What’s MM thoughts on SSM from here?

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Question asked 26/08/2022

What’s MM thoughts on SSM from here?

Hi James and Team, Thanks for your report I read them eagerly and generally love the service you provide ..however .. Regarding SSM... on 6/5/22 you advised .."At MM we believe the company will now start paying 2 dividends per year at around 4-5c each and the recent improvement in the stock suggests others agree with us, its definitely an interesting aggressive yield play under $1". The recent MM report 23/0822 (after the result) said the dividend of 1cps was also light on – we were expecting ~2cps.... Not sure when you changed your mind about the likely dividend ..or whether this was communicated to MM subscribers that a big change in your dividend expectations had occurred for this income stock.. ? I may have missed something ? Also of course now wondering where to from here for SSM or do we wait for more info. at the AGM ? Many Thanks Don

Answer

Hi Don,

Unfortunately we still own SSM in our Active Income Portfolio and we were disappointed with their FY22 update, especially when we consider how optimistic the management were last time we spoke to them.

The dividend was a surprise to us, in 2019 they paid 8.3cps and in 2020 they paid 8.9cps before the pandemic took hold. As business returned to normal, that dividend should have been achievable even with the bigger share count – however margins were very weak because of higher costs.

We did think the dividend this time around could have been lower (~2c) due to the acquisitions made during the period before resuming a run rate of 8c+ pa from there. We did not write about this tentative change in thinking which we should have – sorry about that. We now think it will take them longer to get earnings back to a level to pay 8c +, and that is now a concern for us.

We’ll get more information at their AGM, at this stage, we’re holding tight but like you, I’m annoyed with the position.

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LAST UPDATED 26/08/2022 13:51

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