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SGH

0.00%

54.5¢ slater & gordon limited

Recapitalisation Agreement – by an unsophisticated retail investor, page-2

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SirEdmund

764 Posts.

81

02/07/17

11:59

Post #: 25613643
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Originally posted by niks ↑

The deal is subject to a shareholder vote and court approval.

The debt would be reduced to $80 million, which is a modest debt for SGH. Existing shareholders would retain 4% of the company.

Free of its debt burden, SGH should be worth around $2 per share. (Assumes $60 million pa free cash flow, 5% pa cash earnings growth rate and 11% discount rate or a free cash flow multiple of 12)

So, $2 per share x 4% = $0.08 which just happens to be the current price.

This suggests the market is correctly valuing SGH unless a better offer is put on the table.

One final kicker – If I understand it correctly, any proceeds up to $250 million that SGH receives from a settlement with Watchstone will go to the lenders. Any shortfall in this amount will be paid to the lenders in more shares. This means the 4% share holdings for existing shareholders could drop to below 3%.

The offer is terrible, so I’ll be voting NO. It offers nothing to shareholders beyond the recent share price. On the other hand, the lenders stand to lose over $146 million in their debt investment plus the opportunity cost on a huge capital gain if shareholders vote no and SGH goes broke. It is because of this I’m hopeful of a better offer.

This is just the opinion of an unsophisticated retail investor and not advice, so decide at your own risk.

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Absolutely it's a NO. Long way to go here..

SGH Price at posting: 8.1¢ Sentiment: Hold Disclosure: Held
2 Upvote

0 Great analysis

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