News: Slater & Gordon Limited - ASX Small to Mid , page-3

re: News: Slater & Gordon Limited - ASX Small... I think five points made by Andrew Grech are worthy of comment.

1) SGH are not actively pursuing large acquisitions similar to Trilby Misso and Keddies, which from my perspective is a good thing. Small easily acquired and easily digested acquisitions are OK in my opinion, because SGH has a long history of doing this, so its business as normal. Mr Grech explained that there is a lot of scope for organic growth via cross selling services and conventional marketing of the SGH brand, so that is where the growth can be got. This expansionary approach should obviate the need to raise capital, which SGH did to acquire Trilby Misso.

2) Because SGH targets the man-in-the-street market, it does not have chunks of its business that can migrate en masse to competitors, as can happen with law and other services firms that target the big-end of town.

3) Future earnings have high visibility, because work in progress is reported, and this can be extrapolated to give future revenue. This is very different to many construction and mining services business who survive or die on whether they win large contracts, or not.

4) The demand for personal legal services is substantially unaffected by what is happening in the economy. In this respect, SGH's business behaves like that of poverty stocks, which are ideal investment vehicles in these uncertain times.

5) The potential to expand into the UK is exciting, because its Australian experience of operating a legal practice that is not the conventional partnership is experience that until now, UK legislation has precluded UK firms from gaining, and further, the legal profiles of the UK and Australia are substantially similar.

That should help to cover some of the thematic reasons to consider SGH. The next thing is to look at the metrics. The only thing that I recall Mr Getch saying is that SGH should have a $200 million revenue this current year, and $300 million in the year ending 30 June 2015 – that is bullish growth.

A quick look at Morningstar metrics should suggest that SGH has been undersold. I am not going to duplicate metrics that you can read in online-broker sites like Westpac and Comsec – look at the numbers yourself. As you would expect from a fast-expanding company, the dividend payout ratio is low, but the growth of the EPS and the dividend is generous.

Some weeks ago The Bull newsletter gave SGH a good plug – part of which reads:

“Austock's Heffernan listed SGH as a buy in June, stating that the company "continues to progress in a quietly robust manner". "Slater & Gordon represent a superior investment option among small industrial stocks in the current environment," says Heffernan. He doesn't believe that litigation will be affected by a slowing economy, and has a 12-month price target of $2.90/share. His DCF is $3.20/share.”

Read the full article at http:

www.thebull.com.au/articles/a/22878-5-sold-off-small-caps-going-cheap.html

I hold 18000 SGH, which I bought a year ago at $1.68. I wish I were so smart that I would have known to skip out at its recent high of $2.30, and used the proceeds to buy 27879 SGH at its more recent low of $1.485, but alas, poor Pioupiou is not that sharp. I thought then that I would, perhaps skip out at $2.40 or $2.50. Anyhow, I am happy to hold my TGH shares.

If I were not cash-strapped right now, I would buy more SGH, because it is a business that is not negatively impacted by the usual things that hurtASX-listed companies. I hold 18,000 shares.