Agree with Boomer on this one. Have a shedload of these myself and a bit dissapointed with the depth of sell-off, though not unexpected shortly after the deal was done. Similar thing with AAZPB where once it was obvious they went perpetual some holders just needed to get out for reasons of fund rules etc. Over time those that need/want to leave will be replaced by those who are happy with the return vs capital uncertainty perpetuity brings. Right now they look well over-sold.
The question for those holding or looking to buy is how safe are the divi's and what chance insolvency. Gearing is currently zero effectively so Stokes would have to blow up the balance sheet with more grandiose aquisitions on the hock that go bad.... and with his ego that is always a concern. The chance of having divi's suspended is also unfortunately very real because he has proven himself a greedy sod with no respect for commercial responsibility or reputation. ALZ went through hell and back including 2 very dilutive capital raisings totalling $1B but never flinched about maintaining divi payments to AAZPB. I just cannot see Stokes taking any sort of personal pain before sacrificing the SVWPA holders for a $33Mpa free re-cap into his own pocket. He shafted them by not redeeming TELYS3 at the end of the contract period despite having $1B in cash. The Step-up was sold as a last resort penalty if redemption was not possible not an option for him to bail out his own private problems. By turning the TELYS3 into perpetuals he instantly knocked 15% off their value for his own benefit.
Anyway, after a few reds I go on too much, the salient point now is what chance SEV goes the way of ELD? To some extent the RSPT might actually prevent a big blow-up that could see divi's cut. My logic is that businesses that grow slowly tend not to overstretch and come a croppa because slow growth businesses don't face the type volatility that can bring the ambitious undone. If Westrac have a slower growth over the next few years as less projects/expansions go ahead then they will need less capital to gear-up; ie they will slowly grow revenue and profits and the balance sheet fom retained earnings. If there was no RSPT they might well win heaps of contracts, take on heaps of debt buying heaps of new machines just to find China crashes and clients all stop paying bills at once with a massive fleet parked up. That sort of GFC '08 shock is what brings an otherwise "steady" service company down, not slow growth. High growth is what the SVW shareholders want whereas SVWPA holders want just enough profit to maintain a healthy company and our divi's .... stuff the high-risk, high-growth attitude.
If the business ticks over with a slower resource industry that suits me OK with this diversified conglomerate looking pretty solid for at least modest profits. That said Rudd and his RSPT shts me to tears in the typical way of socialists and academics residing in their ivory towers fixated on why everyone cannot have an extra slice of the cake. They have never put their own skin in the game, never poured millions of dollars into the ground for no return on the hope of finding Eldarado. Even with the current royalty/tax set-up over the longrun resources have been aterrible investment. Most either find nothing or have a few glorious years before plowing their profits back into looking for the next great find only to go broke trying. Who would go looking for Eldarado when their was only a modest return at best and going broke a probability. Fair dinkum, I'm in the game and the Gov beauracracy, envirnomental hurdles and Native Tilte extortion make it near impossible now. Nuff said.
gooluck
SVW Price at posting:
$6.47 Sentiment: LT Buy Disclosure: Held
(20min delay)