NAG trading, page-814

Whilst I agree 100% with you re: very healthy profit, I do have major concerns with NAG's potential Cash Conversion Cycle, CCC.

our revenue and profitability will be great based on accruals. The SP, based on P/E multiples of sector average of 16.8, will also be high.

However, based on Days Payable Outsanding, DPO, of construction majors, we could have an issue with cash generation. If our CCC is poor, then dividends may not be as healthy as some expect/hope and we may not have sufficient cash to go after the gold or fund the gap between receipts and our own payables.

In John Holland's last publicly available, Financial Report 2014, DPO was about 180+ days. I include both materials and subbies in my Cost of Sales. See: http://www.johnholland.com.au/media/2037/jhg_fr_2014.pdf

I am in my mid-late 40's. I got into NAG for the expected SP rise. Any divvies was to be a bonus. There seems to be a few old tigers on here who may well be in NAG for divvies to fund retirement. My background is banking; same as 'the seller', old mate CG. I wanted to try to understand why CG would be selling. He likes a resources spec. But perhaps he saw what I am potentially seeing here.

As per my sentiment, this is not a down-ramp. But purely a discussion point which may/may not have any validity whatsoever. I'd be keen in hearing some feedback from the posters who have dealt with John Holland; without breaking commercial confidence, obviously.

I once did an M&A with a US Tech Giant between them as a buyer and a minnow supplier based purely on cost of capital arbitrage. And I mentioned in an earlier post, there are some giants who could be very interested in part of this minnow's business, which could then fund a bigger gold play.

What would I do if I was Mike? Well, I would:
1. Raise some cash. Tick.
2. Complete all the infrastructure for the PASS business. Tick - work in progress. An operating business unit is worth far more than an approved hole in the ground.
3. Survey the gold tenements. Tick. Before divesting yourself of a potentially very profitable business, you want to lower the risk of the bits you are left with.

Interesting and exciting times.

All speculation and imo. Beats getting into a slanging match with someone I have on ignore.