it's elders time, page-24

Getting back on track:

GPASAS, I used to have a position in the hybrids, and I'm still hanging around watching them long term. In the mean time, I'm rotating capital more efficiently. I may try to jump in if rural services starts making decent money again. I didn't "thumbs down" your post, but really, it shouldn't matter what people think. Indeed, it's better if you can act contrary to popular sentiment; you'll buy for a better price. It's the internet, after all; don't let your feelings get too hurt. If anything, you should welcome the opportunity to test your thesis by letting everyone try to tear it down.


In that regard, here's why I think the FPOs are not a good investment:

- Debts are approximately equal to liquidation value of assets.
- Assets will be sold to pay down debt in a difficult environment, taking a long time and not achieving a premium price.
- Hybrid holders will get preferential pickings of what's left if Elders goes bust, and of any excess cash to pay distributions before dividends if not.
- Elders isn't currently making much money. It isn't even making enough to service the distributions to hybrid holders - remember, that excess cash currently can't be used for dividends, distributions, not even growing the business! It's currently for firefighting.
- There is no quick fix for a return to profitability. All the services are based on networks of infrastructure and people, and are very slow to reconfigure (if management even knew what the right reconfiguration was?!). The only section of Elders that is actually well-run and makes money is Futuris, which is supposedly up for sale when Elders gets the rest of the act together.

If this were not all convincing, I put it to you that there have been two years of "turning the corner" announcements. Debt is still high, profits are still negative - why should now be elders' time? For the next two years, I can only see more of the same write offs and struggle for profitability.