shine lawyers SHG strategic positioning, page-16

"The jury's still out on this stock, nothing changed since our discussion 18 months ago. A lot of WIP now reported as current asset, guess if that's true it would be positive but no hurry.

I thought 2.5c was a good divvy again says they see some cash coming in."


I think you may be underselling it a bit here. The main concern 18 months ago was the thesis by Jimmy C that WIP was not converting to cashflow fast enough, the WIP on the balance sheet was grossly overstated and the business wasn't growing. These were the main reasons trying to explain why the then current valuation was justified. In other words, Jimmy and the like would concede that if these conditions were not met then the sp was undervalued ( massively , in some people opinion).

However looking at the report I don't see any of these conditions being met and in fact just the reverse. GOCF are improving, revenue is up and profit before tax was also up. Guidance was also given for further moderate growth in FY 19, substantial WIP is looking to be converted to cash this year and operating cashflows are now targeted towards 65% + with a movement to litigation funders. It's even likely that the PI industry as a whole is returning to small growth.

Also no writedowns of WIP as predicted by some, restoring confidence in the company and futher derisking it imo.

It's a pity that more people didn't realize that we would of seen profit growth this year apart from the large increase in the tax bill. Not to mention that a large part of current WIP on the balance sheet ( probably 30-40m) and around 20m+ ( from memory )in unbilled disimbursements will likely be realised into cash with the ethicon settlement ( of course shine might not see this cash until late 2019, but the judge approving the settlement should happen before years end or a few months past, at which point the cash is essentially bankable)

Of course I'm a more than a nit biased and only seeing the positives but on balance I think things have changed for the better, remember it's not that long ago that people were greeting every HY or FY report with fear and trembling of large writedowns on the balance sheet and comparing it to SGH.