Is a huge problem ahead?, page-9

SAI Global has brand awareness and sells data and services that there will be a continuous growing  demand for . Hence it is a take over target as displayed in 2014.

I believe it is risky buying at these levels. My reasoning is:

• over the last 2 years organic revenue growth has been flat growth has come from currency tailwind
• Similar EBITDA has been flat apart from efficiency gains and currency tailwind
• Property transactions have peaked over the last 2 years and will start to decline
• Growth initiatives have gained no traction
• latest guidance using currency as a factor is part downgrade exhibits poor leadership. Why not also provide guidance on a constant currency basis so investors can see where the business is heading. Not providing this is an indication that organic growth will disappoint once again.
• Standards Australia contract renewal is a concern. Currently the relationship is not on the best of terms with disagreement on royalty claims. The current level of 10% royalty payment is low and will definitely be increased. SAI have an option for a further 5 years. I don't see the relationship terminating as it is also in Standards Australia best interests to have the contract awarded to a party who can distubute the product... there are not many options.. I therefore believe a happy medium will be achieved but significantly higher than 10%... more like 30-40%. This will impact EBITDA as 30% comes from this segment. This comes into play in 2019. Also this uncertainty was mentioned as the reason PEP/KKR did not make a final offer.

So with flat growth for 3 years (inclusive of guidance), property transactions to decline, impact of contract renewal and management that is questionable  there is a large risk that the SP could fall allot lower. I see earnings declining on a constant currency basis.

I believe the SP is being held up buy the rumors circulating of potential takeover. If  it is not confirmed in the 6 months in conjunction with flat earnings the share price could have a large decline.

For me it is too risky at this level as it is a bet on a takeover deal not promising growth.