SGH (ASX) Got legs

Originally posted by chibba123 ↑

I imagine the budget is determined by the terms of their debt, so I read 'on budget' as 'we are keeping our bankers happy'.

I've nothing to back that up apart from logic. Would have been nice to know the numbers at agm, but I guess you can make an fairly rough educated guess based on the progress shown from last years FY vs HY results.

For me the business side of the turnaround has happened and the business should now be quite profitable (HY17 results will confirm if this is the case). The issue obviously remains around the debt and if they are still making quick enough progress (remember the PIP stages mentioned in the AGM) to be able to refinance on good terms and avoid any costly dilution.

I don't see a recap as a foregone conclusion. They have another 16 months before their nearest maturity. A lot can happen in this time. My interpretation of the line "The Company is working pro-actively and co-operatively with its Lenders to explore and manage options for the refinancing and recapitalisation of the Group" from the Dec 28 announcement is that in the event that there are the PIP falls behind schedule and they want to be able to manage a potential recap in the best possible way. More like a "hope for the best but prepare for the worst" scenario than a definite course of action.
I don't think a recap is going to be as catastrophic as some have suggested. They don't need to wipe out the whole debt with a recap. Hypothetically, they may only need $40m to get back on track to where they should have been if they were on target with the PIP.

There's a lot of risk in this stock, don't get me wrong, but it's far less than where we were a year ago and six months ago. The fact that it's still hanging around these levels boggles my mind. It's no longer in a position where it is at risk of going out of business. I've already got a relatively significant parcel, so won't be adding any more. However in saying that I think it is definitely a buy.

All my own opinion of course, and please DYOR.

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I would also like to buy more at these prices but are maxed out.