Undervalued based on P/E, page-11

Grant62 - in situations such as the one you're looking at in H1 2016, would it not be 'normalised' earnings after exceptional write-offs that would provide the best guidance as to actual performance? In SGH's case the 'normalised' net loss after tax loss in HI was $42.1m (not $93m as you state).

Not sure where you got your number of from - can you clarify? Here's a link to the figures the company provided at the recent investors presentation:

http://www.asx.com.au/asxpdf/20160229/pdf/435fwmsxbxl71m.pdf

Re impairment (which you describe as a very real number - is it?). To me, it's a judgemental one based on present and conservative future projected profits generated by the assets under scrutiny (in SGH's case mostly goodwill arising on the acquisition of the PSD of the former Quindell). Should future performance improve, a reversal of the write-off might well be justified, although in practice 'write-backs' are seldom made for reasons that are academic.

In the vast majority of cases where impairments are made for whatever reason, no-one makes a big fuss about these non-cash write-offs, although in SGH's case, shareholders had every right to feel angry about the goodwill impairment because, up to the time of Bryce Houghton's appointment, they had been let down by the accuracy of the company's reporting of events. But the fact performance of the PSD has been poor should not prevent the underlying reasons for this from being fully examined and understood, rather than killing the company for its sins. Factors outside the company's control (principally the proposed UK legislative changes from 2017 and changes in standard accounting practices in reporting WIP and revenue) also contributed to the loss. $45m is not a huge number to reverse given the volume of potential revenue still to flow from WIP in H2 and beyond. I believe the company is right not to give any guidance until there is more certainty.

SGH isn't a basket case; it is a company with much work to do to turn around a difficult situation that is far from being beyond repair, but the balance of probability is that if all stakeholders behave sensibly and give it the time it needs (this shouldn't be long) it will go on to survive and prosper (after some form of restructuring to bring gearing back into balance). Over half its business is still performing well and the big hits the company has taken in H1 should make it somewhat easier to report a much improved performance moving forward. All will be revealed in due course. The shares are priced for failure. IMO they don't deserve to be.

Are you feeling lucky with your shorts, 99?