Have read plenty of articles about SGH recent days... The bad things are clear to all: under performance of all business units...Operating Cash Flow turns negative, far away from Management's expectation. And I don't believe the 2nd half year will deliver better results as the previous 2nd half didn't.
But the only solid positive thing I find so far is that a large sum of the Directors' fortune is tied up with this Company. 10 out of 11 directors participated the CR to support the PSD purchases in May 2015. These were true money from their own pockets and note Andrew ate the most what he cooked. Go figure how much they lost today.
Maybe before the deal really closed, no one would know exactly how PSD would taste.
However on 30 Nov 2015 and 1 Dec 2015, both of John Skippen (Chair) and Ian Court topped up their holdings (not huge amount but still good money out of their own pockets). John Skippen is a chartered accountant with 30 years experience and Ian Court(on SGH board since 2007) served on the funds management companies over 25 years. I bet that they are true Believer of SGH's model and know it will make money but I also bet they didn't know PSD would underperform that bad when they topped up. The topped-up was after PSD deal so they should be the best or at least the second best person knowing the book. They still topped up anyway and then the big write-down occurs 3 months later. So obviously and mainly it is the Banks who push the write-down and the company to adopt strict accounting policies.
No, I cannot deny how big the current headwind is and we cannot ignore those Directors' motives to turn around the company either.
Yes, it is truly speculative to buy if we only look at the numbers but business are only numbers? I don't see any real benefits for the banks to bankrupt SGH. At this stage Andrew will push the WIP as fast as possible to become real cash but if banks like to control the WIP themselves, the only result is their money will be much less and get delayed much longer.
My ave is 84 cents. I'd like to bet a bit more when the price is 20 cents or lower and I'd like to bet on the management.
But the numbers says there is like 70% chance the banks will make it broke...
I don't know... Whoever saw enough bankruptcies and see my posting should come out and share some opinions...
Good luck~
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Do your own research. My words above are not investment advice.
SGH Price at posting:
26.0¢ Sentiment: Hold Disclosure: Held
