Great breakdown — the cash backing + buybacks definitely make SDL hard to ignore. What struck me is how the market still buckets it as ‘old print’ when the SaaS side is sticky, asset-light, and scaling internationally. The Pitney Bowes partnership looks like a real distribution lever, but the customer concentration risk is still glaring. Curious if you see this as a compounding software play that eventually earns a SaaS multiple, or if it’s more of a mean-reversion value setup with a capped upside?
It remains to be seen if the software can continue long term growth. My assumption is the company will never recover to 2024 earnings and net income will stabilize between $1-2M per year by 2027/2028. This scenario would be more of a mean-reversion play however could still offer substantial upside, especially if management distributes the cash pile as a dividends.
I see your point on earnings normalization, but I’m not sure I’d cap it there. If the SaaS side keeps compounding (even at mid-teens), you could argue for a blended multiple closer to software peers than legacy print. The cash pile plus buybacks/dividends provides a real floor, but the optionality is whether the market eventually re-rates it as a SaaS compounding story instead of a liquidation value setup.
Agreed. I just tend to be conservative with my valuations. But that is the upside scenario and is definitely possible if they continue the strong growth.
Exactly — conservatism makes sense as a base case. But the interesting part for me is how the market tends to misclassify these hybrid models. If SDL can keep shifting revenue mix toward SaaS while using the cash pile to smooth out the bumps, the ceiling is less about “mean reversion” and more about whether investors eventually price it like a recurring-revenue engine. Even a partial re-rating would move the needle meaningfully.
Thanks for the article. The company is based a few km from where I live. While I don't know the company that well, I'm very familiar with most of the shareholders on the top shareholder list - it's a whose who of those in the sharebroking/investment community in NZ. The Chair is a smart guy - he was a top analyst when in sharebroking - and he's also a major shareholder. I'd be surprised if they can buy back much if any stock at all if they put a buyback program in place. Maybe they can make an acquisition as funds on deposit now earning less than 4% pa before tax isn't very efficient. It looks a 50/50 bet to me. I'm dubious on the ThreeWaters growth option, and the mortgage refinancing - well New Zealanders are all on short-dated housing loans, so yes there's a lot of that going on right now, as I think around 3/4 of NZ housing loans rollover in the next 12 months. For me, I think there are better small cap options in NZ - but if they can grow earnings again, it could easily pop as you say!
Thanks for the insight. Do you know if any of the large shareholders have increased or decreased their position recently?
I agree it would be difficult utilize the entire buyback amount, but some shares were repurchased earlier this year so they proved it is possible.
There is also market consolidation going on in this industry, and management has looked at acquisition opportunities but it seems they are being conservative which is a good thing.
This is really compelling. I especially like the management’s clarity in acknowledging that the stock trades below cash and openly committing to buybacks at these levels. Unfortunately, I’m among the unlucky “few” whose broker doesn’t provide access to this security, so I’m stuck on the sidelines. It really sucks!
Thanks for commenting! I am optimistic on the buybacks but with the low liquidity it will be difficult. Management has also said they've looked at acquisition opportunities so will be interesting to see what ends up happening.
Nice read, although as you say, difficult for many to actually invest in. Classic deep-value setup: profitable, cash-rich, misunderstood. The best opportunities often hide behind old narratives. Thanks for sharing!
Great breakdown — the cash backing + buybacks definitely make SDL hard to ignore. What struck me is how the market still buckets it as ‘old print’ when the SaaS side is sticky, asset-light, and scaling internationally. The Pitney Bowes partnership looks like a real distribution lever, but the customer concentration risk is still glaring. Curious if you see this as a compounding software play that eventually earns a SaaS multiple, or if it’s more of a mean-reversion value setup with a capped upside?
It remains to be seen if the software can continue long term growth. My assumption is the company will never recover to 2024 earnings and net income will stabilize between $1-2M per year by 2027/2028. This scenario would be more of a mean-reversion play however could still offer substantial upside, especially if management distributes the cash pile as a dividends.
I see your point on earnings normalization, but I’m not sure I’d cap it there. If the SaaS side keeps compounding (even at mid-teens), you could argue for a blended multiple closer to software peers than legacy print. The cash pile plus buybacks/dividends provides a real floor, but the optionality is whether the market eventually re-rates it as a SaaS compounding story instead of a liquidation value setup.
Agreed. I just tend to be conservative with my valuations. But that is the upside scenario and is definitely possible if they continue the strong growth.
Exactly — conservatism makes sense as a base case. But the interesting part for me is how the market tends to misclassify these hybrid models. If SDL can keep shifting revenue mix toward SaaS while using the cash pile to smooth out the bumps, the ceiling is less about “mean reversion” and more about whether investors eventually price it like a recurring-revenue engine. Even a partial re-rating would move the needle meaningfully.
Thanks for the article. The company is based a few km from where I live. While I don't know the company that well, I'm very familiar with most of the shareholders on the top shareholder list - it's a whose who of those in the sharebroking/investment community in NZ. The Chair is a smart guy - he was a top analyst when in sharebroking - and he's also a major shareholder. I'd be surprised if they can buy back much if any stock at all if they put a buyback program in place. Maybe they can make an acquisition as funds on deposit now earning less than 4% pa before tax isn't very efficient. It looks a 50/50 bet to me. I'm dubious on the ThreeWaters growth option, and the mortgage refinancing - well New Zealanders are all on short-dated housing loans, so yes there's a lot of that going on right now, as I think around 3/4 of NZ housing loans rollover in the next 12 months. For me, I think there are better small cap options in NZ - but if they can grow earnings again, it could easily pop as you say!
Thanks for the insight. Do you know if any of the large shareholders have increased or decreased their position recently?
I agree it would be difficult utilize the entire buyback amount, but some shares were repurchased earlier this year so they proved it is possible.
There is also market consolidation going on in this industry, and management has looked at acquisition opportunities but it seems they are being conservative which is a good thing.
Great write up and find.
Thank you!
Very interesting. Thank you!
Which broker did you use to buy shares?
International trade on Fidelity
This is really compelling. I especially like the management’s clarity in acknowledging that the stock trades below cash and openly committing to buybacks at these levels. Unfortunately, I’m among the unlucky “few” whose broker doesn’t provide access to this security, so I’m stuck on the sidelines. It really sucks!
Thanks for commenting! I am optimistic on the buybacks but with the low liquidity it will be difficult. Management has also said they've looked at acquisition opportunities so will be interesting to see what ends up happening.
Hidden software revenue plus buybacks? That’s the kind of setup that catches my attention fast!
Agreed that’s why I’m surprised I haven’t seen the name anywhere else
Very interesting. Nice post.
Nice read, although as you say, difficult for many to actually invest in. Classic deep-value setup: profitable, cash-rich, misunderstood. The best opportunities often hide behind old narratives. Thanks for sharing!
thank you!
Thanks for reading