Having a look at the Morgans rec for SGH and noticed a pretty...

Having a look at the Morgans rec for SGH and noticed a pretty big error in their valuation.

They have it on hold with a $1 target. Previously they had a $7.52 price target on it 8 November then a $5.31 price target 23 November before the current update too. But only a $1 target now.

To get that target they use a sum of parts with PE and EV/EBITDA, each with a 50% weighting.

FY16 EPS they have pegged at 46.5c/share.

They massively dropped the PE they were using to 7 (pretty conservative... they formerly used a PE of 11 with 25% weighting) so calc is 7 x 46.5 = $3.255 * 50% weighting = $1.63
EV/EBITDA based valuation on 5 times FY16 = $2.08 - 50% - $1.04

Sum of part = $2.67

Here is the error ... for some absolutely unknown reason, most likely they didn't check the model as they changed it from the model used in the previous calculations they HALVE that again to give a valuation per share of $1.33.

Then for good measure they add in a discount to valuation for risk of 25% to give a price target of $1.

People wonder why analysts "target prices" don't get taken seriously. They don't even double check their figures. This has been out since 26 November and no update yet.

Effectively they have valued it at a PE of 2.15 @ $1.

If the error wasn't made and you accept yeah a PE of 7 is close of enough and 25% risk due to volatility, then price target if no error should be $2. I am sure they would just add a 50% discount instead or something to get the figure closer to where they want it to be but that would still be $1.335 and a lot clearer to the market but at least that would be transparent in showing there is a massive 100% increase in price target from $1.335 to $2.67 if risk / volatility settles down.

End of the day.... don't trust the research reports.

One other quick note... shorters have not covered anywhere near as much as I thought they would have by now. Data still to come for 2/12 but volume well down since then. If there is any positive news there will be a lot there exposed and we could still get a short covering rally. Also explains why it hasn't pushed up as they are likely still playing games with it to keep it down.