News: SFH Specialty Fashion Group updates on non-binding change of control proposal from Al Alfia..., page-7

An excellent set of results – the turn around from net debt to net cash after (i) and increase in inventory and (ii) higher CAPEX spending, the increased eps says a lot for the ability of this business to generate cash when they get it right. Even allowing for the seasonality factor the company looks cheap at current prices and would look ridiculously cheap if they can continue to improve.

What I didn't like:

#1: no dividend. With cash on hand and an abundance of franking credits I fail to see why a dividend of around 1 cps wasn't declared – the implication is that management sees a need to retain cash which is not encouraging

#2: (apart from the reduction in the size of the debt facility) the statements regarding outlook were so vague as to be meaningless

#3: they have reduced the debt facility and expect it to reduce further = lower facility fees which is good. However, the fact that management feel it needs to be as high as they are forecasting suggests that they see a need which implies a lack of confidence in the outlook for the next 6-18 months

Short version: a good result making to stock looks very cheap on valuation grounds, but management are sending some seriously negative signals about the future.

I'm thinking about buying more.