As most know, I've been following CUS for a few years now, and I am happy to say that the company has survived (touch wood) the worst of the market, although, it did get a kick in the teeth at the beginning of the year. All through that period, and notwithstanding some average management decisions last year pre Wildash that we have had to live with, the main reasons for the stock not recovering have been the start date of surcharging, and its balance sheet. I have now discounted the start date, because the banks are all pretty well ready and the argument has been had and the RBA has won. However, the balance sheet is something that I have taken a special interst in.
According to the AGM presentation the company needs to repay $10 mill of debt by 31/12. We have been told that Bendigo are providing $5 mill for 14.2% of SPS. We have also been told that they have reduced their debt further by a)the exercise of $2 mill of options and b)$1.2 mill through operational profit up to 30/sept (presumably against a background of capex ahead of direct charging).
By my calculations, CUS have raised $8.2 mill out of $10 mill, leaving $1.8 mill to be found by 31/12. Assuming that the company is still making $400,000 pcm (extrapolation of the $1.2 mill operational profit up to sept 30) then they can do the same in Oct, Nov and Dec especially since they dont have the capex and they do have the windfall of Krudd's consumer handout on 8/12. That leaves them short by $800,000 which is tight but I suppose they could always make up the difference with a small placement. My gut feel, though, is that they will cover their numbers and do it quite easily.
Its strange isn't it, that 1 year ago we weren't even worried about this sort of thing. I bet CBA would give their right leg to see CUS default on a covenant. No doubt they would also recommend an administrator too...one that was particularly friendly to CBA...
CUS Price at posting:
0.0¢ Sentiment: ST Buy Disclosure: Held
