Business going well, page-9

Bank of America could just as easily say the same thing back about Slaters, its history, plus issues concerning some of its Australian acquisitions. So, if such issues are no longer considered relevant because Slaters have since risen above their past (including by acquisition), then why can't the same thing be suggested of Bank of America?

When the PSD acquisition was announced, the SP was $7.08. By 2 April, it had gone to $7.85. The clearing price on the institutional offering was $7.50. On the retail offering, the clearing price was $6.38.

The new shares (issued on a 2:3 basis) were struck at $6.37.

On 1/6, the PSD acquisition completed. The share price closed that day at $6.20.

On 24/6, SGH sought to counter the comments of that day in the AFR. At the time, the share price was trading in a $6.11 - $6.45 range. The PSD information session was held that day. Then a further media response was released concerning the ASIC comments, etc. The share price closed that day at $6.13.

On 29 June, Slaters issued the cashflow clarifying statement /note re: it's UK operations. The share price was $3.78 at market close, that day.

On 28 August, SGH released its preliminary results being the unaudited X/4E announcement, followed by its investor presentation. A number of different figures /outcomes were referenced both in the Presentation and in the 4E announcement (restated, split between current and non-current, updated for acquisitive behaviour, ex-PSD, inclusive of PSD< normalised, etc, etc).

A common theme since then has been in trying to reconcile the figures together. Even here, in slides such as S22 of the Presentation, no mention was made of Disbursements, yet these would have been counted in as part of Customer Receipts and as Revenue /Fees. After all, in years past, disbursement values have represented 55% of F14 Receivables and 77% of F14 Payables. In F13, the corresponding values were 47% as Receivables and 79% as Payables (72% in F12).

That day (28/8), the share price closed at $3.12.

Since then, the share price has continued to fall, to last night's close of $2.72 (down 13% on the results announcement). In the same time frame, the AXJO has fallen by 4.5%. So, near on 3x the fall of the AXJO, in the same time period. In the same time frame, the ASX100 has fallen by 4.85%.

Whether liked or not, SGH has an issue. It has a problem with how it is being perceived in the market place. It is having a problem with explaining away the PSD cum ASIC issues, etc. It is having a problem in trying to educate the investing public. Most importantly however, it is having a problem in convincing others that it really is converting WIP into fees at 116%, that it is achieving significant organic growth, and that it is growing significantly (ex-acquisition).

Take the time out to properly read the reports. Go back through the past reports. Challenge and query what's being said, and then draw some conclusions as to where the future lies.

PSD will likely generate something of value, but now it really has to perform because the acquisition has actually cost SGH market value. I'm not talking about the amount raised back in April, but rather in looking at comparative market value today compared to last year.

At last night's close, with 351m shares on issue, SGH was valued at $961m. Back on 8/9/14 with 205.6m shares on issue, it was valued at $1.18B. That's a $200m+ drop on its market cap of 12 months ago, and that's with using the enlarged share base for yesterday's figures.

Considered in another way, at the time of the H15 results (10/2/15), SGH had an MCAP of on 208.7M shares $1.4B, translating since then into a drop of $440M.

Right here, right now, right at this particular point in time, PSD may very well present as a "free option" to anyone buying into the future of SGH, but in the cold hard light of day, PSD has cost SGH $200M+ in real, YOY MCAP values.

That's the problem, and its a problem that will only be sorted once SGH goes completely on the information, disclosure and investment roundup offensive. But until then, trust is a very serious point of contention for them. Ask anyone who outlaid $7.50 amongst the institutions back in April, or $6.37 from amongst the retail investors. That's all real money, and it will take quite some time (not just a few months) in order to recover all this back. That's the problem and that's why SGH has some very real work ahead of it at this time.