by
Will Willitts
Yes fish Deutsche bank has done a lot of research on Sgh and believe it's going to repay debt in full plus interest!!
Deutsche Bank initiates coverage of Slater & Gordon with a “buy" rating and a $7.40 target price.
“We initiate coverage on SGH with a Buy rating with the stock trading at a 15% discount to our $7.40 DCF-based PT. Our Buy thesis is predicated on SGH’s leading positions within the Australian and UK PI sectors which exhibit attractive defensive-growth traits, strong EPS growth (16% 3-yr CAGR) and valuation. SGH is trading on a yr-fwd PER of c.16.5x, falling to c.14.5x a year out. Our PT implies a yr-fwd PER of c.17x. Further M&A offers upside potential to our valuation, particularly in the UK market where SGH has gained first mover advantage, replicating its successful Australian business model.
“SGH is a consumer law firm employing c.2,600 staff in 96 locations. The firm provides specialist Personal Injury (PI) and General Law (GL) legal services to c.100k active clients. SGH has leading positions in the Australian and UK PI litigation sectors where demand exhibits low correlation to the macro cycle, typically driven by factors like population growth and accident rates.
“The firm’s growth strategy involves: leading the consolidation of the UK consumer law market (4-5x Aust. mkt); growing the Australian PI practice (est. 25% mkt share); & further expansion into GL (2-3x Aust. PI mkt). SGH has strong M&A expertise having acquired >50 businesses. Our earnings forecasts do not factor in future acquisitions; DB analysis suggests $65-120m existing debt capacity for M&A, delivering 10-18% potential EPS upside to FY16f..
“SGH has gained first mover advantage in consolidating the large and fragmented UK consumer law market, capitalising on opportunities presented by regulatory changes and leveraging the firm’s strong case management systems and M&A capabilities. With just c.5% share of the fragmented UK PI market, scope exists for further consolidation opportunities, in our view.
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http://www.copyright link/business/...th-a-buy-rating-20150120-12ulib#ixzz4S7B0iMzR
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