analysis of the announcement

So, MHL received an Appendix 5B query, and in its response we can actually gleam quite a bit of information.

1. We know they won't go bankrupt in the short- to medium-term, they have addressed that in their answer to Q1. POSITIVE

2. Now this is an interesting one. MHL states and I quote "... the Company does not expect negative operating cash flows to continue at this level ...". What does this mean? This means that they expect their operating cash flows will increase favourably in the short- to medium-term. Now that could be due to numerous reasons, but assuming that MHL has been following continuous disclosure rules, this means that MHL *expects* that the JV will be signed! As simple as that, that's what the response to Q2 means. POSITIVE

3. The third point about placement. That is also interesting, this means that there is continuing interest in MHL by "sophisticated investors" (who we assume must know more than us) and that there is continuing potential in MHL -- to put it crudely, that it is not a "dud" given current circumstances. But as with all placements, the share pool will be diluted, but given that there are around 600m shares outstanding, this should not be too much of a worry. POSITIVE/NEGATIVE

From the analysis above, we can see that we have 2 "positive" pieces of information that we can gleam from the announcement and 1 "negative". Weighing it up, I personally believe that there is much upside potential for MHL.

The savage market reaction to the announcement is due in part to two things: (a) old adage -- buy on rumour, sell on fact; (b) market was expecting confirmation of the JV, but instead it was an Appendix 5B query.

Ultimately, the short-term plight of MHL hinges on the signing of the JV and confirmation from Sentry that all is to plan. Once we see the JV signed and sealed, the MHL SP should get re-rated. Until then, I see the SP ranging anywhere from 1.5c to 2c.

Any comments appreciated re: the above analysis.