SGH (ASX) The long case... (yes there is one).

Originally posted by PointBreak5 ↑

Alright - ive read a few hundred posts today - most of them bears - and its easy to bash when the stock is getting hit.

So why should you go long here?

1. Banks get nothing if they draw in the debt - they only stop further losses. So the idea that they can liquidate and get their money back is ridiculous - they need to stick with the company IF they can minimize the negative cash flow.
2. How do they minimize the negative cash flow - well the nice thing about the cash flow statement is the AMOUNT of payment to employments & suppliers - $594m !! there is significant amount of headroom to cut this dramatically and show the banks they can be cash flow positive.
3. Analyst prices since the writedown range from the worst .41 to the highest $1.50.. well above where we are now.
4. ASIC discontinued inquiries for FY14 & FY15.
5. S&G IN compliance with covenants as of DEC 31.
6. Australian business is trending > 20% growth in revenues.
7. From the conference call "Australian customers have not been distracted by the noise"

I do think a lot of people sold out today... and we may go lower tomorrow (closing at absolute lows is never good). But I also think that the business is not totally screwed, there are parts which are profitable, and with general interest levels low - the company could come out of this... no not with a $400m market cap... but significantly higher than the $111m market cap it is tonight.

Im long for a trade, and yes, I'm down approx 20%(long around 38 cents).

Goodluck all -

PB.

"In Slater & Gordon's favour is that the only asset with the potential to generate future positive cashflows is work in progress, and work in progress is of most value in the hands of Slater & Gordon." - Macquarie Analyst

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There's a lot of different things I could say, not going to repeat stuff, where you're missing very important parts of the bear case. A confident bull case needs to rebut these points too.

But point 7. sticks out like a sore thumb! This comment was made right before SGH front page news, and evening news, to effect: ultimatum from banks / verge insolvency / Chairman and MD should resign. Do you think there is anyone in Australia at moment in need of a lawyer who hasn't heard about this? What do you think SGH staff think reading this - with MD away n UK trying stop haemorrhaging there? What do you think is being said amongst entire legal fraternity in Australia now about Slaters?

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