Agree with most of your comments, and thank you for being so polite.
You say: "So instead of finding faults with the PPX business model, it would be better to find solutions. Are they salvageable? Should they slim down? Diversify? Cap raise?"
I respond as follows:
(1) There probably isn't anything fundamentally wrong with the PPX business model, save they've exhausted their financial reserves. This puts strains everywhere, and apparently on the senior execs.
(2) I know as fact that the professional market believes PPX acted inappropriately between May-Oct 2011. They won't say this publicly, yet when I do the result is inevitable.
(3) Is PPX salvageable? I believe not and have explained why many times. Their major market, print, is in crisis. Some basic examples:
(a) Heidelberg isn't making money. Check out its price chart which looks like PPX - http://au.finance.yahoo.com/q/bc?t=5y&s=HDD.BE&l=on&z=l&q=l&c=ppx.ax.
Heidelberg is God to this industry, and it cannot make money.
(b) On the ground, I'm told that Heidelberg in OZ is selling new machines with generous vendor terms + deb charge. After about 2 years the printer goes broke. Heidelberg takes back a near new machine, but the other suppliers do their dough. I suspect this is why Marchant said on May 18 that OZ sales were down due to tighter credit control. I conclude that Heidelberg sales are to keep the factory running, and to maintain market dominance, not to make money.
(c) When you read industry newsletters, it's all doom & gloom. I encourage you to read http://www.printweek.com/bulletin/printweekdailybulletin/article/1111926/print-buyers-unsurprised-web-offset-capacity-cuts/
- talks of pay cuts up to 20% in the UK!!!
(d) I could go on. If you read the SEQUANA AR, it lists 4-5 suppliers to the fine paper market in Europe. Check out SEQUANNA's shareholders and its ultimate parent; etc, etc.
Try as I may, I cannot find good news so I'm seen to bag PaperlinX. Some of the rebuttals of my research are simply laughable.
Only today MYPRAVDA says: "Now is the time to be patient and join together so we can bring back paperlinx to its former glory days." How does one respond to this without being rude?
SLIM DOWN: Yes. Sell USA, Canada, OZ, NZ & Asia. Get debt free then relist in UK or Europe as a European business with a European board in 2-5 years. DIVERSIFY: No, its a myth, as explained yesterday. CAP RAISE: I canvassed this in some detail at http://www.paperlinx-sux.com/2012/01/paperlinx-announces-share-buy-back.html
If the Board couldn't bit the bullet at 40 cents, because the raising at $1.25 barely scrapped home, how will it fare at 6-7 cents and not underwritten.
SUMMARY: I genuinely believe that PaperlinX is so out of favour that eventually it'll implode of its own doing. Some possibilities:
(1) Board stoush (2) Suppliers (mills) tighten credit (3) Breach of bank covenants (4) Acts of God - Europe is snow bound for 30 days and all business stops (like our cyclones & floods) (5) Its credit insurer goes broke
All are low % probabilities, but PPX wouldn't survive any one of them.
Finally, check out this graph http://www.paperlinx-sux.com/2012/01/wealth-warning.html PPX is now trading at 21% of its GFC lows. Not good.
RAY of HOPE: Tony Clarke is a miracle worker.
SRS Price at posting:
6.5¢ Sentiment: Sell Disclosure: Not Held
