Up or Down ??, page-5229

I will write next about the surging tidal wave of revenue and free cash flow that is about to lift the business in the next few months and along with it the lagging share price. FY25 on even a pessimistic interpretation looks very bright indeed.

The important question however is will the share price respond positively to such good news in the near future? The answer is absolutely yes! The prevailing market opinions that say ‘tv is dying’ ‘SWM is cheap, it will always be cheap’ ‘SWM will never pay a dividend’ etc have set in place some very low expectations as to what will happen with the business.

George Soros said it best when he said that
‘The worse a situation becomes the less it takes to turn it around, the bigger the upside.’

Put another way the current situation involving the SWM share price is completely and utterly terrible! You couldn’t get a worse performing share price over the last 12 months if you tried! However, when you closely observe such market sentiment you realise that Fund Managers have left themselves dangerously out on a limb by choosing to drive the share price to such unsustainable lows and positioning themselves as hugely underweight SWM.

At 24.5 cents per share, a yearly dividend of 4 cents per share (which is a dividend payout ratio of less than 40%) would provide a yield of 16.3% (before the effect of franking credits is included). The upside from these current pricing levels is extraordinary simply because expectations are so very low.