Taking a bite at SFH, page-3

@natnicnak

Thanks a lot for your feedback.

Yes, I agree that no EBITDA loss in JH2018 would be very positive news. Recent price action would seem to indicate that the market does not believe in that guidance being realised, but it does look achievable to me.

With regard to improving the products on offer, I cannot disagree with you, but there is little value I can add to the topic as I am no expert of this sector. Hence my focus on cost cutting as a primary way of improving EBITDA margins. Keeping Rivers EBITDA positive is certainly key for a turnaround of the Company.

Regarding the currency impact: I do recognise its importance, but I also do notice that in FY2013 (with an average AUD/USD above parity, if I’m not mistaken) SFH only achieved an EBITDA margin of 7.30% (i.e. almost 300bp lower than the average of FY2007-FY2010); and in FY2014 the EBITDA margin was even lower at 5.2% (despite the exchange rate being still in the 90s), because of the CODB/Sales ratio reaching a peak of 57.9%.

Thus, the benefit in terms of COGS due to the higher-than-average AUD/USD was more than offset by the increase in CODB. What I totally agree with, though, is that everything else being the same (and especially at the current depressed SP) there is a lot of optionality to a higher AUD/USD embedded in the shares.

I personally do not have a strong directional view on the exchange rate, but I do have some long USD exposure originating from some USD-denominated holdings; therefore, some long optionality to the AUD is something that sort of suits me from an overall portfolio perspective.

IMHO & DYOR