Bearing Fruits- More Lemon?, page-83

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23/09/16

20:19

Post #: 19389170
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Originally posted by Dr.Who ↑

On a serious note.

Under what circumstances would anyone inject more funds into S&G? We've discussed this before.

If funds are required (CR) it must be because it cannot service its debt. There likelihood of requiring funds for an acquisition in the medium term is virtually nil.

If it cannot service its debt then it is not a viable business. If is is nit a viable business under what circumstances would an institution or current shareholders inject additional funds?

It is a predictable business, not similar to a resource company not earning yet but more funds will see it through to the golden production rush in three years. If Slater cannot earn now it cannot earn tomorrow or next year or next decade.

I maintain CR is out of the question, the bed is made and we now sleep in it or roll over onto the hard floor. There is no circumstance where a CR makes sense. All stakeholders (BOD, SH, banks, clients, partners, government, regulatory authorities) need the comply to work within its current capital structure. If it can't then it must be broken up and sold for salvage.

There appears to be an assumption that a CR can happen just because someone says it is needed. Forgetting that subscribers would need to satisfy themselves the company can generate expected return on equity. If it can produce expected return then there is no need fir fresh capital in the first place.

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Good points Doc......and that's the nuts and bolts of it......the business model either works or it doesn't. Also as you mentioned you don't keep ploughing money into inferior businesses that do not provide an adequate return on capital employed......that's business 101......the ASX market participants should have that tattooed on their foreheads.

SGH Price at posting: 38.5¢ Sentiment: Buy Disclosure: Held
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