I tend to disagree about AG being a fraud, reason being accounting rules for revenue means it's almost cash basis. If there was no SGS revenue, yes it is a dud they bought, but SGS revenue did come in, not as much as they expected and also had the high expenses, but that means the business is viable, and have a in demand product.
Forget about AG, I don't really care if he stays or goes, SGH has a viable product that generates revenue, it just needs to be managed so it can produce the margin. And I see a normalised margin as very likely. Why? Because if they didn't binge on the $70m advertisement, they would most likely got away with a profit in 2016!
I guess the way I see it is that don't blame the car if the driver is amerture. A F1 is still a F1, it will perform differently in the hands of different drivers, but you shouldn't pay less for the car itself just because the driver caused it to come last. Yet, the price of the car now seems to be driven by the ranking, the car that came last is selling for almost nil...so I call that a bargain.
Risk wise, they don't need to payback the full loan amount, slight dilution leading to greater certainty will improve the share prices. In the longer term they may even do buy backs, and rejig the balance of debt and equity. So longer term looks bright, for me at least.
SGH Price at posting:
26.5¢ Sentiment: Buy Disclosure: Held
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