Successwillcome As a Qpp shareholder, and as someone with a bit...

Successwillcome

As a Qpp shareholder, and as someone with a bit of history in turnarounds and highly geared deals, I really could not work out quite why SGH chose to "deal" at the gearing which would follow the PSD purchase. However I had been close to a defence team on a highly leveraged offer for a UK listed co. ( It failed but I could not work out how the OZ side could have made it work)
Several years ago I was just left with the impression that higher levels of leverage than seem sensible/feasible can work in OZ ( ?) ......and I have never got to the bottom of it.

2 things were obvious:

1. Post deal gearing would breech most Investing instututions risk criteria.
2. The swarm of shorters who had trashed the qpp sp would see easy prey.

So the post deal SGH absolutely wasn't for me. I have never shorted and prefer 1-4 year investment horizons ( enough for a turnaorund) - so I wasn't going to join the SGH frenzy.

It is actually difficult for a UK investor to buy SGH because it is not on the CREST system. Kept watching
and thinking I knew quite a bit about QPP PSD and its good ,but dull , prospects......it was obvious that the frenzy had taken SGH to absurd level ( if SGS does what it said on the tin) and still is.

All that SGH directors had to do is

A. be brutal enough to shrink the overall UK business by 10-15% and that will generate net cash.
( get rid of least profitable elements )
B. Shrink OZ by 10% for net cash
C. Milk NIHL for net cash after 2 years
D. See how much debt could be shrunk in 2 years
If debt is below $500 at end of 2017 it is obviously well geared but affordable

At the end of 2017 SGH will have options.

I believe the most sensible option would be to reduce debt by $150M ( £90m gbp) with astute placings in the UK. There are UK investment trust managers which have "long view investment trusts" . The fabulously wealthy Kayzer family and The Rothschilds have such old fashioned trusts ( eg Caledonian Investment Trust) . If the directors are really cutting the mustard they would identify the target long view trusts and ensure a sweettalking behind closed doors road show.

The the big one E.

E would be a plan to ensure a main market dual listing in the UK. ( 2019?) and a placing of new shares.
The plan would be enhanced by growth ideas ----and there are other highly profitable segments of the legal market
The plan is more likely to hit the objectives if recruitment includes a *Dan Carter of the legal world with strategic planning ability , rather than just expend in a segment of the market you know.

Now I dont know if that takes the sp to $8 ....but I rather doubt it. It could take SGH to very low gearing.

So AG 's accretive notion is possible.

None of it seems to work unless they get to D above.

Mel

* That said Scotand's stand off made Dan Carter look second rate in a match recently.