Recapitalisation Of ELD Elders, page-5

If I were a shareholder in ELD anything behind November 2013 and had been riding this stock down i would be a pessimist about this company . . . and would be bitterly disappointed at the continual mistakes being made by it - and the outside challenges that faced it right down to the Indonesian meat issue which was outside of its control
But here we are in a place where after announcing a 500 mil loss the stock price barely yawned down 2c
The sellers are exhausted!!!
and then on top of that the 25 mil extra loss - rubbing salt in to the wound - from the livestock dealing debacle - and the market just couldn't get interested in selling down
Its dead . . there is no more selling energy left - nothing left to lose!
Its all already lost - its an almost dead horse

and so we are at this place now where you have to ask yourself what the most likely outcome is?
Because if this is a low base - as seems to be the case fundamentally - then there needs to be something even more negative than the extreme negatives we have already seen - to drive the prices under the old lows
Once all the bad news is out - its out and we are left with the new beast
The company that fell from $28 to 6c
It didn't become a 6c company without all the negatives which drove it there

So looking ahead - from 19c - and after factoring all of those things in
We still have a company which has survived 175 years in various formats - almost 200 branches - an active business which has potential with the right management and provided it is recapitalised and gets back to its core activities including export

So ultimately one of two things is going to happen
A it fails
B it survives

herein lies the bet

If it fails you lose your premium
If it succeeds then you have the equivalent of cheap call options with no expiry date and massive leverage potential

Assuming the survival story is the way it goes - we should be looking at a low base being in place - and then have to look at the next part of the equation
Thriving

and that will be a long slow earn as I see it
It has to rebuild its reputation . . but any glimpse of that could see this stock at 60c

From this low price blue sky starts looking possible with a restructuring completed - whenever that is

At the end of the GFC most people were worried that the entire system would fail . . cash was being put under mattresses and even today people are carrying this fear of melt down under the mountains of debt in the world. The point being that when fear was at its height the buy signal was given . .
The contrarians got set and here we are at new highs on overseas markets
Buffett got that right ahead of everyone else

Can ELD do the same thing from here
It wouldn't take much to double this share price
Crystal ball gazing - some Chinese interest as per the saving of GMG Goodman group wouldn't be out of the question . . but I am not suggesting this as an outcome
A cornerstone Investor bailing in would be a real shot in the arm

But at these levels I really don't see a rights issue or other form of capitalisation taking place
So in the meantime the company just needs to keep making profit and pay down debt off its own back until share prices reflect more proactive results - as per the ones we have just seen out
It just needs to keep its nose clean

I am a contrarian - and have taken that bet
But I think its going to be long and slow
After a dollar and a number of years (3 to 5) - the multiples could start looking very interesting - based on these cheap prices now . .. and after history has unfolded and people say - wow if I had just seen that coming and picked up a few of those - they could be wishing that they got on board
Its a bottom drawer number . .

and one that only hindsight will gratify - one way or the other