I think it appropriate to start a new thread on this topic as the bears have dominated the other threads due to SP doing them a favor.
I won't repeat the facts as they have been repeated and used by both bulls and bears in many other threads, but instead of the facts, I want to emphasis the timing of these facts and why SP in my view is oversold after SGH announced that they are working with the banks to amend the facilities and recapitalise SGH.
SP is oversold because
1. DE may or may not occur, if it does occur the dilution effect won't hit SGH until the facilities are due in 2018
2. SGH's announcement stresses that SGH has reached an agreement, and that the banks are being supportive through this process, the subtle use of the language suggests SGH has power to negotiate, and that the banks are not interested to mutually destroy each other. This suggest the banks and SGH are not desperate as many suggest; also, my previous post suggest that timing and sell of MQG and Citi's share of the debt to separate parties at different prices may have things to do with the cross litigation that's occurring at the moment with M&B, SGH and Watchstone.
3. Timing for financial reports is Feb 2017, August 2017, and one more time prior to May 2018 when the fixed facilities are due (if I remembered it right), which is when DE would happen if it does indeed happen. At each of these points as long as it's BAU with SGH's $1bn revenue and stabilized expense, I don't see why SP would remain at 20c range, it can bounce up to say $1 before DE, and say even with 50% dilution, you still end up with 50c which is substantially higher than 20c.
4. Bryce Houghton was hired to fix the finance side of SGH, the McGrathNichole report have suggested that the underlying business is sound, but the capital structure needs fixing, and that what exactly Bryce is doing, so put the pieces together, you can see a much calmer water with the bank and SGH working together to solve the problem created by the way the acquisition was structured. What's causing noise is not the business itself, it's the market, which Bryce have pointed out will speculate the outcome of the recaptialisation discussion.
5. Risk wise, SGH was at 21.5c when bank support was uncertain, boat still leaking cash as no heat counts have been cut/restructured, acquired business in its first year, manager still trying to get a grip onto the new business... now, all these have been fixed, Sp still slagging at low 20s.
Common guys, make up your own mind, if you have some cash to spare, get in at this price and hold for a year, that's value investing.
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