in a hole, tracking only modestly better than the dark periods of the pandemic. That’s a tough journey to follow for a stock that had re-rated from $6 to $20 and back to $12.

Sims is amongst the more cyclical stocks on the ASX; things are either great, or they are horrible, and if you can pick it up at a great price you’ll probably make money.

But it’s not for the faint hearted. The balance sheet has gone from ungeared (good!) to geared (~1.5x ND/EBITDA, not huge, but given the volatility, maybe not the best).

More to follow.

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