A world without waste

Stock Watch

by Regina Meani

Market analyst Regina Meani discusses Sims (ASX:SGM).

Sims Limited (ASX: SGM $21.39) has four core businesses: Sims Lifecycle Services, Sims Metal, Sims Municipal Recycling and Sims Resource Renewal. The Sims Lifecycle Services division provides global IT asset disposal services and electronics recycling to enterprises and data centres, with operations in the United Kingdom, Europe, North America, the Asia-Pacific region and Africa.

Sims Metal has expanded from an Australian operation to become one of the most significant metal recycling businesses in the world. Sims Metal buys, processes and sells ferrous and non-ferrous metal to manufacturers in 30 different countries.

In 2002, the company created Sims Municipal Recycling, a curb side recycling venture in the United States. The operation has grown to become the key element of New York City’s recycling system. The business processes and markets more than 600,000 tonnes of municipal curb side material per year.

Sims Resource Renewal is currently undertaking the research and development and operations to take responsibility for their own waste while developing the technology required to advance the circular economy. The company has a plan to design and build several resource renewal facilities around the world by 2030, so that the material left over following metal recycling, will be diverted from landfill and transformed into new, quality products.

The share price for Sims enjoyed a strong upward trend from its low at $4.34 in 2001 to reach heady heights in 2008 at $43.04. Momentum overrun saw the price top out and plunge to $10.68 by November of that year. The price bounced from support to rally back towards the top halting in resistance around $29 in mid-2009 to commence a volatile downward path that would lead to a low and turning point at $5.96 in early 2016. The combination of support in this area produced a strong recovery but it found a significant barrier in the first half of 2018 around $18.00, which rebuffed the price. Breaking the new uptrend in August 2018 the price fell returning it to the $5.50-6.00 support by March 2020.

Here the price again found support and combined with diverging momentum the price powered higher in a strong recovery which is still influencing the price. In late February we have seen the price overcome the $18 barrier zone completing a stage in the long-term basing process. The initial breakaway from the barrier has sapped the near-term momentum and we may see the price pause and possibly pullback to consolidate as it stretches towards $22.50. Beyond this, the price has gained the potential to head towards $25-26 and $28 where a more significant pause in the upswing may occur. The longer-term outlook remains positive for a continuation of the upward path for significantly higher prices.

Over the near-term traders and investors should be aware that a drop below $20.75 may indicate a pause action with a further drop through $20.25 suggesting a deeper pullback may be due. In this case the main support zone is located in the $18-20 area.


Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.