gearing

In looking at THG as a near reaching the bottom, in addition to expecting a gradual improvement in operating conditions, I also looked at revised level of gearing that writeoffs would mean in terms of gearing levels.

At 31 December Gearing was 49%, based on Net Debt Figure of $680m and Total Assets of $1.387B. With the additional writedowns of $206m that will be booked for June half this means gearing will increase to 58%, hence need to refinance in terms of banking facility.

For a business that even despite recent challenging conditions that is turning a n operating profit, 58% gearing is not high. With a revised NTA of 80 cents per share cf current share price of 22.5 cents, and quality assets, we have a bargain basement.

That said I don't expect this to rocket back up as negative sentiment against a stock with this sort of announcement will take time to turn around, so for day traders it won't be for you. For others looking for core positions, I would take a closer look as this will be a good recovery stock given the assets owned.