Value Creation Under Sims’ Scrap Metals Strategy Questionable; Reiterate FVE on Analyst Transfer
No-moat-rated Sims’ recently revised strategy includes some promising elements. However, we question whether its scrap metals strategy, which will see North American ferrous volumes increase by 40% and non-ferrous volumes double over the coming six years, can deliver value for shareholders. But with much of the new strategy guiding long-term direction, our earnings estimates are unchanged. Therefore, we retain our fair value estimate of AUD 10.10 per share and our no-moat and high uncertainty ra...Sims Metal Management buys, processes and sells ferrous and non-ferrous recycled metals and provides environmentally responsible solutions for the disposal of post-consumer electronic products, including information technology assets recycled for commercial customers. Co.'s product groups are: ferrous secondary recycling, which collects, processes and trades iron and steel secondary raw material; non-ferrous secondary recycling, which collects, processes and trades other metal alloys and residues; recycling solutions, which disposes post-consumer electronic products; and secondary processing and other services, which focuses on melting, refining and ingoting of certain non-ferrous metals.
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