Why I see SGH as a good buy?
SGH (AU) and SGH (UK): easily generating 65NPAT
Pitcher partners being kicked out due to minor accounting error, if E&Y disappointed SGH with Quindell acquisition due diligence, why SGH is replacing Pitcher partners with E&Y. I don’t have the whole picture of SGS (UK) performance, to my understanding some office is doing well, but some is not, and I don’t know what is the propotion.SGH management can easily cut off those offices which are underperform and keep only those with can generate healthy cashflow. This involves one off massive restructuring cost. In addition, this year performance will definitely below expectation due to the teething issue. If it is done right, next year we no longer will no longer cost for restructuring and teething issue, which definitely provide SGH shareholders with a better return. This is the reason I would keen to keep this share long term. MGN and FTI are now working along with SGH auditor, the bank clearly knows what is happening. If SGH is a goose that laid golden eggs based on its current share price, I don’t think the bank syndicate will not support them through the hard time. And again, if this is the worst scenario.
I still don’t understand what those so called professional analysts are thinking, a year ago, with acquisition of quindell, they already know the net debt SGH will be carrying, yet many analysts are putting recommendation to ‘buy’. A year later, the debt is nearly constant, but they the share price has plunged almost 90% and they start to change their recommendation to ‘sell’. I do not have a number of how far we are missing the guidance, but isn’t it that it is a clear sign of overreacting and shortists are at the denial stage of the cycle? It is funny enough that people still think the write off of the intangible asset will have further downwards pressure on the share price.
Expand