"my thoughts only - keen to hear what others make out of this ?"
Since you asked, (though I'm not a holder currently), can't fault your maths, but some of the assumptions might need another look.
- The goodwill impairment was based on expected future cash flows from SGS, not expected reduction of EBITDA. Not sure how the 27% figure would have been arrived at, but the auditors would have had their methods.
- The expected EBITDA of 25% of revenue for 2017 FY has to go into the "wishful thinking" category unless SGH come out with some trading updates supporting that. 2H 2016 normalised EBITDAW for SGH was $51.4M, which was about 12.2% of revenue. We know that there are some ongoing non-recurring expenses happening in 2017 FY (staff downsizing etc) so even with some impact from the PIP in 2017 results, EBITDA as a percentage of revenue is likely to be similar to 2016 2H, maybe a bit higher if things are improving. So EBITDA of 13% of 2017 FY revenue might be more realistic.
- Reforms are unlikely to impact 2018 FY first half results - looks like it will be too late for that (assuming the legislation actually happens) - and may not impact 2018 at all. But with the downsizing disclosed and other noises made at the AGM it sounds like total revenue may decline marginally anyway though. Not sure whether that is a good thing or a bad thing long term, but reducing scale of current ops could be part of the CFO's survival strategy - so that cash flow actually starts exceeding operating profit for a while. It's what I would do if I was in his position.
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SGH Price at posting:
31.0¢ Sentiment: None Disclosure: Not Held
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