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54.5¢ slater & gordon limited

Ann: Recapitalisation Agreement, page-190

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Nick Miller

1,276 Posts.

46

30/06/17

13:08

Post #: 25589841
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Originally posted by Warnie ↑

Question one asks him/herself...
Is there is a buying opportunity here or not?

rather than just say yes or no, one must crunch some simple numbers:

It's really 96% of the business for about $300m

Debt was circa $800m
Less $75m in new loans/stated debt on books
less $423m AUD in warrant calls can be claimed by asset sales or watchstone or any other matter the directors will make up

Leaves $300m net debt for the 96% shares.
Lenders have paid no more than $300m in total for all the debt anyway inc new loans so sounds about right.
So 4% is worth roughly $12m or 50% of current today's market cap.

When the stock re-trades, it should be at least what the lenders are happy to pay for it IMO as a base, roughly $315m market cap or 90c using current share numbers.

So should you buy now?

buy 100,000 shares today 9c = $9000 value
You will own 5000 shares at ($315m market cap) = 90c = $4500 value

So based on this you would lose 50% of your value straight away.

Knowing this, and assuming $315m is the base market cap, what is the buy in price to at least look like a break even?

100,000 at 4.5c = $4500
5000 at 90c = $4500

So it's a buy at 4.5c (today) IMO based on how the lenders bought (buying) the company.

I could be nice and say the lenders bought cheap, and it should be $500m market cap minimum?

100,000 at 9c = $9000
5000 at $1.49 = $7450 (still lose money)

100,000 at 7c = $7000
5000 at $1.49 = $7450

So at $500m market cap I need to buy today at 7c.

** The other issue is, if UK assets are sold off, or watchstone payment comes, they go to the warrant debtors, holders don't see the cash nor the company.

Also your worth (value as a business) is lower as you have just sold an underlying asset if UK asset is sold.

Makes it a very hard case to put up to buy this stock even at 4.5c or 7c IMO.

Expand

Can you please explain the logic behind buying 100k shares and being left with 5k.

I'm also a bit lost on the SP at 0.90c. Are you assuming a share consolidation?

SGH Price at posting: 8.3¢ Sentiment: Sell Disclosure: Not Held
1 Upvote

0 Great analysis

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