Kamikaze I have said this before but post purchase of PSD from...

Kamikaze

I have said this before but post purchase of PSD from QPP I looked at the gearing ratio of SGH and it was glaringly obvious that :

1. SGH wouldnt fit with investing institutions and they would run for cover.
2. As they and those "obliged" to support the placing ran for cover they would if they could short.
3. AG wouldnt say it was accretive unless that was so - but probably not immediately.
4. £90 M advertising spend , new Manchester office move and new broom elements made gearing worse.
5. there would be a shorters fest.

Well right so far and now , relative to expected future profits the SGH shares are astonishingly cheap.

What next? Any large company can cut it least profitable trading and that is cash generative. The 53000 hearing loss cases would absorb cash short term but it was clear , given the structure of the profits split, that both sides expected clarity on outcomes within 2 years. Here we are in 2017 and I expect evidence on likely outcomes soon. Even if there is a poor return on NIHL - they are likely to generate 8 and possibly 9 figure net cash in 2017/18. The Escrow dispute could bear fruit ( no idea).
My calculations suggest operations will generate $60 M pa cash +ve on an ongoing basis and I am hoping for one off $60-120M cash in 2017. If at the disappointing end of my leverage sensitivity calculations ( which rely on a a lot of guesswork ) I think SGH should look for $100-200M new dilutive equity this time next year.

Even if the 2017 outcomes prove to be disappointing - the current SP is ridiculous. It should be over a dollar ......and I shall eat my hat if it is not so in feb 2017. Add a bit of good news and double that.

Yup. I am a relaxed investor in a fairly dull professional services business. Divy in 2018 please.
A return to last divy level ......33% divy returns would do nicely. Clear recovery and Redde plc shows us that a valuation of 20 times profits in future is possible. Geometric progression is lovely...add a modicum of growth ......then Yee Haaa!

Now it is valued at less than 1 times future profits. The market always tends to overshoot both ways.
DAFT!

Mel