my order completed at 26.5c and I see it then went down to 25c for a few moments and some lucky person got some.
Well I still have a small bit of ammunition but I am going to wait until June. I personally think it will close out the financial year really low and then climb into the yearly results.
If they did not intend to maintain the dividend I would have thought they would have pulled the half year and just had one. I expect it to be a 0.5c interim and a 1c final all fully franked. Its a great dividend and in fact I think too high for a growth company. Over 8% on current prices and really a bit rich. However if you look at the forecast and take EBITDA as $1,8million which is really on the low side. Then add back around 300K for depreciation and amortization then in fact in a stable non growth environment the business should generate around $2.1 million net cash flow (there is the debtors that we now have to fund the build up for L&R) however interest is around $400,000 so all in all the business cashflow over time should generate around $1,7 million in cash and they are paying out around $1million. On this basis the distribution is in a normal year sustainable. The issue really is that of their $3million cash they will be paying out $1.5 million to the repayment of a loan - a very expensive historical one. They have no bank debt but I bet they are a much better bet at the bank these days. Maybe people dont really understand how transforming L&R will be for them. I reckon they could now easily replace the $1,5 million debt at 10% with a bank facility at around 6.5% and probably get closer to $2 million.
So the dividend is sustainable and I think that they will have to use gearing as an issue of shares at these prices are just far too dilutionary. However I think they are on the right track - Just a bit early for the market to notice. I think that in august and at the AGM if they have delivered on the forecast it may get noticed. What I have learned from this stock is that life is never a straight line.
PGC Price at posting:
27.5¢ Sentiment: None Disclosure: Held
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