Ann: Suspension from Official Quotation, page-17

Few very interesting points in the presentation associated with the capital raise:
1. the balance sheet on page 11 is actually the most interesting. The company acknowledges for the first time I think that they are currently not compliant with the accreditations. Explains why they did not win many projects. Also means if that if the institutional placement is not successful the outlook is pretty dark. They also say to be deemed compliant they need AUD 30 MM in working capital defined as "current assets - current liabilities" and indeed pro-forma for the capital raising they get to AUD 55.4. The catch is that a big portion of that is achieved by reclassifying homeground as an "asset for sale" which means it becomes a current asset. There are a few reasons why this is problematic in my view: a) if they sell homeground at a lower price than what is currently on the books they and accounting for the now expected H2 losses there will not be a lot of buffer b) government agencies may do these assessments mechanically but if I was a mining company I would not take a lot of comfort in their liquidity c) homeground may now count as a current asset, but it is not exactly liquid. If you take out homeground, current assets = current liabilities. Liquidity situation will still be fairly tight even post capital increase
2. It is good to finally see some numbers on problem projects (Sunraysia, RDP, Mulla Mulla). What is not so comforting is that the up- and downside cases seem still pretty optimistic. For RDP for example they say the downside is AUD 11 MM, but if you look in the appendix then it appears that this only includes the liquidated damages but not the cost for remediation which is another AUD 56 MM. In my mind the downside case should be...well..."how much money does it cost if you loose". Mulla Mulla follows the unfortunately a bit familiar pattern of only announcing problems when there is no alternative. If you look at the timeline they must have known about this for a while and passed on several opportunities to come clean (for example the half year presentation when this was only mentioned vaguely).
3 Pipeline: work in hand is getting pretty low at AUD 400 MM. Pipeline at about AUD 8 Bn sounds impressive, but about AUD 5 Bn is tracking / other. Maybe I am cynical, but that sounds like these are at least in the short term not very real opportunities. If you exclude these, the pipeline becomes about AUD 2.5 Bn over the next 12 months. To become profitable they probably need AUD 500-600 MM in contracts so they need to win about 20% of these. That is actually not such a low win rate. The other thing that is interesting is that despite the company's comment on government projects, most of these projects are in other sectors. Given the recent issues the company has had, I would discount their chances of success outside the government/ renewable space
4. What is striking is that there is very little on run rate profitability of this thing. Appreciate that this is dependent on how many projects they win, but they know the overhead and the tender margin, so would seem pretty easy to give people an idea.