Sandal plc
Ticker: SAND Exchange: NEX

Sandal (c.20 employees) is a specialist developer & supplier of electronic products/solutions for smart home, IoT, energy saving and other applications. It joined NEX in March ’15 and operates 3 divisions.

Latest Reports

Solid start to FY19

Published: 28th November 2018
Sandal is a specialist developer & supplier of electronic products/solutions for smart home, IoT, energy saving and other applications. It joined NEX in March ’15 and operates 3 divisions.

In a trading update ahead of today’s AGM the Board said that revenues had climbed for the 1st 5 months of FY19 (ED est 5%-10% LFL), thanks to a 11.8% rise at PowerConnections, along with a 95% jump in the number of smart home connected devices (Re lighting & heating) vs 12 months ago. 3rd party distribution has been expanded too, with Primaflow F&P, Expert Electrical (Ireland), JTF, Plumb Nation, Renuvo, and Utilita Energy all selecting the MiHome platform.

That said, MiHome’s FY18 comparatives included a large ‘stock build’ at a major customer, which is unlikely to be repeated. Instead orderflow this year is set to be far better balanced from a working capital perspective, thus avoiding another inventory overhang within the channel. Meaning that as of today, the anticipated shift to a 50/50 split between PowerConnections and MiHome has not yet occurred. Albeit we view this simply as a timing issue which should unwind in due course. 

Far more importantly though from an investor perspective, is that underlying LFL demand remains strong supported by a buoyant home automation market. As evidenced again last week, when the UK’s #1 smart energy provider Hive (Centrica), reported a 50% uplift in turnover for the 10 months to the 31st October.

Interestingly the CEO addresses financing the growth opportunity in his report that ‘’The Directors continue to be excited about the opportunities for MiHome, but recognise that these will only be fully achieved with additional capital for both further product development and increased marketing spend. The Board is therefore pursuing the possibility of raising further equity or debt for this purpose.

In terms of the outlook, given the tough FY18 comparatives (re stock overhang) and uncertainty surrounding Brexit, we have nudged down our overall FY19 turnover and PBT forecasts to £4.15m (vs £4.43m before) and -£22k (+£6k) respectively. Albeit due to the adverse mix effect between MiHome and PowerConnections, this has had a slightly bigger impact on the sum of the parts valuation, which has fallen from 65p to 57p per share.

Download Now

FY19 set for >22% LFL growth and positive EBIT

Published: 11th October 2018
Sandal (19 employees) is a specialist developer & supplier of electronic products/solutions for smart home, IoT, energy saving and other applications.

With only 42 days left until Thanksgiving and another 33 to Xmas, what is going to be this year’s ‘must-have’ stocking filler? The accolade is typically won by the latest ‘hot’ iPhone, electronic gadget or video game. However for 2018, my guess is it will be the ‘smart speaker’, either the Amazon Echo or Google Home. Why?

Well, accordingly to IDC worldwide sales of smart speakers will soar 168.1% in 2018 to $11.8bn (vs $4.4bn last year) and climb a further 23.9% pa on average over the next 4 years. In turn, creating a surge in demand for MiHome’s first class smart heating, lighting, power and other internet enabled devices.

Encouragingly, this morning the company said that for the y/e May’18 its installed base of gateways had jumped 144% to c.12.6k (5.2k LY). With the total number of connected devices similarly leaping 194% - equivalent to 4.33/system up from 3.67 LY. Driving revenues 71% higher to £1,015km (£593k) – and demonstrating once again that not only do consumers like what they buy, but they are also adding extra functionality into their mushrooming smart home networks.

It is worth noting that there are c. 23m households in the UK, of which we estimate only around 7% today are using smart lighting, heating, power &/or motion detector equipment. Assuming penetration rates rise to say 50% by 2025 - generating revenues of c.£250/system with MiHome securing a 5% share (vs 1% today) - then (in theory) this would represent a £143m opportunity.

We expect FY19 sales to rise >22% to £4,433k - pushing the group into the black (PBT £60k), whilst being only modestly cash flow negative, even after absorbing additional marketing/R&D investment. Elsewhere net debt is set to close FY19 at £1,236k, up £145k from May18 (£1,091k) – split £500k shareholder loan from Greenbrook Industries (24.7% stake), debt factoring and bank borrowings/overdraft.

Finally, in terms of the outlook we think that Sandal is on track to hit our projections, and hence maintain our 65p/share valuation: split 11.8p for PowerConnections, 57.0p MiHome, 2.2p Energenie and -6.0p net debt

Download Now

MiHome sales going through the roof

Published: 11th September 2018
Sandal is a specialist developer & supplier of electronic products/solutions for smart home, IoT, energy saving and other applications.

Jeff Wilke (CEO Worldwide Consumer) has revealed that Amazon sold >1m smart home devices on 17th July alone (ED Est 4m-5m for all Q2’18) thanks to its annual ‘Prime Day’ promotion. In fact the biggest 24 hours in its history. The good news is that this is having a hugely beneficial effect on Sandal’s leading MiHome division, where we reckon the e-commerce giant contributes c.50% of revenues.

CEO Alan Tadd commenting today that: “We are very encouraged by the growing demand for Smart Home, as demonstrated by some significant growth via Amazon this summer. Indeed between June to August, Amazon increased its sales of MiHome systems and devices by 330% and 442% compared with 2017.’’

But that’s not all. MiHome has also just launched a new professional installer service in partnership with Icon Heating Solutions who have assembled a network of suitably qualified electricians, plumbers and heating engineers. The package will initially cover the M5, M40 and M4 areas, where adoption is greatest.

Lastly, Sandal has continued to grow its user base at an increasing rate and there are currently 13,935 gateway systems installed with 61,453 devices connected. The company intends to launch a monthly subscription service over the next 12 months which is expected to generate a recurring revenue stream from consumers for the first time.

Based our sum of the parts analysis, we still value the stock at 65p/share: split 12p for PowerConnections, 55p MiHome, 2p Energenie and -4p re net debt.

Download Now

Riding the wave of 'Home Automation'

Published: 26th July 2018
Sandal is a specialist developer & supplier of electronic products/solutions for smart home, IoT, energy saving and other applications. It joined NEX in March ’15 and operates 3 divisions: MiHome offers Smart Home devices and associated software solutions to remotely control heating, lighting, power and other internet enabled appliances; PowerConnections sells a range of patented electricity/converter plugs, line-cords, extension leads, cordsets and adaptors;  Energenie is a leading supplier of energy saving products, eg LEDs, sockets, etc.

Smart homes are transforming the way people live. Not only allowing almost any internet-enabled appliance, security alarm/camera, lock, light, thermostat et al to communicate automatically with each other and everyone. But also creating a huge market opportunity, with Strategy Analytics estimating that consumers will spend a staggering $96bn (+14%) globally in 2018, climbing to $155bn by 2023 (10% CAGR). 

What’s more, this growth is likely to be much higher in Western economies. In fact, Voicebot believe that by 2022, 55% of all Americans will own at least one voice-activated smart-speaker (33% CAGR) and 48% in the UK (37%). 

The tricky bit for investors, of course, is trying to figure out which horses to back. Internationally the major players include a long list of publicly quoted & privately-owned organisations. Nonetheless, one stock that stands-out, especially for risk-tolerant GARP investors, is micro-cap Sandal plc. It is listed on NEX and we like its growth trajectory, breadth of product range, experienced management team and favourable risk/reward profile.

At 26p, the stock is rated on a modest 1.0x CY EV/revenues vs MiHome peers at 2.5-3.0x and the S&P500 1.9x. Over the past two years MiHome’s success has been masked by Sandal’s two other divisions. However, today smart home devices account for ~28% of turnover, meaning that the business has reached a tipping point. In fact, we’re forecasting 30% and 42% top line expansion for this year and next – generating revenues of £4.8m and £6.8m respectively, alongside positive operating profits.

Taking all these factors into consideration, we conclude that on a sum of the parts (SOTP) basis, Sandal is worth 65p/share: split 12p PowerConnections, 55p MiHome, 2p Energenie and -4p net debt.

Download Now