Hi Klogg A recent addition to the site and in a bit of an...

Hi Klogg

A recent addition to the site and in a bit of an obscure spot, but at least it’s there now.

My assessment of the performance required to achieve the hurdles with the current business would be the ability to fog a mirror. So either they are gifting the rights issue to the CEO or I am mistaken on the outlook for the business and the company is forecasting rather serious deterioration in profitability.

I note from the presentation that ROE is calculated as underlying cash NPAT divided by the average of opening and closing equity – so even the definition of ROE is less strenuous then say statutory NPAT on closing equity.

They achieved 18.9 this year and I would expect that to improve with the maturing of the receivables book. So 16% as a target perplexes me. The difference in valuation if 16% ROE is where the business is heading as opposed to what I formally expected is around $1.00 and makes TGA a rather tenuous hold rather than a comfortable hold proposition from my perspective.

So big question are they low balling it and gifting the rights to the CEO rather then aligning his rewards to our shareholders outcomes or are they forecasting a deterioration in profitability? Neither fills me with confidence. Perhaps there's another explanation? Planning an acquisition that will lower ROE? or another big increase in the receivables book that effectively delays the maturing. Watching closely........