I wrote to Editor Greg Canavan of 'Sound Money Sound Investment'...

I wrote to Editor Greg Canavan of 'Sound Money Sound Investment' (to which i am a very satisfied subscriber) and requested if i could publish an excerpt from last week's edition re his update re CSV. Greg kindly agreed but HC readers shouldn't expect this to be a regular occurence as regular 'freebies' obviously dimish the brand. SMSI reckons:

"There are a few recommendation changes this week. Before I get into them, let me provide a brief update on CSG Ltd (CSV).
The timing of the initial buy recommendation (16/03 at $1.38) on the stock was ordinary to say the least. Soon after, the company reported half-yearly earnings and although the headline number looked ok, the quality wasn?t too flash (as discussed in last week?s update).
What seems to be worrying the market the most is the drop off in operating cashflow. Working capital expanded by $22.4m in the half, mainly
due to the Canon acquisition. When working capital needs increase, this represents a drain on cashflow. As a result, operating cashflow was only $4.9m in the half. This wasn?t enough to fund the rest of the business so CSG had to borrow, adding $18m to long-term debt.
Constrained operating cashflow is not unusual when a company is growing so it appears to me that the market has over-reacted. The share price sell-off reflects investor concern that CSG management will not effectively manage its strong growth profile. That is always a risk when small companies grow, perhaps more so in this case because of the large acquisitions taken on last year, which are now being integrated. While such concerns might be legitimate, based on consensus earnings estimates (revised down following the half-yearly result) CSG?s share price still looks to be well below intrinsic value.
I estimate the company?s intrinsic value at around $1.75. The current share price is currently more than 50 per cent below that
level. This doesn?t necessarily make CSG a screaming buy. The discount is due to concerns over management and it is likely CSG will take
some time to gain the market?s confidence. As you can see in the accompanying share price chart, the stock price is in a downward
trend. I would expect it will take a few months of ?consolidation? before the trend reverses itself.
Hence, I am changing the recommendation from last week?s HOLD to ACCUMULATE.

If CSG delivers a better quality full-year result and proves to the market that it hasn?t bitten off more than it can chew, then the current share
price will prove to be very, very cheap. Other recommendation changes this week:..... "