can't say i agree with anyone here. i am expecting the majors are slowly unwinding their positions without trying to cause too much downward pressure on the share price.
my reasoning for this is as follows:
1. How reliable is there current underlying earnings figure of $67 million. It is not clear how much of this has been propped up by the forward selling and incentives that were going on.
I mean it is easy to see why pharmacists refused to forward order this year in anticipation of even cheaper prices after the new pharmacy agreement.
Further, I am expecting reduced market share anyway, with cash being tight means less spent on employees means lower morale which means lower sales. A vicious cycle which is difficult to get out of. Imagine the number of employees who did not get a bonus?
In addition there interest costs will be higher this year and the covenant of not losing market share is pretty onerous.
2. They gotta sell assets with a stipulated time frame. They are going to have almost zero negotiating power especially if there is no competitive tension.
3. They will need to do a diluting rights issue, which will cause a drop in price as well. Not only is their debt but the Allco facility is $500 million, very similar to current market cap. THE CRITICAL ISSUE HERE IS THIS FACILITY IS CALLABLE BY ALLCO ON 120 DAYS NOTICE.
If that were to happen, the company would go bust. However, supporting their position is that the receivables backing the security would be more difficult to collect - a conundrum for their receivers and managers.
I reckon the best price a vulture fund would want to pay for this business is $0.40. Not because the underlying business does not have a long-term future, but because of the significant cost and expense to unwind its current state would be prohibitive at a higher price.
SIP Price at posting:
47.5¢ Sentiment: LT Sell Disclosure: Not Held
