# SGH - Slater and Gordon



## beatrice (21 May 2007)

Any thoughts on the slater and gordon launch this morning?
Will other law firms follow suit?
I am thinking of jumping in at open.


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## Ruprect (21 May 2007)

This one might take off on open. 

Make those apalling ambulance chasers rich. Just my opinion...no, actually its a fact. They are appalling.


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## Broadside (21 May 2007)

I wonder if Julia Gillard has any equity, she used to be a partner.

I want to float a company Doowie Cheatem and Howe.


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## greggy (21 May 2007)

Ruprect said:


> This one might take off on open.
> 
> Make those apalling ambulance chasers rich. Just my opinion...no, actually its a fact. They are appalling.




What a twist. The so-called chardonay socialists have finally discovered capitalism.  Known for being left-wing, they're now listing.  Slater and Gordon has a good brand name as its very well known for the high profile cases that its taken on.  
DYOR


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## Ruprect (21 May 2007)

Broadside said:


> I wonder if Julia Gillard has any equity, she used to be a partner.
> 
> I want to float a company Doowie Cheatem and Howe.




I think Julia Gillard has way too much dignity to take part in such an offer. Hasnt been there for more than a decade as far as im aware, and she's on to better things now.

And i think its sauvignon blanc socialists now, nobody drinks chardonnay anymore, except me. 

Sorry, back to the forum. Its good for slater and gordon partners, although im unsure what long term potential it has.


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## Ruprect (22 May 2007)

From the Australian today. Good for the directors? Oh yes. Looks like Slaters and staff have kept over 70% of the shares on offer. And they are still in debt. Very curious indeed.

*Let's see if the talent floats too*

YOU can tell the top of the market has arrived when the investing public willingly give their money to lawyers.
After Slater & Gordon's first, sensational day as a listed company, it might look as if this is the way of the future for the legal profession. 

But it's not. Law firms that are interested in attracting and keeping the nation's best legal talent will be unlikely to float. 

They might incorporate in order to more efficiently distribute profits to family members or retain earnings. But that is a long way short of raising money from the public in a float. 

A public listing is great news for the generation of principals that sells its equity. They become instant millionaires while retaining control of the firm. 

But for subsequent generations, it's poison. And here's why: five years from now, the last of the share sale restrictions on the Slater's principals will expire. They will then be free to cash in their remaining shares, take their millions and walk away. 

The firm will then be run by a generation of lawyers who will be forced to reduce their incomes in order to share the firm's profits with the investing public. 

For the generation of lawyers who sold the firm, that problem is merely theoretical. They will still hold plenty of shares and therefore a healthy dividend stream. 

But when they go, Slaters looks set to be mugged by economic reality. How long does anyone expect that the next generation of lawyers will put up with reduced incomes in order to keep shareholders happy? A nanosecond, perhaps? 

If the next generation at Slaters is as good as the current one, they could be partners at a traditional law firm where partners get to keep all the firm's profits without the complications of looking after shareholders. 

So five years from now, the big winner from the Slaters float might be that firm's arch-rival, Maurice Blackburn Cashman, which has rejected the option of listing. 

In order to prevent a flight of talent to MBC, Slaters will need to ensure that its profits five years from now are massively ahead of MBC's. 

Investors who piled into Slaters have a great deal riding on the success of its growth strategy - a primary reason for the float. But a close reading of the prospectus shows that the war chest is empty. After the float, Slaters still has short-term borrowings of $7.1 million, according to the pro-forma balance sheet. It plans to grow by blowing out that debt by about $15.4 million. Slaters might succeed. But then again they might not. Either way, the lawyers who sold the firm yesterday will still be in clover.


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## Sodapop (22 May 2007)

So will they inititiate class action proceedings against themselves when/if they are accused of insider trading??? Good/guaranteed money...


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## Pioupiou (24 April 2011)

*Re: SG.5%H - Slater and Gordon*

Ruprecht,s post of 22 May 2007 is very thought provoking, and the germ of what he wrote should survive as a caution for investors in SGH in years to come.  However, some four years have elapsed since then, so I wonder what people think now.

I invested about $30K ($30,312) in SGH on 12 October 2010 at $1.684 a share, and at COB on 21 April 2011 I am 47.5% ahead on paper at a SP of $2.42.  To hold or to run?  That is the question.

Volumes have seemed to increase from a very low base only months ago when it was not unusual to have no transactions, and there appear to be more buyers than sellers.


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## Pioupiou (28 April 2011)

Closed on 27/04/11 at $2.50 - my $30K+ investment of 12/10/10 is now up 48.5%, and there are still more buyers than sellers.  Does anybody have a view on SGH?


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## Pioupiou (12 May 2011)

On occasions fairly large SGH (or at least large  relative to SGH) buy-sell orders are executed.  I suppose there are lawyers who have waxed fat on the basis of their SGH holdings and salaries, and who now want to enjoy their twilight years wallowing in Chardonnay.  However, for every sell, there is an equal-value buy, so other folk are keen to get into SGH.

What intrigues me is that recently there has bee a lot of Bot activity in respect to SGH, and I do not know if this is driven by folk who want to drive the price up as sellers, or the reverse as buyers.  This morning (12/5/11) it looked like this:


12:58:19 PM -- $2.430 -- 10 -- $24.300
12:57:45 PM -- $2.430 -- 11 -- $26.730
12:55:49 PM -- $2.430 -- 10 -- $24.300
12:55:47 PM -- $2.430 -- 11 -- $26.730
12:54:46 PM -- $2.430 -- 10 -- $24.300
12:53:16 PM -- $2.430 -- 11 -- $26.730
12:52:49 PM -- $2.430 -- 10 -- $24.300
12:50:53 PM -- $2.430 -- 10 -- $24.300
12:50:52 PM -- $2.430 -- 11 -- $26.730
12:49:50 PM -- $2.430 -- 10 -- $24.300
12:48:23 PM -- $2.430 -- 11 -- $26.730
12:46:53 PM -- $2.430 -- 10 -- $24.300
12:46:47 PM -- $2.430 -- 11 -- $26.730
12:45:48 PM -- $2.430 -- 10 -- $24.300
12:43:51 PM -- $2.430 -- 11 -- $26.730
12:42:52 PM -- $2.430 -- 10 -- $24.300
12:42:50 PM -- $2.430 -- 11 -- $26.730
12:41:48 PM -- $2.430 -- 10 -- $24.300
12:39:56 PM -- $2.430 -- 10 -- $24.300
12:38:49 PM -- $2.430 -- 10 -- $24.300


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## Bowlane (12 May 2011)

Sorry I don't understand, but what do the 10 and 11 in your Column 3 represent?


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## Pioupiou (13 May 2011)

Bowlane said:


> Sorry I don't understand, but what do the 10 and 11 in your Column 3 represent?




The 10 and 11 are the quantity of shares traded for each transaction.   The first $ value is the price, and the second one is the quantity multiplied by the price - the total value of the transaction.

These small trades are often used by brokers to mask a large aggregate trade so that the SP does not get pushed up too much.  The brokers will use software to do this, hence the process is termed Robot Trading, or BOT for short.  There a thread on BOTs.


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## Pioupiou (6 June 2011)

I hold 18000 SGH, which I bought late last year for $1.684 each on average.  The SP is about $2.20 now, but it did edge up to $2.50 some months ago.  I like the idea of a stock that does not get hit by economic factors like interest rates, exchange rates and business cycles.  I believe the recent slide south of $2.50 was caused by shares coming out of escrow increasing the shares put up for sale, but this slide seems to have ended.

At last somebody seems to have mentioned SGH – to wit:

Michael Heffernan, Austock
BUY RECOMMENDATIONS

Slater & Gordon (SGH)

Australia’s only listed legal firm continues to progress in a quietly robust manner. Slater & Gordon represent a superior investment option among small industrial stocks in the current environment. Litigation is likely to be unaffected by a slowing economy.


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## Pioupiou (14 June 2011)

SGH is edging upward rather nicely - more buyers than sellers.  It closed at $2.25 on Thursday, $2.31 on Friday and $2.38 today, Tuesday, 14/06/11 (Monday was a holiday).


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## Garpal Gumnut (9 July 2011)

I've been watching SGH, and feel it may be due for a retracement to $2

This is an old resistance line for the stock and should provide some support.

I'm no Elliot follower, I can never even remember how many L's and T's are in his name, but from my old ATAA days, it seems to have completed a 1 to 5 and is now in an ABC, or a new 2 of a higher degree.

It is getting buyers on low volume, but recent large holders are out for a profit as evidenced by the recent large vol bar ending on a low.

It could also trend sideways for a range trade.

Don't you love lawyers.

In this climate a $2 target is reasonable.

gg


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## Pioupiou (19 September 2011)

Carpal Gumnut wrote "I've been watching SGH, and feel it may be due for a retracement to $2", and this is what has happened.  On the fundamentals the SP should be closer to $3, and it may get there if the mood of the market sloughs off its negativity.  Being a cautious bod, I'll stick to the halfway point of $2.50.

Read today's positive wrap on SGH at:

http://www.thebull.com.au/articles/a/22878-5-sold-off-small-caps-going-cheap.html

I bought 18,000 late last year at about $1.68, so it has been a good investment.


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## So_Cynical (19 October 2011)

Pioupiou said:


> (24th-April-2011)
> I invested about $30K ($30,312) in SGH on 12 October 2010 at $1.684 a share, and at COB on 21 April 2011 I am 47.5% ahead on paper at a SP of $2.42.  To hold or to run?  That is the question.






Pioupiou said:


> I bought 18,000 late last year at about $1.68, so it has been a good investment.




Did you sell any at the top? i like to take at least some profit to lock in gains/create free carry.

----------------------

I brought in today after watching for more than 18 months and kicking myself i missed out the last time SGH was trading at around this level...SGH is my second legal stock as i own shares in IMF too, i like legal business, i like investing with lawyers.

Safe cash flows, lots of repeat business and economy's of scale with SGH, still room for both organic growth and growth by acquisition...ok divi yield with potential for yield growth over time.

In today at $1.76 ~ portfolio stock #24 ~ i brought today because i feel the SP is very close to bottom, the new lows this week after the market lows of past weeks should mean that the worst is over, and the Vioxx decision is now a week or so old.
~


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## odds-on (9 May 2012)

What is going on with the SGH share price? It has been all over the show recently. Are there any technical analysts who would be able to enlighten me?

I started purchasing SGH around Jan 2012 and my averaging down has turned profitable. I intend to offload once it starts trading around PE = 11.


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## tigerboi (10 May 2012)

nothing to worry about as slater/gordon are appearing for me in my workers comp case

then the common law suit v my employer...i intend to buy a large stake.so it will be about $3 after xmas...tb


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## Pioupiou (11 May 2012)

tigerboi said:


> nothing to worry about as slater/gordon are appearing for me in my workers comp case
> 
> then the common law suit v my employer...i intend to buy a large stake.so it will be about $3 after xmas...tb




Well, that is at least a recent comment on SGH - which makes it novel.  I think SGH is a turn-around stock in the sense that its management has stated that they are going to tone down acquisitions and focus on organic growth.  This should improve various performance ratios, and make the stock less risky.  It is not so much a turnaround as a refraction.  We should see good signs when various reports are published for YE 30/06/2012, but it will take longer for more recent acquisitions to make their mark, especially the UK one.

Perpetual has been taking a position, and that has uplifted the stock from a slump that it has suffered for a year or more.


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## So_Cynical (15 July 2012)

So_Cynical said:


> (19th-October-2011)In today at $1.76 ~ portfolio stock #24 ~




I got most of my $1.95 sell order filled on Tuesday but the SP never got back to $1.95 to see my order completed..oh well, so i have decided to hold on to a few extra SGH shares, trade profit was 9.62% and i received 1 FF dividend of 2.5c (3.25 gross) so overall a 11.5% result for holding 10 months...not to shabby.

With the small (parcel) average down i took in March (1.505) the average price of my remaining shares is $1.71 ~ i have posted a 12 month chart of my activity's...keen to re enter below $1.70.

Closed Trade #91

Still lots to like about investing with lawyers.
~


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## herzy (16 July 2012)

So_Cynical said:


> so overall a 11.5% result for holding 10 months...not to shabby.
> 
> With the small (parcel) average down i took in March (1.505) the average price of my remaining shares is $1.71 ~ i have posted a 12 month chart of my activity's...keen to re enter below $1.70.
> 
> ...




Well done SC! Congratulations. I'm also keen to get into SGH, except that I'm not sure if there's a problem being overexposed to legal (I'm currently in IMF and should be for a while given such a low pe). That said, I tend to enjoy legal, IT (sometimes) and biotech anyway, so maybe I should ignore the diversification factor. I just always preferred IMF to SGH anyway. Thoughts?


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## So_Cynical (16 July 2012)

herzy said:


> Well done SC! Congratulations. I'm also keen to get into SGH, except that I'm not sure if there's a problem being overexposed to legal (I'm currently in IMF and should be for a while given such a low pe). That said, I tend to enjoy legal, IT (sometimes) and biotech anyway, so maybe I should ignore the diversification factor. I just always preferred IMF to SGH anyway. *Thoughts*?




IMF and SGH are 2 very different business really so i reckon there is very little diversification over lap, i own both stocks and have at times tried to buy the only other listed legal stock (IAW) as well...my portfolio is currently 23 stocks and will be limited to 25 - 26, i don't have any problem fitting in all 3 legal stocks into my long term portfolio.

I really cant see a down side to having a portfolio slightly over weight in legals, considering the MC (size) differences and the core business differences.


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## So_Cynical (18 July 2012)

bloomberg.com said:
			
		

> Diageo Plc agreed to pay more than A$1 million ($1 million) to an Australian victim of a drug that can cause birth defects, opening the way for settlement talks with *more than 100 other* affected people, *a law firm said*.




And that law firm is Slater & Gordon.

http://www.bloomberg.com/news/2012-...ustralian-thalidomide-suit-law-firm-says.html

SGH trading above $2 today for the first time in 10 months, i suppose 1 mill x 100 or more means that SGH looks like it will be a significantly more profitable business.


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## Pioupiou (1 September 2012)

So_Cynical said:


> IMF and SGH are 2 very different business really so i reckon there is very little diversification over lap, i own both stocks and have at times tried to buy the only other listed legal stock (IAW) as well...my portfolio is currently 23 stocks and will be limited to 25 - 26, i don't have any problem fitting in all 3 legal stocks into my long term portfolio.
> 
> I really cant see a down side to having a portfolio slightly over weight in legals, considering the MC (size) differences and the core business differences.




I agree - IAW, IMF and SGH are very different styles of business, and at the right price one could hold all three, but a brief look at IAW sufficed to conduce me to put it aside.  I like the other two, and I hold SGH (bought October 2010 at $1.68).

IAW refers to itself as a legal practice aggregator, which is a red flag for me - not necessary a no-no, but a matter requiring consideration, because many aggregators have ended up in the mire.  IAW seeks business in the top end of town, rather than in what I call the Joe-'n-Jane demographic.  Anyhow, IAW makes no more profit than two smart lawyers with the usual support staff could make for themselves, so I am not tempted to hurl money at it.

IMF is essentially a financier – it finances large legal proceedings on a no-win-no-pay basis, but it is astute enough to make $3 out of every $1 it invests, so it is very profitable.  If, for example, it obtains five results a year on average, then it would not be abnormal for this number to vary between say three and seven, and hence its profits can bounce around from year to year.  Also, because the cases are large, but few in number, there is in statistical parlance too small a “population” to keep the $3-to-$1 ratio reasonably constant.  A would-be investor cannot read too much into inter-yeaer profit movements.  I like IMF, but I am not a shareholder.

SGH is into the Joe-'n-Jane market – personal injury is its fortÃ¨, but it is moving into the other lines of business relevant to the Joe-'n-Jane demographic – lines like conveyancing and family law.  SGH has self-funded large class-actions, which gives it an overlap with IMF, but it plans not to self-fund these in future.  The problem is that the WIP tends to be debited, which is standard accounting practice, but there are not enough of these cases for likelihood-of-failure provisions to average over a year, and this can occasion large write-downs if a case is lost, as happened with the VIOXX decision in YE 30/06/2012.   Although SGH has acquired many legal practices in recent years, it did this to achieve footprint in geographic and line-of-business (e.g., conveyancing) catchment areas, rather than as an “aggregator” per se, and management has stated that acquisition activity will now be reduced.   I think SGH has a good business model, and I am banking on management doing the things that they have said they would do – namely:

* substantially reduce the level of acquisition activity;
* focus on growing the business organically;
* focus on settling down past acquisitions and improving margins; and
* cooperate with “funders” in large VIOXX-style litigation, rather than self-funding these.

Because of its mass-market style of business, SGH should be more predictable than IMF, but IMF's low costs means that its profit swings range from good to exceptionally good – swings that may cause some investors to sell when they should not, and so create opportunities for the canny who understand the flip-flop nature of the beast.


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## Pioupiou (2 November 2012)

Denver Investments of Colorado seem to be interested in SGH - not that I can derive anything useful from that observation.  If management can change from a grow-turnover focus to a grow-EPS focus, SGH should do OK, and I am holding my late-2010 purchase at $1.68 to see if the leopard can change its spots.  The business should be able to do well, but I am unsure of the motivations of SGH's management.  Are they growing SGH's turnover as an ego trip, or as the basis to remunerate themselves at a higher level, or is it for the long-term benefit of shareholders?


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## Pioupiou (1 March 2013)

Pioupiou said:


> . . .  We should see good signs when various reports are published for YE 30/06/2012, but it will take longer for more recent acquisitions to make their mark, especially the UK one. . .




YE 30/6/result was poor due mainly to one-offs, particularly the writing off of $10.5 million worth of WIP clocked up to the VIOXX matter, which went sour.  Anyhow, the so-called "normalised" metrics for 2012 looked better, and the 2013H1 report has reflected that level of profitability, so relative to the poor 2012H1, it looks very good.  SP was $1.50 on 30/3/2012, and today, 1/3/2013, it closed at $2.65 - probably a fair-value price relative the Thomson Consensus Forecast for 2013 EPS of 23.7 cents.


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## Pioupiou (13 March 2013)

Pioupiou said:


> Well, that is at least a recent comment on SGH  . . . blah, blah blah . . .  Perpetual has been taking a position, and that has uplifted the stock from a slump that it has suffered for a year or more.




PPT still buying in March 2013, and SP started looking toppy, so I bailed out on 6 and 7 of March, selling 18,000 shares at $2.65.  I'll watch TTG for a possible re-entry if the SP drops below my guesstimated fair-value price.  I like the basic idea of SGH - legal services churned out like sausages for the masses.


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## piggybank (23 August 2013)

I don't know who is representing James Hird - But his wife Tania was a solicitor prior to them getting married.

Anyway, a daily update on the stock.


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## McCoy Pauley (27 August 2013)

Hird's solicitors are Ashurst Australia, and he has Julian Burnside QC and a junior barrister also representing him.


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## So_Cynical (27 August 2013)

piggybank said:


> I don't know who is representing James Hird - But his wife Tania was a solicitor prior to them getting married.
> 
> Anyway, a daily update on the stock.
> 
> View attachment 53998




What a ride for SGH holders, from $1.50 to $3.50 in less than 18 months...and this is a safe conservative legal stock.

I'm up 98.6% and loving it.  plus a gross div yield on investment of just under 5%


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## So_Cynical (26 September 2013)

So_Cynical said:


> (15th-July-2012) I got most of my $1.95 sell order filled on Tuesday but the SP never got back to $1.95 to see my order completed..oh well, so i have decided to hold on to a few extra SGH shares
> 
> With the small (parcel) average down i took in March (1.505) the average price of my remaining shares is $1.71




I sold a little less than half of my remaining SGH shares today @ 3.80 ~ with hindsight it was a good thing that my sell order of 14 months ago wasn't completely filled because those extra shares made this half profit take possible, seeing that im still left with an acceptable sized position.

Very surprised that i could take a 114% profit from a safe conservative legal stock in less than 18 months. :dunno: its a hell of an up-trend.
~


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## piggybank (22 October 2013)

Nice work So Cynical - closed today above the $4 mark for the first time.

Hi McCoy Pauly - is this the junior barrister you were referring to?  http://www.ashurst.com/people-detail.aspx?id_Content=6612


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## Garpal Gumnut (22 October 2013)

So_Cynical said:


> I sold a little less than half of my remaining SGH shares today @ 3.80 ~ with hindsight it was a good thing that my sell order of 14 months ago wasn't completely filled because those extra shares made this half profit take possible, seeing that im still left with an acceptable sized position.
> 
> Very surprised that i could take a 114% profit from a safe conservative legal stock in less than 18 months. :dunno: its a hell of an up-trend.
> ~




I did try to alert y'all to SGH.

A nice earner for me since the election.

https://www.aussiestockforums.com/forums/showthread.php?t=27367&p=792905#post792905

gg


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## McCoy Pauley (23 October 2013)

piggybank said:


> Nice work So Cynical - closed today above the $4 mark for the first time.
> 
> Hi McCoy Pauly - is this the junior barrister you were referring to?  http://www.ashurst.com/people-detail.aspx?id_Content=6612




He's the partner who would be briefing Burnside and the junior on behalf of Hird. Generally, employees and partners of firms of solicitors don't argue the case before the Supreme Court.


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## tigerboi (18 November 2013)

pleased to report my lawyers SAG smashed the insurance compay XCHANGING 
WHAT a pack of dog fcnk lowlifes they are tried to force me back to work
special mention to JIMMY DUFOUR  my lawyer I love you bruvva assistant natsha rose
nice chick,

so you  get injured you wanna win go to sag
tigerboi


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## tigerboi (29 November 2013)

tigerboi said:


> nothing to worry about as slater/gordon are appearing for me in my workers comp case
> 
> then the common law suit v my employer...i intend to buy a large stake.so it will be about $3 after xmas...tb




well it hit $3 as I said so I get my payout around September & im going to toss
in $100,000 as a really good 5-10 year investment spoke with the MD the other
day when he rang my lawyer to give him a wrap on our victory.
so I will make this prediction SGH to be $7.50 next xmas & $10 the one after
tigerboi


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## piggybank (13 December 2013)

A report done by the fools...

http://www.fool.com.au/2013/12/12/should-you-buy-slater-gordon-in-2014/


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## piggybank (24 February 2014)

FY14 HY1 Financial Results Investor Presentation - http://stocknessmonster.com/news-item?S=SGH&E=ASX&N=401907

​


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## So_Cynical (24 February 2014)

piggybank said:


> FY14 HY1 Financial Results Investor Presentation - http://stocknessmonster.com/news-item?S=SGH&E=ASX&N=401907
> 
> View attachment 56941​




Breakout? SGH has been hitting new all time highs for over a year now..how much bluer can the sky get?


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## Ann (1 June 2014)

I am looking at stocks that have a dividend reinvestment plan (DRP). This is one of them.

This is a very simple chart with end of day prices shown in a simple line taken over a monthly period. I look at charts with candlesticks, EOD, daily, weekly, monthly, quarterly. I look for the chart that says something to me...this chart says something very clearly.

I always work with the KISS principle which may look amateurish but it really is the best way!


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## herzy (2 June 2014)

What does the chart say very clearly?


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## McCoy Pauley (2 June 2014)

herzy said:


> What does the chart say very clearly?




It says I should have trusted my gut instinct and bought in when the share price was less than half its current price.


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## So_Cynical (2 June 2014)

McCoy Pauley said:


> It says I should have trusted my gut instinct and bought in when the share price was less than half its current price.




Yep...Gut instinct is a very underrated signal.


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## galumay (2 June 2014)

McCoy Pauley said:


> It says I should have trusted my gut instinct and bought in when the share price was less than half its current price.




It possibly also says hindsight is a wonderful gift. Charts only tell you what has happened in the past unfortunately, otherwise we would all be rich.


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## Ann (2 June 2014)

galumay said:


> It possibly also says hindsight is a wonderful gift. Charts only tell you what has happened in the past unfortunately, otherwise we would all be rich.




Hi Galumay,

The joy of charts is their capacity to form reccuring patterns and those patterns have potential reccuring outcomes. The art (not science) of charting is the ability to recognize a potential chart pattern and know its potential outcome. Easier said than done!



herzy said:


> What does the chart say very clearly?




Hi Herzy,

The chart is simple with clean, easy to read lines and shows a pennant on a flagpole, which can be a very bullish chart pattern. If it fails the pattern then it may offer a good buying opportunity, if it moves up and out of the pennant it may offer a good trading opportunity.

The pattern tells me it is an interesting and potentially spectacular chart to watch.


Cheers
Ann


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## galumay (2 June 2014)

Ann said:


> Hi Galumay,
> 
> The joy of charts is their capacity to form reccuring patterns and those patterns have potential reccuring outcomes. The art (not science) of charting is the ability to recognize a potential chart pattern and know its potential outcome. Easier said than done!
> 
> Ann




I shall avoid dragging the thread off topic by debating the proven danger of trying to predict future outcomes based on past performance!

Hopefully your strategy returns profit for you!

I certainly missed the boat, they were on my watch list as a FA, but i put my money elsewhere.


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## Ann (2 June 2014)

galumay said:


> I shall avoid dragging the thread off topic by debating the proven danger of trying to predict future outcomes based on past performance!




Technical analysis is not so much about past performance, that is more FA, TA is more about recognizing a pattern formation which has the potential to evolve in a certain way which is not exclusive to a particular stock. There are certain perameters which will warn of a potential fail or of a potential success during the pattern's evolution.  It is just another handy way to manage stop loss along with anything else that works for someone when aquiring/disposing of an asset. It is neither magic nor foolproof just another tool to use for decision making.


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## bigdog (12 August 2014)

*$5.1900 Change 	+0.2600 	+%5.3 @1:47 PM*

12/08/2014 	08:41  	 	SGH FY14 Full Year Financial Results

12 August 2014 

Slater & Gordon FY14 Full Year Financial Results 
•	Total revenue up 40.4% to A$418.5 million 
•	Net Profit After Tax (NPAT) up 47.2% to A$61.1 million 
•	Normalised EBITDA margin of 24.6% 
•	Full year dividend up 21.2% to 8.0 cents per share 

Results Summary: 
Slater & Gordon Limited ("Slater & Gordon") delivered a strong financial performance in the twelve months ending 30 June 2014. Revenue, earnings and cash flow all exceeded full year guidance. 

Total revenue was A$418.5 million, up 40.4% on the previous corresponding period, while NPAT increased 47.2% to A$61.1 million. 

Cash flow from operations of A$54.8 million was 89.7% of NPAT. 

Net debt at 30 June 2014 was A$101.1 million with a gearing ratio (net bank debt/equity) of 23.9%. 

Directors have declared a fully franked final dividend of 5.0 cents per share, up 29.9%, payable on 24 October 2014 with a record date of 17 September 2014. The Dividend Reinvestment Plan (DRP) will be active for the final dividend at the volume weighted average prices for the pricing period from 19 September 2014 to 16 October 2014. 

Highlights: 
Australian Personal Injury Law (PIL) practice continues to grow and maintain margins despite disruption caused by legislative change. 

Five UK acquisitions announced and completed during the period. 

Existing UK business and acquisitions delivered FY14 financial and operational targets. 

UK integration process well advanced and on track for completion in FY15. 

Australian General Law (GL) platform established. 

Managing Director's Commentary:
Slater & Gordon Group Managing Director Andrew Grech said "I am very pleased with the Group's financial performance for FY14. We have been able to deliver the results we promised while making great progress in each of the key areas of our growth strategy. Importantly, the results reinforce our capability as a management team to deliver sustainable growth from a variety of channels whilst at the same time achieving key business improvement milestones."

"The businesses acquired in the UK are running smoothly and the integration of all acquired firms is well progressed. We have been delighted by the response to the launch of the Slater & Gordon brand which along with Claims Direct is delivering underlying revenue growth of 8% year on year. 
We have now established a stable base in the UK and have the people and initiatives in place to make the best of the opportunities which are continuing to open up in that market."

"We are also now in a position to execute more acquisition opportunities in the Australian market across both personal injury law and general law."

"In Australia, we have undertaken several initiatives during the year focused on improving the client intake process and enhancing client satisfaction. The results have been very pleasing with improvement in key operational metrics such as calls answered, wait times and increased client satisfaction."

"Investment in our brand in both Australia and the UK is delivering results with steady growth in new file numbers during the year."

"We also continued to invest in our people with the announcement of a new staff share scheme and the launch of our refreshed values."

"I am confident that we enter FY15 as a stronger and more effective business with the resources and systems in place to exploit the substantial opportunities available to us to help people get easy access to world class legal services."

Acquisition Activity: 
Slater & Gordon also announced today the proposed acquisition of Victorian specialist PIL firm Nowicki Carbone and Queensland consumer law practice Schultz Toomey O'Brien
with a combined estimated annual fee revenue of A$39 million. For more information please refer to this morning's ASX disclosures.

FY15 Outlook: 
In FY15 we expect the Australian business to deliver total revenue of A$270.0 million comprised of 5% revenue growth from the PI practices, 10% revenue growth in General Law and a A$25.6 million contribution from the acquisitions announced today. 

Total UK revenue is expected to be A$230.0 million comprising the expected full year contribution of acquisitions completed in FY14 and 8% revenue growth from the underlying practices. 

At the Group level we expect: 
•	Total Revenue of A$500 million. 
•	EBITDA margin of 23      24%. 
•	Cash from operations (as % NPAT) of >70%


----------



## piggybank (13 August 2014)

Up another 6.5% today to close @ $5.58 - a new all time high close


----------



## So_Cynical (23 December 2014)

piggybank said:


> Up another 6.5% today to close @ $5.58 - a new all time high close




4 months on and yet another new all time high today - up through $6.50 on no news.


----------



## The Cat (23 January 2015)

Anyone here aware of SGH more than doubling in size in the not too distant future.


----------



## Julia (23 January 2015)

"Doubling in size"?  Do you mean the firm doubling the number of its employees, doubling its billing/profitability, or are you referring to the share price?


----------



## galumay (23 January 2015)

The Cat said:


> Anyone here aware of SGH more than doubling in size in the not too distant future.




An odd post for your first post, forgive my cynicism, but it sounds like spruiking to me.


----------



## Joe Blow (23 January 2015)

I just became aware of The Cat's post and decided to check on another fourm where this kind of spruiking is the norm, and sure enough there was another "Cat" over there pushing the same line.

This, apparently, is what The Cat was referring to: http://www.ft.com/intl/cms/s/0/a906c89a-a250-11e4-aba2-00144feab7de.html#axzz3PcSKMXV7


----------



## Julia (23 January 2015)

galumay said:


> An odd post for your first post, forgive my cynicism, but it sounds like spruiking to me.



Of course, just as well you're more awake than I obviously am, galumay.


----------



## galumay (23 January 2015)

Joe Blow said:


> I just became aware of The Cat's post and decided to check on another fourm where this kind of spruiking is the norm, and sure enough there was another "Cat" over there pushing the same line.
> 
> This, apparently, is what The Cat was referring to: http://www.ft.com/intl/cms/s/0/a906c89a-a250-11e4-aba2-00144feab7de.html#axzz3PcSKMXV7




Here is the actual notice to the ASX, 

http://www.asx.com.au/asxpdf/20150123/pdf/42w4d87sk12pfl.pdf

"Contrary to press speculation today, SGH has not submitted any offer or proposal beyond the file transfer transaction.
The file transfer transaction is not material."

Nothing to see here, move along please.


----------



## SuperGlue (23 January 2015)

Julia said:


> "Doubling in size"?  Do you mean the firm doubling the number of its employees, doubling its billing/profitability, or are you referring to the share price?




Maybe this report by Morgans with target price of $7.31

UK growth the driving force.

https://media.slatergordon.com.au/morgans-5-january-2015.pdf


----------



## galumay (30 March 2015)

So at last the expected announcement, purchase of Quindrell's PSD for $1.225b thru mixture of CR & debt.

Havent had a chance to analyse in detail, but retail entitlement offer is 2 for 3 at a 15% discount to last trade.

Will be interesting to see the market reaction later this week.


----------



## skc (30 March 2015)

galumay said:


> So at last the expected announcement, purchase of Quindrell's PSD for $1.225b thru mixture of CR & debt.
> 
> Havent had a chance to analyse in detail, but retail entitlement offer is 2 for 3 at a 15% discount to last trade.
> 
> Will be interesting to see the market reaction later this week.




Massive acquisition. Shades of RCG and I expect share price to be north of $8.50 when it re-opens. It's a great PE arbitrage.


----------



## galumay (30 March 2015)

skc said:


> Massive acquisition. Shades of RCG and I expect share price to be north of $8.50 when it re-opens. It's a great PE arbitrage.




Yes, i wouldnt be surprised. I am very pleased to have both RCG & SGH in the SMSF. 

I do have some concerns with SGH, the WIP is growing year on year and there may be an impairment for at least some of it at some point, and no doubt it will grow even more with this acquisition but I suspect the market will like it overall.


----------



## skc (30 March 2015)

galumay said:


> I do have some concerns with SGH, the WIP is growing year on year and there may be an impairment for at least some of it at some point




I don't know about this line of thinking. WIP for a law firm is like inventory for a retailer. If the inventory is growing because the retailer is opening more stores... that's just what the business needs to operate as it expands. Yes some inventory will be written off one time or another, but that's just business as usual.

Correct me if I am wrong, but SGH must surely "impair" their WIP regularly as a matter of course? They are "no win no fee" and they can't possibly win them all?!

The risks in this transaction is the due diligence. Are the current portfolio of cases acquired going to generate the required return? SGH has reviewed 8000 cases by 70 lawyers over 6 weeks.... say each lawyer works 55 hours per week, that's less than 3 hours per case. That's probably not enough although there's no reason to suspect that the case portfolio of PSD has deteriorated just in time to be acquired.


----------



## galumay (30 March 2015)

skc said:


> I don't know about this line of thinking. WIP for a law firm is like inventory for a retailer. If the inventory is growing because the retailer is opening more stores... that's just what the business needs to operate as it expands. Yes some inventory will be written off one time or another, but that's just business as usual.
> 
> Correct me if I am wrong, but SGH must surely "impair" their WIP regularly as a matter of course? They are "no win no fee" and they can't possibly win them all?!
> 
> The risks in this transaction is the due diligence. Are the current portfolio of cases acquired going to generate the required return? SGH has reviewed 8000 cases by 70 lawyers over 6 weeks.... say each lawyer works 55 hours per week, that's less than 3 hours per case. That's probably not enough although there's no reason to suspect that the case portfolio of PSD has deteriorated just in time to be acquired.




Ok, I have just watched the WIP steadily grow year on year - and its around $500m now - thats a lot of 'inventory'. It has a significant impact on the financials for SGH. Its over half of the assets on the balance sheet. 

I see what you mean by impairing it for the lost cases, and i agree that would be happening as a matter of course. I was more concerned about an impairment to wipe the slate clean so to speak. 

As far as the due diligence goes, management seem to have done a good job of it to date, but given the problems around Quintrell and the size and complexity, I agree there is certainly risk there.


----------



## skc (30 March 2015)

galumay said:


> Ok, I have just watched the WIP steadily grow year on year - and its around $500m now - thats a lot of 'inventory'. It has a significant impact on the financials for SGH. Its over half of the assets on the balance sheet.
> 
> I see what you mean by impairing it for the lost cases, and i agree that would be happening as a matter of course. I was more concerned about an impairment to wipe the slate clean so to speak.




Taking year end numbers ($m) for the last 5 financial years.
WIP = 471, 299, 246, 180, 112
Total assets = 895, 599, 525, 378, 270
WIP/Total assets (%) = 52.6, 49.9. 46.9, 47.6, 41.5

Total revenue = 412, 295, 214, 178, 122
WIP / revenue (%) = 114, 101, 115, 101, 92

On the surface there is no clear trend and the amount of WIP on the balance sheet is simply growing inline with the business.

Yes that item is perfect if management wants to sweep all unprofitable, unwinnable cases into it... but that's would be quite a deceitful thing to do.


----------



## galumay (30 March 2015)

skc said:


> Taking year end numbers ($m) for the last 5 financial years.
> .....




Thanks for taking the effort to dig a little deeper skc, I can see your point about it being proportionly fairly stable.

I guess there is a lesson there about understanding the different types of inputs in financial statements in different sectors - WIP is only a term I have seen in legal company reports and understanding that its a genuine asset line in the balance sheet didnt come naturally to me!


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## So_Cynical (30 March 2015)

2 new shares for every 3 held - i will have to sell some SGH shares in order to fund the new ones.


----------



## galumay (30 March 2015)

So_Cynical said:


> 2 new shares for every 3 held - i will have to sell some SGH shares in order to fund the new ones.




Its a tough one, especially as even with the discount its a fair bit more than I paid for my original parcel, so I will end up with a position size that is about double the value of my original position. I guess I will buy the entitlement and then sell down afterwards to resize the holding.


----------



## skc (30 March 2015)

So_Cynical said:


> 2 new shares for every 3 held - i will have to sell some SGH shares in order to fund the new ones.




It's an renounceable issue. If you don't take up your rights, it goes into a shortfall bookbuild and you get credited the difference. But best read the documents to make sure.

This will avoid capital gains tax if you don't want to increase your overall holding.


----------



## skc (30 March 2015)

skc said:


> Massive acquisition. Shades of RCG and I expect share price to be north of $8.50 when it re-opens. It's a great PE arbitrage.




Hmmm... upon reading further, the target has a bit of a checkered past, doesn't it?

May be it won't be as gloriously received as first glance suggests.

Will need to read more and I am keeping an open mind about which way it would trade upon resumption.


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## skc (31 March 2015)

Some info on Quindell.

http://www.telegraph.co.uk/finance/...7867/Quindell-hits-back-at-short-sellers.html

http://gothamcityresearch.com/2014/04/22/quindell-plc-a-country-club-built-on-quicksand/

The quality of due diligence already done by SGH is going to be hugely important...


----------



## galumay (31 March 2015)

skc said:


> Some info on Quindell.
> 
> http://www.telegraph.co.uk/finance/...7867/Quindell-hits-back-at-short-sellers.html
> 
> ...




Thanks, skc, I read the Gotham City stuff earlier, its what led to the huge shorting of the company. No doubt there is a checkered past there, but I guess thats why SGH think they have found value they can unlock. As i said earlier, their due diligence seems to have been up to the job on past acquisitions, I can only hope they have got it right again!


----------



## So_Cynical (1 April 2015)

I'm inclined to think that the Quindell purchase is a bad deal, unlike all the other acquisitions this one is big enough to really hurt SGH, well hurt the shareholders because they are the ones putting up the bulk of the money, its a risky move simply due to the size.

Its been quite a while since a major Aussie company made a massive blunder buying something foreign so i reckon we are overdue, its like the roll up expansion is more important than the safety of shareholder funds. feels like SGH is taking us to a crap table hoping to win big with our money.


----------



## ROE (1 April 2015)

So_Cynical said:


> I'm inclined to think that the Quindell purchase is a bad deal, unlike all the other acquisitions this one is big enough to really hurt SGH, well hurt the shareholders because they are the ones putting up the bulk of the money, its a risky move simply due to the size.
> 
> Its been quite a while since a major Aussie company made a massive blunder buying something foreign so i reckon we are overdue, its like the roll up expansion is more important than the safety of shareholder funds. feels like SGH is taking us to a crap table hoping to win big with our money.




If History is a guide, most ASX listed stock that venture into the UK ending wasting a lot of shareholder money and multi years of under performance


----------



## skc (1 April 2015)

ROE said:


> If History is a guide, most ASX listed stock that venture into the UK ending wasting a lot of shareholder money and multi years of under performance




IAG comes to mind... althought SGH already has a meaningful presence in UK. 



So_Cynical said:


> I'm inclined to think that the Quindell purchase is a bad deal, unlike all the other acquisitions this one is big enough to really hurt SGH, well hurt the shareholders because they are the ones putting up the bulk of the money, its a risky move simply due to the size.
> 
> Its been quite a while since a major Aussie company made a massive blunder buying something foreign so i reckon we are overdue, its like the roll up expansion is more important than the safety of shareholder funds. feels like SGH is taking us to a crap table hoping to win big with our money.




I kind of agree with you and I think your description is a good one. However, reading thru the analyst reports, most are quite positive about the acquisition. They are probably too high and mighty to care about the negative research from Gotham City. Granted that report contain mostly dated information, and had little information on the core PI business being acquired.

The more I research, the more I am repelled by the whole "no win, no fee" business model. It's definitely a breeding ground for dodgy claims, and it drives up the insurance cost for the whole society. Apparently UK is known as the "Whiplash capital of Europe", and everyone from insurers to lawyers are in on this. Shades of VET scamming the Vocation Fee system. And imo, it's not a sustainable or ethical investment proposition.

http://www.telegraph.co.uk/finance/...ritain-is-the-whiplash-capital-of-Europe.html

The fact that SGH has to take a large axe to QPP's internal management accounts to arrive at an adjusted EBITDA is a pretty good red flag. Was the cut sufficient given the due diligence effort? What about some of the major contracts renewal risks? Did QPP do anything dodgy to secure those contracts in the first place?

It will be an interesting day for SGH tomorrow. On one hand, you got major investment house upgrades, EPS uplift, and potential ASX100 inclusion generating demand. On the other hand, you got questionable accouting of QPP, poor historical cash flows as well as the gaze of hedge funds now seeing SGH as a potential new short target. 

I am guessing open high and close at the low, but I don't really know how to judge the competing forces listed above.


----------



## skc (2 April 2015)

Just found a 36 part series on Quindell on Alphaville...

http://ftalphaville.ft.com/2015/03/30/2125246/dear-slater-gordon-shareholders/


----------



## McLovin (4 April 2015)

skc said:


> Just found a 36 part series on Quindell on Alphaville...
> 
> http://ftalphaville.ft.com/2015/03/30/2125246/dear-slater-gordon-shareholders/




I'm working my way through this series...

This one is worth reading and is highlights the biggest risk to Quindell's revenue...

http://ftalphaville.ft.com/2014/07/14/1897222/feeling-the-wip-and-recognising-the-law-at-quindell/


These guys have definitely gone the aggressive accounting route. I hope SGH have done their homework or this could really blow up on them. There's a massive disconnect when Aviva claim an 85% claim rejection rate but Quindell claims a 70% success rate. How on Earth can you grow your case book that quickly while maintaining such an extraordinarily high success rate.

Time will tell I guess.


----------



## skc (7 April 2015)

McLovin said:


> I'm working my way through this series...
> 
> This one is worth reading and is highlights the biggest risk to Quindell's revenue...
> 
> ...




I think the hearing stuff is sort of taken care of... SGH is essentially paying nothing for them. They have a revenue share model with QPP so SGH will still need to cover the costs to bring cases to settlement. But overall, they didn't acquire anything that has been "aggressively" capitalised from what I can see.

I am more concern about the rest of the stuff. QPP has still not reported FY14 figures (Dec year end). It's saying that, because re-statement will be required, it could be June before the audited accounts are available. SGH is going off internal management accounts and adjusting it to suit its own style... but was it really enough? 

As far as I can see, ignoring the adjustments related to NIHL cases, gross profit was adjusted down 18m to 99m (15.4%) while EBITDA was adjusted down 18m to 70m (21%). That is actually quite a high endorsement of the "core" business. Given the alleged management history of QPP, are these adjustments enough? 

And indeed, within the core, only 60% of the EBITDA actually relates to professional services. The other "complementary services" are probably a bit outside the scope of SGH's core activities. And there's very little information in the presentation to assess those business lines. The question is whether they actually generate the sort of EBITDA margin being reported?

And then there is the issue of cashflow... which frankly isn't great within SGH to start with. QPP claimed that the cash inflow will start in Q4 2014... but public hasn't seen the report yet.

Meanwhile...the shorts are piling up.





http://www.shortman.com.au/stock?q=SGH


----------



## skyQuake (8 April 2015)

You have to wonder though what % of shorts are just instos hedging their entitlements. There's at least 10mil shares from the bookbuild taken by new holders, potentially looking to flip it out quick - 14th Apr insto stock comes out.
I have no idea why they use 80% in once sentence, then qualify it with 87% in the next


----------



## VSntchr (15 April 2015)

Price has failed to continue any ascent since the trading halt as the market digests the acquisition. Bit of a plummet today as the falling market compounds with Bank of America downgrading based on their update which states that SGH overpaid..

http://beta.afr.com/street-talk/merrill-calls-time-on-slater--gordon-following-uk-deal-20150415-1mlchn


----------



## bigdog (20 April 2015)

*The entitlement to new shares at $6.37 on a 2 for 3 basis was looking attractive 10 days ago! *
-- closes today

*SGH $6.600 $-0.270 -3.93% @ Mon 20 Apr 2015 11:46 AM Sydney time
*
*Any predictions where the SP is heading??*
-- looks like down!!
-- reasons ???

*Trading after announcement*
Date____	Close	Volume
17/04/2015	6.87	5,660,554
16/04/2015	7.21	2,894,962
15/04/2015	7.21	4,657,251
14/04/2015	7.57	2,931,260
13/04/2015	7.47	2,143,903
10/04/2015	7.29	2,653,579
09/04/2015	7.27	2,284,967
08/04/2015	7.52	4,704,436
07/04/2015	7.69	3,207,123
02/04/2015	7.85	6,704,969


*Trading prior to announcement*
Date____	Close	Volume
27/03/2015	7.55	1,073,982
26/03/2015	7.6	1,362,012
25/03/2015	7.57	687,196

1117


----------



## galumay (20 April 2015)

bigdog said:


> *
> Any predictions where the SP is heading??
> -- looks like down!!
> -- reasons ???
> *



*

My insight tells me the price will either go down, up or stay the same.

Reasons it has fallen probably include but are not limited to, a significant downturn in the market, so its just got dragged down with the general sentitment, some remaining concerns about the long term impact on the business due to the acquisition, and profit takers on the CR.*


----------



## So_Cynical (20 April 2015)

bigdog said:


> *The entitlement to new shares at $6.37 on a 2 for 3 basis was looking attractive 10 days ago! *
> -- closes today
> 
> *SGH $6.600 $-0.270 -3.93% @ Mon 20 Apr 2015 11:46 AM Sydney time
> *




I didn't take up the offer or sell down my holding, and now my windfall profit from the retail shortfall bookbuild is disappearing faster than a shonky lawyer with a suitcase full of money.


----------



## galumay (20 April 2015)

So_Cynical said:


> I didn't take up the offer or sell down my holding, and now my windfall profit from the retail shortfall bookbuild is disappearing *faster than a shonky lawyer with a suitcase full of money*.




GOLD! Maybe we should employ some lawyers to look into these lawyers?


----------



## So_Cynical (24 April 2015)

Retail book build return for non participant share holders = 1c per share, i feel like a complete idiot  turns out the absolute worst strategy for dealing with the rights issue was to do nothing...doing anything else would of got me a significantly better return.

http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01618641


----------



## galumay (24 April 2015)

So_Cynical said:


> i feel like a complete idiot




I dont think you should be too hard on yourself! This one was hard to pick, I took up my entitlement and didnt sell any, I am very surprised how much the price has fallen. Not sure that my decision is much better than yours! I could have sold out and done better too.


----------



## piggybank (24 April 2015)

Don't be too hard on yourselves lads. Most of us here have been down this road at least once. We can all look back with hindsight (except those who died without e.g. car accident) and wish we had done better but it's partly that (the unknown) that makes trading so interesting.


----------



## galumay (24 April 2015)

piggybank said:


> Don't be too hard on yourselves lads.




No risk of that, its not like we are losing money, I am still well in front with SGH, its more a case of considering whether a different course of action might have been better, and i always like to think about whether it was a poor decision on my part of something outside my control and understanding.


----------



## skc (24 April 2015)

So_Cynical said:


> Retail book build return for non participant share holders = 1c per share, i feel like a complete idiot  turns out the absolute worst strategy for dealing with the rights issue was to do nothing...doing anything else would of got me a significantly better return.
> 
> http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01618641




IMO it makes sense for a investor to have a CFD account to deal with situations like this (and many others).

You could short your entitlement amount and lock in the profits, then square them off when the news shares are issued. 

It's also potentially useful for hedging overall market crash...


----------



## skc (25 June 2015)

skc said:


> I am more concern about the rest of the stuff. QPP has still not reported FY14 figures (Dec year end). It's saying that, because re-statement will be required, it could be June before the audited accounts are available. SGH is going off internal management accounts and adjusting it to suit its own style... but was it really enough?
> 
> As far as I can see, ignoring the adjustments related to NIHL cases, gross profit was adjusted down 18m to 99m (15.4%) while EBITDA was adjusted down 18m to 70m (21%). That is actually quite a high endorsement of the "core" business. Given the alleged management history of QPP, are these adjustments enough?




It's blowing up in their face a bit now.

http://www.afr.com/business/banking...spended-amid-accounting-probe-20150625-ghwyj6


----------



## skyQuake (25 June 2015)

skc said:


> It's blowing up in their face a bit now.
> 
> http://www.afr.com/business/banking...spended-amid-accounting-probe-20150625-ghwyj6




Poor Quindell, first the Gotham City Research report, now an actual probe. Cant a respectable ambulance chaser firm catch a break thesedays?


----------



## skc (25 June 2015)

skyQuake said:


> Poor Quindell, first the Gotham City Research report, now an actual probe. Cant a respectable ambulance chaser firm catch a break thesedays?




Lol. I think there was quite a few dodgy related party transactions that will be looked at.

SGH has bought a $1B lemon...  From $8 high down to $5 today, pretty much exactly $1B in market cap lost. 

Great fun trading this today.


----------



## notting (25 June 2015)

skc said:


> It's blowing up in their face a bit now.




Perhaps they should diversify to become a conglomerate and buy Clydesdale off NAB.


----------



## ROE (25 June 2015)

"Once in a generation opportunity" comment kept me away 

In the stock market corporate take over you cant buy anything at a bargain, at best you pay a fair price, at worse you bought a dud


----------



## McLovin (25 June 2015)

skc said:


> SGH has bought a $1B lemon...




Bit early to say, isn't it? I think we need to keep things in perspective. SGH has a large presence in the UK and I do find it difficult to imagine that they have had the wool pulled over their eyes.

It seems a bit overdone to me, given the information we have to hand.

I'm not offering an opinion either way, just that the market seems to have made up its mind. And really, we, and SGH, already knew that Quindell had accounting problems.


----------



## galumay (25 June 2015)

Typical over reaction by the market, happy to accumulate at this sort of discount to value. Happily it never fails to amaze me how people react to news without even reading the detail.


----------



## ROE (25 June 2015)

galumay said:


> Typical over reaction by the market, happy to accumulate at this sort of discount to value. Happily it never fails to amaze me how people react to news without even reading the detail.




From my reading it may not be a typical market reaction but a bunch of smart hedge fund guys short Quindell
long before SGH bought it, they know Quindell books very well and now they targeting SGH 

they are not typical punter, they have their own number crunching guys and they came to a diff conclusion to SGH.

Best to wait and see what play out .... another 6 months to a year will tell a clearer picture if SGH bought a dud but then again it may not but you cant really be sure either way.


----------



## notting (25 June 2015)

galumay said:


> Typical over reaction by the market, happy to accumulate at this sort of discount to value. Happily it never fails to amaze me how people react to news without even reading the detail.




Your happilyness will be affirmed if it lives up to the 3 times touted 30% earnings accretive tag given to it by SGH board.  As apposed to 30% earnings creative Quindell book cooking.  
Looked like a blow off today and was worth a punt.


----------



## skc (25 June 2015)

McLovin said:


> Bit early to say, isn't it? I think we need to keep things in perspective. SGH has a large presence in the UK and I do find it difficult to imagine that they have had the wool pulled over their eyes.
> 
> It seems a bit overdone to me, given the information we have to hand.
> 
> I'm not offering an opinion either way, just that the market seems to have made up its mind. And really, we, and SGH, already knew that Quindell had accounting problems.




No you wouldn't think so... but strange things happen esp when management egos are involved. I also wouldn't discount the possibility of fradulent seller behaviour.

I love how the QPP announcement said "changes to Group's accounting policies are largely of historical interest only". They might as well have said "because SGH was silly enough to buy it from us".



galumay said:


> Typical over reaction by the market, happy to accumulate at this sort of discount to value. Happily it never fails to amaze me how people react to news without even reading the detail.




I am unsure anyone has accurate information to assess the value. The only thing you can assert/assume at this stage is the SGH has done the due diligence properly. You couldn't have done the due diligence properly yourself on QPP because all the financial reports in the past are rubbish. The Gotham City report and the Alphaville blog contained some pretty good information on why ALL parts of QPP is questionable, not just the NHIL cases.

Until the findings come out, SGH will be underpressure. SGH's own earnings quality will be under "contagion" suspicion as well. SGH is still a $1.8B company and the hedge funds are so happy that they get a second go at shorting QPP.



skc said:


> I am more concern about the rest of the stuff. QPP has still not reported FY14 figures (Dec year end). It's saying that, because re-statement will be required, it could be June before the audited accounts are available. SGH is going off internal management accounts and adjusting it to suit its own style... but was it really enough?
> 
> As far as I can see, ignoring the adjustments related to NIHL cases, gross profit was adjusted down 18m to 99m (15.4%) while EBITDA was adjusted down 18m to 70m (21%). That is actually quite a high endorsement of the "core" business. Given the alleged management history of QPP, are these adjustments enough?




I actually forgot in this analysis, that while SGH didn't pay anything to acquire the NHIL case portfolio, it is still liable to pay the costs involved to squeeze cash out of them. It could be a cash positive or a cash drain, depending on what are actually in those 50,000 cases.


----------



## So_Cynical (26 June 2015)

So_Cynical said:


> *I'm inclined to think that the Quindell purchase is a bad deal, unlike all the other acquisitions this one is big enough to really hurt SGH,* well hurt the shareholders because they are the ones putting up the bulk of the money, its a risky move simply due to the size.
> 
> *Its been quite a while since a major Aussie company made a massive blunder buying something foreign* so i reckon we are overdue, its like the roll up expansion is more important than the safety of shareholder funds. feels like SGH is taking us to a crap table hoping to win big with our money.




I hate how i know something is fishy yet somehow i manage not to make any money out of it, i have good gut feel yet so often don't act on it...at least i didn't participate in the cap raising..


----------



## lemongrass1 (26 June 2015)

Seems like a storm in a tea cup, much like Sirtex earlier this year. 

I bought some shares in SGH today.


----------



## skc (29 June 2015)

As they say, bad news come in 3's, but rarely in the same week.

So ASIC is looking, and we are still waiting on QPP's account. Then SGH really didn't help its own course by disclosing a "consolidation error" on cash flow. It's a 25% dent on confidence when confidence is already low... and on the most sensitive item at present, and on one of the worst days of for the overall market.

A perfect storm (in a pretty large tea cup).


----------



## skyQuake (29 June 2015)

skc said:


> As they say, bad news come in 3's, but rarely in the same week.
> 
> So ASIC is looking, and we are still waiting on QPP's account. Then SGH really didn't help its own course by disclosing a "consolidation error" on cash flow. It's a 25% dent on confidence when confidence is already low... and on the most sensitive item at present, and on one of the worst days of for the overall market.
> 
> A perfect storm (in a pretty large tea cup).




Plus everyone is looking for anything with even a hint of European exposure


----------



## skc (29 June 2015)

skyQuake said:


> Plus everyone is looking for anything with even a hint of European exposure




UK earnings a bit better than Euro though.

I am holding shorts on MQA but that hasn't underperform by anything meaningfully.


----------



## ROE (29 June 2015)

Over the years I learned there are always more than one cockroaches in the kitchen.


----------



## McLovin (29 June 2015)

skc said:


> As they say, bad news come in 3's, but rarely in the same week.
> 
> So ASIC is looking, and we are still waiting on QPP's account. Then SGH really didn't help its own course by disclosing a "consolidation error" on cash flow. It's a 25% dent on confidence when confidence is already low... and on the most sensitive item at present, and on one of the worst days of for the overall market.
> 
> A perfect storm (in a pretty large tea cup).




The one that concerns me is the accounting irregularity. There might be nothing to it, but to be prodded so gently (ASIC only started last Wednesday) and already be coming up with two "mistakes" doesn't really bode well, imo.

Horrific day to announce all this too. Where are the PR people when you need them!


----------



## skc (29 June 2015)

McLovin said:


> The one that concerns me is the accounting irregularity. There might be nothing to it, but to be prodded so gently (ASIC only started last Wednesday) and already be coming up with two "mistakes" doesn't really bode well, imo.
> 
> Horrific day to announce all this too. Where are the PR people when you need them!




I love how SGH is still saying "It doesn't matter the number of QPP, because we did our own DD using our own accounting policies". It's pretty clear that the market has moved on to question SGH's own accounting policies.

If we look at what we know is real... that's $54m in operating cashflow in FY14, QPP most likely has $0 cash flow (if not negative), and SGH has $545m in debt (including new debt) and only $16m in cash (as of 31 Dec). They would have spent some chunky cash on acquisiton - accountants, lawyers and bankers etc (so probably most of the op cashflow in H1/15). We already hear that QPP isn't bring in cash until H2... Does SGH have a cash squeeze? And how do they cope if they do? The equity market is closed to them for now you'd think. 

And why suddenly the ASIC probe? Did the UK regulator ask ASIC some questions? Notably, SGH is the only other major listed law firm in the world (SHJ and IMF locally are being punished as well). It wouldn't surprise me if the UK FCA started all this. 

Moral of the less... If you buy $hit, you get smelly. Can't avoid it.



ROE said:


> Over the years I learned there are always more than one cockroaches in the kitchen.




+1. I need to have my pest control guy came in the 2nd time last week...


----------



## McLovin (29 June 2015)

skc said:


> I love how SGH is still saying "It doesn't matter the number of QPP, because we did our own DD using our own accounting policies". It's pretty clear that the market has moved on to question SGH's own accounting policies.






> VGI's April presentation included two slides that focused on "cash receipts and cash payments being overstated" and claimed there was an unexplained variance of $88 million to  $98 million evident on the receipts side in the past two financial years, and a $78 million and $82 million variance evident on the payments side.
> 
> "If 'receipts from customers' is inflated, we believe that cash 'payments to suppliers and employees' would also need to be inflated for the cash flow statement to reconcile with the other financial statements," the presentation said.




http://www.afr.com/business/legal/h...es-in-slater--gordons-kitchen-20150629-gi0o47

Roll up business and now some dodgy accounting. I wouldn't touch this with a barge pole. Let's see how this plays out.


----------



## lemongrass1 (29 June 2015)

Damn, I wish I'd waited until Monday to buy. 



McLovin said:


> The one that concerns me is the accounting irregularity. There might be nothing to it, but to be prodded so gently (ASIC only started last Wednesday) and already be coming up with two "mistakes" doesn't really bode well, imo.
> 
> Horrific day to announce all this too. Where are the PR people when you need them!




Yeah, it's no good. To be fair the error had no net effect. 

I still think a 43% drop over an inconsequential error and a routine ASIC investigation is excessive.


----------



## lemongrass1 (29 June 2015)

McLovin said:


> http://www.afr.com/business/legal/h...es-in-slater--gordons-kitchen-20150629-gi0o47
> 
> Roll up business and* now some dodgy accounting.* I wouldn't touch this with a barge pole. Let's see how this plays out.




There are no allegations of dodgy accounting by SGH?


----------



## Rainman (29 June 2015)

"_It's highly unusual to see an accidental mis-statement in the cash receipts from customers that coincidentally is the exact same number as the mis-statement in the cash payments_," Douglas Tynan, a partner at VGI, told the Financial Review.

That is the heart of the issue: how do you misstate cash receipts?  Either you received a certain sum of cash or you didn't.  The cashflow statements are the place where you're supposed to go when you want to test the quality of the income statements.


----------



## skc (29 June 2015)

lemongrass1 said:


> Yeah, it's no good. To be fair the error had no net effect.
> 
> I still think a 43% drop over an inconsequential error and a routine ASIC investigation is excessive.




Get on with the program!

The ASIC investigation is no longer routine. That was Thursday in SGH's words. Today it's a proper ASIC probe.

This article suggests that the sloppy accounting may be deliberate. It does explain why it was discovered ever so quickly.



> But there could very well be a link between cash flow discrepancies and WIP accounting. A higher cash receipts balance would have the effect of overstating the extent to which Slater is converting both WIP and receivables into dollars. VGI has suggested as much. To neutralise this impact on the net cash position, cash payments would need to be inflated by the same amount, the presentation suggested.
> 
> This would add weight to a theory that the errors revealed by the company on Monday, may reflect more than bad arithmetic and sloppy accounting. That will be one of several questions that will be posed to the company as it prepares to front investors, defend its accounting policies under queries from regulators and a faces up to a confrontation with hedge funds rarely seen in Australian finance.




http://www.afr.com/markets/equity-markets/between-the-lines-of-slater--gordons-books-20150629-gi0slg


----------



## Rainman (29 June 2015)

skc said:


> ... This article suggests that the sloppy accounting may be deliberate...




Unless one is innumerate, I don't see how a misstatement of cash receipts can be anything other than deliberate.   

Why are errors in financial reports always to the favour of the reporting entity's financial performance and never to its disfavour?


----------



## skc (29 June 2015)

Rainman said:


> Unless one is innumerate, I don't see how a misstatement of cash receipts can be anything other than deliberate.
> 
> Why are errors in financial reports always to the favour of the reporting entity's financial performance and never to its disfavour?




Well... I don't consider myself innumerate, but I have incorrectly reported receipts in my BAS by including the GST which telling them it's net of GST.

Thankfully I am not a billion dollar law firm and my accountant corrected it for me before my market capitalisation crashed by 40%.

But for a billion dollar law firm? I guess you could potentially blame that work experience student who did the spreadsheet on his first day...


----------



## Rainman (29 June 2015)

I don't hold SGH shares, so I have never read its financial reports and do not know how it accounts for revenue.

But if I was asked to take guess, I would say that, as a plaintiff law firm, it would recognise revenue whenever it has settled a legal claim and has signed the relevant legal instrument that gives effect to the settlement.  The legal instrument will be either a deed of release and/or a consent judgment which is then filed in court and disposes of the legal proceedings.  Both instruments would provide for a date by which payment of the settlement sum and SGH's costs are required to be paid.  The counterparty, i.e. the defendant to the claim, would normally ultimately be an insurer or a large corporation, so the prospect of SGH not ultimately getting its legal costs is negligible.  However, it would be a fairly common occurrence for the payment date to come and go and for SGH (and its client) to be still waiting for the cash to be deposited into their accounts. 

The other way that SGH would recognise revenue is whenever court proceedings have proceeded to judgment and judgment has been handed down in favour of SGH's client along with costs.  

In both cases, the costs that SGH bills its client for and the costs that it ultimately receives from the insurer/defendant (which become SGH's cash receipts) will almost never be the same.  This is because, once a claim has been settled or has gone to judgment and SGH's client has been awarded damages plus legal costs, the costs that SGH has actually billed will then be the subject of further argy-bargy between SGH and the insurer/defendant.  If they can't agree on the amount of costs which are to be recovered, the dispute will proceed to costs assessment.   Costs assessors generally strip out the fat from lawyers' billed fees, so that most plaintiff lawyers try to avoid the process if they can.  

The net result of all this is that the gap between SGH's billed costs and the costs that it ultimately receives as cash receipts can suffer a considerable time lag and can be quite uncertain during that time.  Further, because SGH operates on a no-win/no-fee basis, its clients are not required to make up the balance between SGH's billed costs and the costs that it ultimately receives as revenue.  

I say all this because I can well see how the revenue recognition of any law practice is open to abuse unless the dominant mindset of the firm is one of conservatism in recognising revenue.  If SGH recognised revenue at the settlement or judgment stage, that could potentially result in a large discrepancy when SGH's legal costs were ultimately paid.


----------



## ROE (29 June 2015)

skc said:


> Get on with the program!
> 
> The ASIC investigation is no longer routine. That was Thursday in SGH's words. Today it's a proper ASIC probe.
> 
> ...





Nasty, the selling was relentless this is more than just market panic, someone knows more than the average Joe about their books.


----------



## lemongrass1 (30 June 2015)

skc said:


> Get on with the program!
> 
> The ASIC investigation is no longer routine. That was Thursday in SGH's words. Today it's a proper ASIC probe.




I don't know if you're aware of this but ASIC investigates A LOT of things, that does not mean there is any wrongoing by the company being investigated. And technically I think it's Pitcher Partners that is being investigated and ASIC is now just making direct inquiries with SGH about its relationship with PP.

Anyway, only time will tell whether there's something to find. Looking forward to seeing how this all plays out.


----------



## ROE (30 June 2015)

lemongrass1 said:


> I don't know if you're aware of this but ASIC investigates A LOT of things, that does not mean there is any wrongoing by the company being investigated. And technically I think it's Pitcher Partners that is being investigated and ASIC is now just making direct inquiries with SGH about its relationship with PP.
> 
> Anyway, only time will tell whether there's something to find. Looking forward to seeing how this all plays out.




huh? don't you read the company admission? they inaccurately reporting  revenue from UK for three years
the thing about inflated figures if you been in the market long enough, it need to be inflated else where in the book  to balance the figure, the more you look the more you find.

Inaccurate revenue reporting isn't wrong doing? what universe are you live in? it certain isn't in the stock market universe

at this state we don't know what is going on with SGH, but if history is a  guide there will be more revelation soon.


----------



## McLovin (30 June 2015)

lemongrass1 said:


> I don't know if you're aware of this but ASIC investigates A LOT of things, that does not mean there is any wrongoing by the company being investigated. And technically I think it's Pitcher Partners that is being investigated and ASIC is now just making direct inquiries with SGH about its relationship with PP.
> 
> Anyway, only time will tell whether there's something to find. Looking forward to seeing how this all plays out.




Hmmm...hedge fund questions, among other matters, the cash receipts/cash payments in the cash flow statement back in April. ASIC launches investigation in late June and four days later SGH "discovers" it overstated casg receipts and payments. Maybe it was a mistake, but did they not know about this back in April? It just seems a little too convenient to find this error so quickly when pressed. And that's assuming it was a genuine mistake.

Like skc said, it's not very reassuring when these guys take over a huge peer with significant accounting issues but say "don't worry, we used our own accounting methodology".


----------



## notting (30 June 2015)

ROE said:


> Inaccurate revenue reporting isn't wrong doing? what universe are you live in? it certain isn't in the stock market universe




Yeah, but perhaps they were just letting common sense prevail even though it was, technically false accounting, as  it came to - net net nothing.  Who cares? - a neurotic market.


----------



## skc (30 June 2015)

notting said:


> Yeah, but perhaps they were just letting common sense prevail even though it was, technically false accounting, as  it came to - net net nothing.  Who cares? - a neurotic market.




It may be net-net nothing... but it still matters. 

If I was analysing the company, I would care about the WIP to cash receipt conversion ratio. And this "error' boost that. And when I look at the high cash outflow in payments, I'd think may be there's some fact in the expense side that could be trimmed. 

So even though it is net-net it does have an actual impact on company's valuation.

But that changes valuation on the margin. It's now all about if everything else in the accounts can be trusted, and what QPP comes up with. If QPP's review by a Big4 comes up with something that is very different to what SGH uses (not what SGH used on the DD, but what SGH uses on its own book), then there would be some pretty big implications here.


----------



## craft (30 June 2015)

skc said:


> It may be net-net nothing... but it still matters.




I agree because SGH's accounts due to their nature are more then most a matter of faith and where faith is required nothing is more damaging then breaching it.

Not even cash flow is useful to the outside observer due to how subsidiary acquisitions expenses flow entirely through investing cash flow and mismatch with the current revenues purchased that flow through the operating cash flow.


----------



## McLovin (30 June 2015)

craft said:


> I agree because SGH's accounts due to their nature are more then most a matter of faith and where faith is required nothing is more damaging then breaching it.
> 
> Not even cash flow is useful to the outside observer due to how subsidiary acquisitions expenses flow entirely through investing cash flow and mismatch with the current revenues purchased that flow through the operating cash flow.




The method of accounting seems more appropriately suited to a partnership style business, rather than a widely held public company.


----------



## craft (30 June 2015)

SGH is way to complicated for me to have a firm view on.  But its fun to watch and what I really want to watch out for is if it continues to unfold badly will IMF fund a class action


----------



## Rainman (30 June 2015)

craft said:


> SGH is way to complicated for me to have a firm view on...




I agree with that.  For all the lumpiness of its earnings, IMF is a much simpler and more straightforward legal services business than SGH.


----------



## skc (30 June 2015)

craft said:


> SGH is way to complicated for me to have a firm view on.  But its fun to watch and what I really want to watch out for is if it continues to unfold badly will IMF fund a class action




I actually thought SGH can fund a case against itself. It's kind of win-win...

If they win the case, may be their insurer can fit the bill while they get paid the fee.

If they lose the case, well... they proved that all is well.

And they get to increase WIP while they work on the case.

Perfect.



Rainman said:


> I agree with that.  For all the lumpiness of its earnings, IMF is a much simpler and more straightforward legal services business than SGH.




Never really occurred to me before, but SGH is a company of lawyers, while IMF is actually a company of financing law suits.


----------



## craft (30 June 2015)

skc said:


> I actually thought SGH can fund a case against itself. It's kind of win-win...
> 
> If they win the case, may be their insurer can fit the bill while they get paid the fee.
> 
> ...




I view IMF more as an investment manager of an alternative asset class then a company of lawyers. Lawyering only really comes into it for case selection.  Its a negative art investment manager similar to investing in distressed debt, except in IMF's case the art is in avoiding too many negative case outcomes. Not sure how anybody without a very long term view, high volatility tolerance looking for a high risk/return component to their portfolio gets comfortable holding IMF as an investment - almost impossible to know how the short run pans out unless you are an exceptional legal talent I would think.  All that said I do hold and have no legal talent, don't even follow the case outcome updates.


----------



## McLovin (30 June 2015)

craft said:


> I view IMF more as an investment manager of an alternative asset class then a company of lawyers. Lawyering only really comes into it for case selection.




Yes. If memory serves, the chief of their US portfolio used to actually run a litigation fund for Credit Suisse, but CS shut it down because funding litigation against your clients wasn't great business practise.

Much prefer IMF personally. I only need to make sure their win rate doesn't slip, or they don't start taking outsized bets. Don't have to worry about whether or not they are good at buying companies. Nice cleaner accounts too.


----------



## skc (27 July 2015)

SGH announcement this morning



> Slater and Gordon Limited (Slater and Gordon) advises that on Friday 24 July 2015, United Kingdom time, the claims management services agreement (Agreement) between Swinton Group Limited (Swinton) and its Professional Services Division (PSD) was ended, with effect from midnight on 31 October 2015.
> 
> The PSD has been providing first notification of loss services to Swinton, a leading UK insurance broker, and legal and complementary services to not-at-fault Swinton customers since December 2012.
> 
> The impact of the end of the Agreement *is not expected to be material to FY16 earnings, *but Slater and Gordon has elected in the current circumstances, to make this announcement nevertheless.




QPP's announcement when the deal was signed



> Quindell Plc (AIM: QPP.L), the provider of sector leading expertise in software, consultancy and technology enabled outsourcing in its key markets, being Insurance, Telecommunications and their related sectors is pleased to announce an extension of a material contract with Swinton, one of the UK’s largest insurance brokers.
> 
> Swinton has agreed to extend its relationship with Quindell to 31 March 2015. This extension follows a first year where a significantly improved customer journey was achieved compared to industry norms and to that experienced from previous partners. This contract is material to Quindell’s revenues and one of the largest signed to date.
> 
> Swinton is one of the UK’s largest insurance brokers with over 1.2 million auto policy holders and the contract will see Quindell service all aspects of the claims process.




http://www.quindell.com/press-releases/rns/significant-contract-extension-swinton/

Does not compute


----------



## VSntchr (27 July 2015)

skc said:


> Does not compute




Not material = material.

hmmmmmmm! Maybe they are not trained in statistics and are confusing their p level


----------



## skc (27 July 2015)

VSntchr said:


> Not material = material.
> 
> hmmmmmmm! Maybe they are not trained in statistics and are confusing their p level




I should have mentioned that the QPP announcement was dated Mar 2014.

So one possible explanation is that, it was material back then, but no longer material now.


----------



## skc (6 August 2015)

Finally... fresh news from SGH. QPP reported last night with vastly restated accounts. A lot of revenue and profits have disappeared, but there isn't a lot of clarity around what SGH took as correct vs what is actually happening. The restated account probably went too far the other way - it's almost at cash accounting so large loss is expected when you start a lot of new cases.

It is entirely possible that, QPP expanded too quickly (or saw the opportunity to write up a lot of revenue and profits by chasing more cases, especially those noise-induced hearing loss ones) and SGH just happened to come in getting all these cases without much outlay while getting a share of the potential proceeds at the back end of the case cycle. However, I wonder if there were adequate quality due diligence on QPP's part in acquiring those cases, so the final outcome is highly uncertain.

Also, it is not clear how the non-NIHL cases are actually going financially... especially cash flows. It seems that the PSD is overall running cashflow negative, even if you take out the cash outlay related to the NIHL cases.

What is certainly bad news, however, is that the SFO (fraud office) is investigating QPP. It's never a good thing to discover that you purchased a $1B asset from a seller under fraud investigation.

SGH share price was very resilient today, considering what assumptions one could make. QPP's share price is down 30% on the AIM at the moment, as investors question the company's ability to return the proceed. Capital return requires court approval, and court approval might be trickier if there's a fraud investigation going on.

SGH's statement today is probably not doing itself a favour if they ever want to chase QPP for any warranty / false representation claims. I guess it's too early to admit they made a mistake.

Some new entries in the Alphaville blog on QPP and SGH.

http://ftalphaville.ft.com/tag/what-is-quindell/


----------



## notting (6 August 2015)

> Quindell is an acquisition machine that has come under attack from the short selling outfit Gotham City Research




Gentleman we're out of our depth.  We have to flick the switch -


----------



## Ves (7 August 2015)

I think the most remarkable thing about this whole saga is that analysts from BoA-Merryl Lynch  estimate that Quindell paid roughly 265mil pounds for the firms that it assembled within its PSD,   then sold them to SGH within 3 years for almost triple that amount.   Mindboggling.

Those FT Alphaville articles are fantastic.   It's a pity stuff of that quality is hard to find.


----------



## McLovin (7 August 2015)

skc said:


> It is entirely possible that, QPP expanded too quickly (or saw the opportunity to write up a lot of revenue and profits by chasing more cases, especially those noise-induced hearing loss ones) and SGH just happened to come in getting all these cases without much outlay while getting a share of the potential proceeds at the back end of the case cycle. However, I wonder if there were adequate quality due diligence on QPP's part in acquiring those cases, so the final outcome is highly uncertain.
> 
> Also, it is not clear how the non-NIHL cases are actually going financially... especially cash flows. It seems that the PSD is overall running cashflow negative, even if you take out the cash outlay related to the NIHL cases.




QPP took on 62,000 NIHL cases last year (in 2013 it was 4,000). That is a staggering amount and runs at almost 250/business day. At that rate, I find it very, very hard to believe that they were adequately screening those cases. It would seem you could walk in with an earache and they'd sign you up.

Also worth noting re the adjustments to PSD, they wrote down full year revenue to £220.5m, but revised first half revenue was £183.5m. Full year loss was £99.5m, but H1 loss was £29.9m. I think you can see where I'm going there. Were they fattening the goose for market and now they're unwinding it? I'm still trying to get my head around what it means for SGH.

QPP now has £535m in cash, about £25m in debt and £55m in escrow, and a pretty simple set of accounts with the big accrual business gone. Arguably they're looking much healthier than SGH.


----------



## notting (7 August 2015)

Setting a new precedent in going from short to long -



> In case you missed it, Slater & Gordon shares staged an impressive turnaround yesterday after a heavy early sell-off.
> 
> And here's a clue to why.
> 
> ...




Good move!


----------



## skc (24 August 2015)

A very nice house.

http://www.domain.com.au/for-sale/25-barry-street-kew-vic-3101-2012186947?sp=0


----------



## skc (31 August 2015)

Any thoughts on the SGH report? Very complicated to me...

A couple more posts from FT's long running series on Quindell.

http://ftalphaville.ft.com/2015/08/...n-complicated-indebted-and-yet-to-be-audited/


----------



## Ves (1 September 2015)

skc said:


> Any thoughts on the SGH report? Very complicated to me...
> 
> A couple more posts from FT's long running series on Quindell.
> 
> http://ftalphaville.ft.com/2015/08/...n-complicated-indebted-and-yet-to-be-audited/




I haven't read the SGH report... probably not much point,  as it won't make much sense any way.

But this was a good laugh from the FT Alphaville article.



> According to the cash flow statement, the company paid about A$50m in fees related to the A$1.3bn deal, or about 4 per cent of the consideration. They break down as $24m costs involved in the acquisition of businesses, A$9m for origination of loans, and an A$18m cost of raising equity.
> 
> Or to put it another way, Slater & Gordon spent more cash than its existing business produces in a year paying people to help with its takeover of a scandal hit UK basket case which, so far, has only lost it more money.




Amazing when you put it like that.


----------



## McLovin (1 September 2015)

skc said:


> Any thoughts on the SGH report? Very complicated to me...
> 
> A couple more posts from FT's long running series on Quindell.
> 
> http://ftalphaville.ft.com/2015/08/...n-complicated-indebted-and-yet-to-be-audited/






Ves said:


> I haven't read the SGH report... probably not much point,  as it won't make much sense any way.
> 
> But this was a good laugh from the FT Alphaville article.
> 
> ...




I'm glad I'm not the only one who struggled with the accounts. There are so many moving (and changing) parts. The prezzo goes into a tonne more depth tnan previous years, and there restatements and non-GAAP measures thrown around everywhere. The picture that I get from it is that things are going along as planned. Ultimately, this story is about whether or not they've been overstating WIP. The jury is still out on that. Time will tell.


----------



## skc (1 September 2015)

McLovin said:


> Ultimately, this story is about whether or not they've been overstating WIP. The jury is still out on that. Time will tell.




Or rather... how much cash can they get out of all the big lines on the balance sheet.

I think the market (or myself anyway) has moved beyond what the ASIC will say. It doesn't matter if ASIC wants SGH to use cash accounting... it won't change what cash will come out of the capitalised items. 

There is a potential positive outcome... which I read from one of the comments in the Alphaville blog series. QPP wasn't so much a fraud, but it was under-capitalised and over trading. It madly acquired those NIHL cases and came to a point where it has no resource to finish them off. Meanwhile, SGH comes in, pick up the cases on the cheap and closer to the harvest stage, and poised to reap the rewards.

My problem with this interpretation, is that it would have been great if SGH paid for the QPP WIP / cases at asset value... but in actual fact they paid a good multiple over that. They didn't value the cases on a standalone basis, but they acquired them as a going concern / business. Obviously that has a lot to do with their own ambition to build market leadership in UK.

I must admit though, the story portrayed by the bears is far more interesting and persuasive than the defense put up by the bulls. As you say... time will tell. There is probably little SGH can do to prove the bull case until the cash starts to roll in... around H2 FY16 by their own projection. Until then the share price might move on short term reaction to ASIC or QPP investigations... but a total re-rating is some time away even under the best case scenario.


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## McLovin (3 September 2015)

skc said:


> I must admit though, the story portrayed by the bears is far more interesting and persuasive than the defense put up by the bulls. As you say... time will tell. There is probably little SGH can do to prove the bull case until the cash starts to roll in... around H2 FY16 by their own projection. Until then the share price might move on short term reaction to ASIC or QPP investigations... but a total re-rating is some time away even under the best case scenario.




The bear story is almost always more persuasive, imo. We'll see what happens. With all the reassurances they have now given the market it seems less and less likely that they have dropped the ball in any meaningful way. They are a bunch of compensation lawyers afterall, so they'd know how to cover their own arses.

It would be much easier to have conviction either way if there damn accounts were easier to read. It seems to me like a lot of the bear case revolves around the opaqueness of the accounts _and because of that_ something must be wrong.


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## skc (3 September 2015)

McLovin said:


> The bear story is almost always more persuasive, imo. We'll see what happens. With all the reassurances they have now given the market it seems less and less likely that they have dropped the ball in any meaningful way. They are a bunch of compensation lawyers afterall, so they'd know how to cover their own arses.
> 
> It would be much easier to have conviction either way if there damn accounts were easier to read. It seems to me like a lot of the bear case revolves around the opaqueness of the accounts _and because of that_ something must be wrong.




You'd think SGH won't be making any acquisition anytime soon. So a period with no acquired WIP should help give a clearer picture.

What they could have done, was to pick, say FY13, WIP on the balance sheet and explain how cashflow came in over the subsequent periods. That will illustrate the true WIP-to-cash cycle. Now whether the true picture fits their story or not... that another matter.


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## Ves (3 September 2015)

McLovin said:


> The bear story is almost always more persuasive, imo.



Was thinking about this recently,  especially after reading something related to this type of "bear story" (ie.  hedge-fund driven).

Something I came across,  was the "bear raids" in the early 2000s on Fairfax Financial (a Canadian insurance company listed on the NYSE) by well known massive hedge funds like S.A.C Capital.   Their bear theories mainly revolved around the fact that FF was using inter-subsidiary re-insurance to hide a $5B insurance provision deficiency that will wipe out the company's equity. Another massive insurer,  in the US,  named AIG had provisioning issues in the years earlier.   So the theory was plausible.

These big hedge funds were  worshipped by brokers and financial analysts alike,  who were often thrown a bone by guys like Steven Cohen,  were encouraged  (that's a euphemism) to write broker / sell-side reports after the shorts were loaded up.  Turned out that none of this was true.   FF actually tried to sue some of these hedge funds years later,  but failed,  however a lot of the email discourse they uncovered (which heavily points towards manipulation of stock prices,  lies etc) is now on the public record.

The stock markets are an interesting place,  that's for sure.


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## lemongrass1 (3 September 2015)

McLovin said:


> *The bear story is almost always more persuasive, imo.* We'll see what happens. With all the reassurances they have now given the market it seems less and less likely that they have dropped the ball in any meaningful way. *They are a bunch of compensation lawyers afterall, so they'd know how to cover their own arses.*
> 
> It would be much easier to have conviction either way if there damn accounts were easier to read. It seems to me like a lot of the bear case revolves around the opaqueness of the accounts _and because of that_ something must be wrong.




Yes, SGH keeps saying they have no liability for things that happened at Quindell before they purchased it, and I have not seen any reports dispute that -- whatever you think about SGH's accounting, they should be in a pretty great position to understand their potential liability.

The general opinion about SGH seems to have improved (here and from the commentators on Sky News Business), perhaps over time once the immediate fear response fades, the facts start to be looked at more rationally.

The share price still hasn't started to make a proper recovery yet, as someone else said it might take until the FY16 results are released to fully convince people of the merit of the Quindell purchase.


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## lemongrass1 (3 September 2015)

Ves said:


> Was thinking about this recently,  especially after reading something related to this type of "bear story" (ie.  hedge-fund driven).
> 
> Something I came across,  was the "bear raids" in the early 2000s on Fairfax Financial (a Canadian insurance company listed on the NYSE) by well known massive hedge funds like S.A.C Capital.   Their bear theories mainly revolved around the fact that FF was using inter-subsidiary re-insurance to hide a $5B insurance provision deficiency that will wipe out the company's equity. Another massive insurer,  in the US,  named AIG had provisioning issues in the years earlier.   So the theory was plausible.
> 
> ...




Have you seen this article? http://www.afr.com/street-talk/slat...of-vgi-partners-long-position-20150826-gj83if

I'm not sure what to make of it.


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## aussietom (24 September 2015)

Saw this on another forum:

This research was posted yesterday, 23 Sept, and provides a pretty detailed analysis.

http://www.edisoninvestmentresearch.com/research/report/slater-gordon11


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## galumay (25 September 2015)

aussietom said:


> Saw this on another forum:
> 
> This research was posted yesterday, 23 Sept, and provides a pretty detailed analysis.
> 
> http://www.edisoninvestmentresearch.com/research/report/slater-gordon11




The thing for me with SGH is that I cant unravel their accounts to my satisfaction. I have spent some time with their unaudited report for the FY15 and frankly its a mess. Its not easy to work out what the real cash flow is in the business and therefore get to a valution range for it. Change in working capital is a worry - without any breakdown of what has caused it. I am ver y wary of the value assgined to WIP, i think thats ripe for impairment.

I dont think its cheap currently, too much uncertainty about its real financial position.


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## Ann (1 November 2015)

SGH has turned out to be a very disappointing share. The five year monthly chart looks more like a pump and dump sooner than a real company. It is close to a long term support/resistance line of $2.40. If it fails this level it may just turn into a plaything for the boys in shorts.  Perhaps a new board of directors and management may get it moving again back in the right direction again.


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## galumay (1 November 2015)

Ann said:


> Perhaps a new board of directors and management may get it moving again back in the right direction again.




I doubt that is an issue, its the overhang of uncertainty about the ASIC case and the lack of clarity in the AR that made it very hard to work out a valuation for the company.

I suspect that the price will make a step recovery when & if SGH get the all clear from ASIC, then it will probably be a wait for the  ½ yearly and see if there is some more clarity on the financials and therefore the value of the company.

I continue to hold, but didnt entertain averaging down due to the lack of clarity and uncertainty about the viability of the acquisition.

I suspect I am going to regret that decision in the next 12 months! But in the end there were lower risk homes for the capital - without the same upside of course!


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## So_Cynical (2 November 2015)

galumay said:


> I doubt that is an issue.




The board completely screwed the rank and file shareholders..totally screwed.


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## craft (2 November 2015)

Ann said:


> SGH has turned out to be a very disappointing share. The five year monthly chart looks more like a pump and dump sooner than a real company. It is close to a long term support/resistance line of $2.40. If it fails this level it may just turn into a plaything for the boys in shorts.  Perhaps a new board of directors and management may get it moving again back in the right direction again.




Why would that support resistance line still be of significance? 75-80% of all the volume ever traded has occurred since that line was last touched. The volume psychologically anchored  to that level and still holding would have to be pretty small I would guess.


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## galumay (2 November 2015)

So_Cynical said:


> The board completely screwed the rank and file shareholders..totally screwed.




I think the jury is out on that one, lets see what the full years results post aquisition bring. 

Even if it turns out to be so, there is no guarantee that changing the board & management will in fact make any difference to the share price - which was Ann's original suggestion.


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## Ann (3 November 2015)

craft said:
			
		

> Why would that support resistance line still be of significance? 75-80% of all the volume ever traded has occurred since that line was last touched. The volume psychologically anchored  to that level and still holding would have to be pretty small I would guess.





G'day craft,  a support/resistance line can be a psychological sell/buy trigger regardless of the volume. It doesn't only take volume to drop a price, it is also the sentiment. SGH originally floated for a $1 so if it drops below the $2.40 line then the original IPO investors may cut and run before their doubled money dissipates. That could prove unattractive for the share price.

If you are asking why the $2.40 level should stick and possibly be a floor without the support of much volume.....sometimes it seems good news comes out just at a critical level and bounces a stock back up again off support. Its a fine spectator sport I find!


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## craft (3 November 2015)

Ann said:


> G'day craft,  a support/resistance line can be a psychological sell/buy trigger regardless of the volume. It doesn't only take volume to drop a price, it is also the sentiment. SGH originally floated for a $1 so if it drops below the $2.40 line then the original IPO investors may cut and run before their doubled money dissipates. That could prove unattractive for the share price.
> 
> If you are asking why the $2.40 level should stick and possibly be a floor without the support of much volume.....sometimes it seems good news comes out just at a critical level and bounces a stock back up again off support. Its a fine spectator sport I find!




I don't know - it seems like a stretch to me. If the psychology of the current participants don't lend weight to the support/resistance or any pattern for that matter then what validity can they possibly have?


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## Ann (3 November 2015)

craft said:


> I don't know - it seems like a stretch to me. If the psychology of the current participants don't lend weight to the support/resistance or any pattern for that matter then what validity can they possibly have?




Well charting is all in the eye of the beholder and many would say there is no validity in charts. I can appreciate that viewpoint and it is why I am never 100% adamant about the outcome of a chart. It is more that certain patterns and lines on regular occasions react in certain ways but not always. It is one tool in the investment toolbox and nothing more. I have made some amazing calls of future outcomes from charts and at other times it has been a total wipe out!

A chart is a tool which at one glance will tell you the current state of a company, a quick and easy tool to begin with.


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## craft (3 November 2015)

Ann said:


> A chart is a tool which at one glance will tell you the current state of a company, a quick and easy tool to begin with.




100% with you on that one - we compute information so much better visually then we do in a tabular form. Try playing noughts and crosses in your head - even keeping track of nine squares without visual reference is difficult. 


On the other point with such a historical level that you are referring to in volume terms I was just curious as to whether you thought current participant psychology drives the price action and therefor the chart or if you tend to think what people read into the chart can drive the price action in a self fulfilling reflexive sort of way. 

Cheers


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## Huskar (3 November 2015)

What I don't like is the Revenue vs Receivables change. Even though revenue increasing at 43% receivables increasing at 203% (and >than total revenue) - that is not sustainable. Sure it is significantly out of whack because of acquisitions etc but law game difficult business in this regard.
Higher end law firms take ~6 months to recover their fees (although average is 3 months for accounts receivable - OZ and US markets here, for example) and ambulance chasers like SGH can be more. You have the flipside of better leverage (in the sense of more fee earners per partner) at ambo chasers but this has its own risk - supervision risk, quality of product etc.
Where a law firm is a good business is that little overhead apart from employee cost (~40% of revs - although compare with 60% in US) and can have strong recurring revenues.
My ultimate thoughts (for what its worth) are that - like investment banks - these are run for the pockets of the equity partners rather than the shareholders (no matter that the structure has supposedly changed).


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## So_Cynical (3 November 2015)

So_Cynical said:


> The board completely screwed the rank and file shareholders..totally screwed.






galumay said:


> I think the jury is out on that one.




No the verdict is in, i got screwed - under the institutional entitlement offer, the instos and sophisticated investors including some board members and senior management got paid $1.13 per share for their entitlements, the retail holders (me) got 1c per share.

Now tell me i didn't get screwed?. 

http://www.asx.com.au/asxpdf/20150402/pdf/42xpdtmvkjk372.pdf

http://www.asx.com.au/asxpdf/20150424/pdf/42y2ppqdvkz47y.pdf


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## Ann (3 November 2015)

craft said:


> On the other point with such a historical level that you are referring to in volume terms I was just curious as to whether you thought current participant psychology drives the price action and therefor the chart or if you tend to think what people read into the chart can drive the price action in a self fulfilling reflexive sort of way.
> 
> Cheers




 Interesting question craft, probably a bit of both depending on the stock. May well be the reason some patterns succeed and some patterns fail. I am betting there is a lot of money in our Western Markets that doesn't speak English but can read a chart and will react to a pattern.  I have for many years asked IC charts to give us horizontal volumes but it has never happened, mores the pity because at a glance it would show you were the major volume pressure is likely to cut in. The best they give you is a thing called EquiVolume which is a chart with thinner and thicker blocks which denote volume. It is OK but not as good as a horizontal volume overlay on a standard chart.


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## galumay (3 November 2015)

So_Cynical said:


> Now tell me i didn't get screwed?.




You didnt get screwed. Should have taken up the offer like i did!


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## So_Cynical (4 November 2015)

galumay said:


> You didn't get screwed. Should have taken up the offer like i did!




So we both got screwed. point was/is that the only ones that didn't get screwed were the board members who sold all or some of their entitlements at $1.31


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## galumay (4 November 2015)

So_Cynical said:


> So we both got screwed. point was/is that the only ones that didn't get screwed were the board members who sold all or some of their entitlements at $1.31




Sorry if I came across as a bit harsh there! 

I think we got a bit off track there, my point was that I doubt that a change in management will make much material difference. The "screwing" we got was par for the course with big business in this country (everywhere probably). You get down with the dogs, you get fleas!

Just be glad you weren't cleaned out by the capitalists involved in the Dick Smith 'scam', makes SGH look benign in comparison! 

Dick Smith scam


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## Ariyahn2011 (7 November 2015)

I took a position at 2.60

will do 1 more buy, if it drops more than 50%.

Cheers


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## McLovin (20 November 2015)

Guidance was reaffirmed although it will be weighted toward the second half. What was guidance? It was EBITDAW $205m and OCF/EBITDAW 100%. 

There is this from the CEO...





That will lower EBITDA because of changes in WIP but improve OCF as that WIP is liquidated. Call me cynical, but because SGH have guidance that excludes WIP (ie EBITDAW) this won't flow through to that number, but the positive affect on OCF will, to the tune of about $42m at today's fx rate. 

The positive side of this is that they do appear to be trying to rein in working capital.

I think the selloff today probably has more to do with the negative OCF forecast in the first period, and the heavier weighting toward the second half.


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## galumay (20 November 2015)

McLovin said:


> I think the selloff today probably has more to do with the negative OCF forecast in the first period, and the heavier weighting toward the second half.




Agreed, a classic mis-pricing opportunity. I would be in like Flynn if I had some spare capital looking for a home! Already have a fair parcel and don't have anything I want to swap capital out of at the moment.


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## Ves (20 November 2015)

McLovin said:


> I think the selloff today probably has more to do with the negative OCF forecast in the first period, and the heavier weighting toward the second half.



I dunno,   do ASIC always have to approve a new auditor?   If so, you'd have thought it'd be fairly straight forward and you wouldn't need to mention it at your AGM...

The AGM speeches didn't really say much at all.  They were pretty wishy-washy and effectively just kicked the can down the road, and on top of that surprised with the negative cash flow comment.  

Didn't the CEO / Chair (can't remember which) recently do an interview with the Australian newspaper full of fighting words about the doubters?

Today's tone was completely different.

Very confusing and plenty of fuel for the doubters.


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## McLovin (20 November 2015)

Ves said:


> I dunno,   do ASIC always have to approve a new auditor?   If so, you'd have thought it'd be fairly straight forward and you wouldn't need to mention it at your AGM...




ASIC doesn't approve new auditors but it does approve resignations of auditors, which is what the company said it was awaiting. I guess it's done to stop opinion shopping. I don't know what the process is, but I would assume it's more than just a rubber stamping, and will probably coincide with the finalisation of the investigation by ASIC. Like all good lawyers they made a qualified comment "we have new auditor, subject to ASIC approving the resignation of our other auditor". 



Ves said:


> The AGM speeches didn't really say much at all.  They were pretty wishy-washy and effectively just kicked the can down the road, and on top of that surprised with the negative cash flow comment.
> 
> Didn't the CEO / Chair (can't remember which) recently do an interview with the Australian newspaper full of fighting words about the doubters?
> 
> ...




I actually thought they sounded pretty upbeat. The OCF thing is a big issue for these guys, and to be honest until there is money coming in the door, not from liquidating WIP, but actual repeat business the lack of cash flow will continue to work the SP over. I think the lack of having anything "big" to say reflects where the business is. They'll either be superstars in 18 months or they won't be around. I'm inclined to think it's the former, but haven't put any money on the table.


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## skc (20 November 2015)

McLovin said:


> Guidance was reaffirmed although it will be weighted toward the second half. What was guidance? It was EBITDAW $205m and OCF/EBITDAW 100%.
> 
> There is this from the CEO...
> 
> ...




Hmmm... Interesting take. But does a reduction in WIP growth naturally translate to improved net cashflow? The cash outflow is mostly staff cost... if you take in less new cases, doesn't it just mean the staff is less busy? Unless you reduce your headcount, or there are true variable costs (like paying a referring agents on a per case basis), reducing WIP may not automatically translate to improvement in cashflows. 

In this instance... re-affirming guidance really means very little when the management changes the forecast in the most sensitive area (i.e. cashflow). It's like saying... "Yes trust us with out guidance - we are good at forecasting. In other news, H1 cashflow was much lower than what we forecasted". But H2 will be good!. 

Their gearing at the end of H1 won't be pretty... and I bet you they are the most geared law firm in the world (public or private). The analysts will take an axe to the reported EPS etc and there'd be a round of price target cuts tonight. 

May be QPP can use all that cash from SGH's acquisition and buy SGH back... that would be pretty funny.



galumay said:


> Agreed, a classic mis-pricing opportunity. I would be in like Flynn if I had some spare capital looking for a home! Already have a fair parcel and don't have anything I want to swap capital out of at the moment.




Definitely a classic mis-pricing. They hid the H1 negative cashflow somewhere in the presentations that was marked non-price sensitive. It was a no brainer short above $3, especially given how they have ran pretty hard leading into the AGM.


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## Ves (20 November 2015)

McLovin said:


> ASIC doesn't approve new auditors but it does approve resignations of auditors, which is what the company said it was awaiting. I guess it's done to stop opinion shopping. I don't know what the process is, but I would assume it's more than just a rubber stamping, and will probably coincide with the finalisation of the investigation by ASIC. Like all good lawyers they made a qualified comment "we have new auditor, subject to ASIC approving the resignation of our other auditor".



Thanks for the clarification mate.   Still seems like strange comment.  I guess they just wanted to say something to tell shareholders that they are working closely with ASIC to fix any existing problems.   It just didn't sound very convincing to me.

It's interesting in your further comments that you said:



> They'll either be superstars in 18 months or they won't be around. I'm inclined to think it's the former, but haven't put any money on the table.




Which makes it sound like a very binary situation.   I think they'll just muddle through to be honest,  but I don't see how they are going to earn extraordinary ROIC in the long-term (and not convinced they are now,  but it's hard to tell considering the lack of transparency in the accounting methods).  In which case,  it'll trade much closer to book value.


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## McLovin (20 November 2015)

skc said:


> Hmmm... Interesting take. But does a reduction in WIP growth naturally translate to improved net cashflow? The cash outflow is mostly staff cost... if you take in less new cases, doesn't it just mean the staff is less busy? Unless you reduce your headcount, or there are true variable costs (like paying a referring agents on a per case basis), reducing WIP may not automatically translate to improvement in cashflows.




Yeah you're right. I keep thinking of WIP as inventory. Unload a bit, release cash.

Fryday.


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## notting (20 November 2015)

skc said:


> May be QPP can use all that cash from SGH's acquisition and buy SGH back... that would be pretty funny.




Reminds me of Kerry Packer selling Nine to Alan Bond and buying it back a few years later. Saw that toad coming from miles away.

Some of these legal firms pay their staff a retainer and rewards for cases taken and won, so staff costs can be a little deceptive.  Regardless of that, it looks like a fricken basket case to me and when they start blaming short sellers, well that's really getting desperate to divert blame for your mess.

At the AGM people were calling for them to sue the fund-managers shorting them.  SGH should take a look at the Church of Scientology model.  Legally harass the neigh neigh-sayers.  Quite the model - The Church of Scientology - vertically integrated!


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## McLovin (20 November 2015)

Ves said:


> Which makes it sound like a very binary situation.   I think they'll just muddle through to be honest,  but I don't see how they are going to earn extraordinary ROIC in the long-term (and not convinced they are now,  but it's hard to tell considering the lack of transparency in the accounting methods).  In which case,  it'll trade much closer to book value.




I dunno, their debt load makes it kind of hard to just muddle along. The funny thing is that this is actually a pretty simple business. John gets hit by Joe, has $x in medical fees and missed work, threatens to sue Joe's insurer, insurer pays up, before it goes near a courtroom. I'm sure the case law is well established and all parties know what the likely outcome is before they start negotiating. The number of cases in the pool and the relative simplicity of the cases involved tells me that they really should do well. I'm sure large parts of the client screen could/are be/en automated even. Unlike say IMF where there are far fewer cases in the pool, each case is far more complex and requires a much larger investment. This isn't heavy duty contract litigation, or Mabo, or even the vibe. It's neck braces and cheap-suited ambulance chasers.


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## Ves (20 November 2015)

McLovin said:


> The funny thing is that this is actually a pretty simple business.



Completely agree.  But,  there-in lies the problem,  every other law firm knows that, and from what I can tell there's pretty fierce competition for the easy cases.

Yep,  they could automate it,  but I'm fairly sure if the technology exists or the systems exist in any form, it wouldn't be that hard for someone else to replicate it.

I wouldn't be surprised if this industry was going the same way as tax accounting given the well established processes. All of the money is in consulting / advice,   and the run of the mill processing stuff has started more and more to become like a sausage mill....  Xero,  MYOB etc. and their whizz bang automated accounting data feeds have made it so much easier than the days of manual line by line processing.  It's now low-cost,  low margin,  fiercely competitive as the staff costs get lower and lower and lower.

What's a brand worth any way?  Does Joe Bloggs really know if he would have got a quicker or bigger claim at the firm up the road?  As long as he is successful I'm sure he'd never notice. You can play sombre / inspiring / tragic music on TV ads all day,  but does anyone really know the difference between Maurice Blackburn and S&G or the local firm making an occasional appearance?


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## Valued (20 November 2015)

What do you expect them to automate exactly?

I have a very intricate understanding of exactly how their business works by the way, so prepare to be ripped to pieces on any silly answers:


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## McLovin (20 November 2015)

Ves said:


> Completely agree.  But,  there-in lies the problem,  every other law firm knows that, and from what I can tell there's pretty fierce competition for the easy cases.
> 
> Yep,  they could automate it,  but I'm fairly sure if the technology exists or the systems exist in any form, it wouldn't be that hard for someone else to replicate it.
> 
> ...




I see where you're coming from re muddling along now, Ves. I agree with what you're saying. FWIW I don't think this is an outstanding business, and when I said they'll be superstars, I meant SP wise. The central case for SGH is that investors believe they are inflating or over estimating what they will collect. I find that difficult to believe of the reasons I gave in my last post. I'm not willing to put money on it because I just don't think I'm right.



			
				Valued said:
			
		

> What do you expect them to automate exactly?




Surely first level screening of potential cases could be run through a question answer type thing that spits out a proceed don't proceed, before the injured punter even meets Mr Hutz? Rip away. If you know how these things work, I'd actually be very interested in understanding.


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## Valued (20 November 2015)

McLovin said:


> Surely first level screening of potential cases could be run through a question answer type thing that spits out a proceed don't proceed, before the injured punter even meets Mr Hutz? Rip away. If you know how these things work, I'd actually be very interested in understanding.




It would be hard to exclude cases unless it was very clear. All firms will have a questionnaire to start off with. Some clients because of their injuries or background won't be able to read/write or understand the form. The questions have to be very basic and just ask things like the date of the injury and what happened. A computer won't be able to say whether there is a case or not, they would be screened by a person. In terms of excluding a case based on questions, I don't see how you could do that. You could have a question like "When did the injury occur?" and if it was over statutory limitation the firm could reject it but they could lose work because sometimes the limitation can be extended and you can still settle out of time cases. There are also exceptions such as being under a legal disability and then clients won't know what constitutes a legal disability without legal advice. If they are excluded because the automated process tells them they were not under a legal disability when they were then the firm could potentially be exposed to liability. Examples of a legal disability are being a minor, being in prison or not being of sound mind.

The only way to know if someone has a case is to get a medico-legal report. The client is made to pay for it. The firm has to collect information from the client and send a letter of instruction to a doctor. If it is a complex case the letter of instruction may take some time and possibly involve instructing a barrister. They would have precedents for the simple cases like the standard motor vehicle accidents. This means the firm has to put in a couple of hours of work at this stage.

As an alternative to an automated process, most firms would just have a 15 minute consultation that is free with the client where they work out pretty quickly if there is any chance at all. If it sounds like a terrible case that is too risky they will not take it unless the client agrees to pay the hourly rate and put money in trust, i.e. they will take the case but not no win no fee. 

An automated process would mean people who want to have that face to face consultation or at least a consultation over the phone would go to a firm that offers that. You are correct in that there are many firms, including just general firms, who will take on speculative personal injuries matters. The rewards are quite high and often involve minimal work since 95% of the cases settle. Therefore, if the big firms lose that personal touch they will likely find people will tend to go to the solicitor who will give them the time of day. Personal injuries firms are more in the listening business then the legal business. Clients want to be listened to. They want someone to hear their story and their problems. Some of those tend to be quite relevant though. A person going on for 30 minutes about how they can't pat their cat called fluffy after the accident because they can't bend down may seem irrelevant but actually that's something they can't do anymore and if it had that much of an effect on them that they can talk about it for 30 minutes that's evidence that goes to the effect the injury had on their life and could increase damages.


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## skyQuake (20 November 2015)

skc said:


> May be QPP can use all that cash from SGH's acquisition and buy SGH back... that would be pretty funny.




Can't wait to see this!


----------



## skc (21 November 2015)

McLovin said:


> The number of cases in the pool and the relative simplicity of the cases involved tells me that they really should do well.
> 
> This isn't heavy duty contract litigation, or Mabo, or even the vibe. It's neck braces and cheap-suited ambulance chasers.




There are 2 caveats.
1. Are the QPP cases on the balance sheet properly selected and properly progressed in line with their capitalised value?
2. The market may have simply over glorified SGH's business (due to acquisition and accounting) in the past. SGH might do well running this simple operations, but I see little hope of it's share price and multiple returning to where it used to be.



Ves said:


> What's a brand worth any way?  Does Joe Bloggs really know if he would have got a quicker or bigger claim at the firm up the road?  As long as he is successful I'm sure he'd never notice. You can play sombre / inspiring / tragic music on TV ads all day,  but does anyone really know the difference between Maurice Blackburn and S&G or the local firm making an occasional appearance?




No but that's exactly why the brand (and unaided recall rate) is important. Plus it's "feed-in" network. The more chances you get to "touch" a potential RTA client (via car hire, healthcare, insurance claim etc), the more chances you'd get the work. So all those seemingly non-core businesses collected by QPP does make some sense.



Valued said:


> *Personal injuries firms are more in the listening business then the legal business. Clients want to be listened to. *




Nice insight. Reminds me of the scene in Erin Brockovich (the movie) where she had all the client's number and family background in her head.



Valued said:


> I have a very intricate understanding of exactly how their business works by the way, so prepare to be ripped to pieces on any silly answers:




Any more insight on the whole SGH/QPP story?


----------



## Valued (21 November 2015)

skc said:


> Any more insight on the whole SGH/QPP story?




Nope. When I say I have an intricate understanding of their business I don't mean financially or on the balance sheet, I mean their actual legal business and what is involved. I am not interested in investing in SGH so I haven't made it my business to know the finance side of things. I know exactly how personal injuries matters proceed down from A-Z including specific steps including what they look for in medico-legal reports down to the exact forms they fill out and how they fill them out under the relevant legislation (it differs from state to state, there is a huge difference between proceeding in Qld and proceeding in NSW, for example).

If QPP is a case or something to do with their legal business, then if you can explain to me what you know is going on, I may be able to offer some insight. I have a law degree which is why I understand their business from that perspective. If you want to know more about that side of things fire away.


----------



## skc (21 November 2015)

Valued said:


> Nope. When I say I have an intricate understanding of their business I don't mean financially or on the balance sheet, I mean their actual legal business and what is involved. I am not interested in investing in SGH so I haven't made it my business to know the finance side of things. I know exactly how personal injuries matters proceed down from A-Z including specific steps including what they look for in medico-legal reports down to the exact forms they fill out and how they fill them out under the relevant legislation (it differs from state to state, there is a huge difference between proceeding in Qld and proceeding in NSW, for example).
> 
> If QPP is a case or something to do with their legal business, then if you can explain to me what you know is going on, I may be able to offer some insight. I have a law degree which is why I understand their business from that perspective. If you want to know more about that side of things fire away.




I see. Thanks. I am more interest in the financials and whole of company stuff, and don't have any specific law-related question at present.


----------



## skc (23 November 2015)

McLovin said:


> That will lower EBITDA because of changes in WIP but improve OCF as that WIP is liquidated. Call me cynical, but because SGH have guidance that excludes WIP (ie EBITDAW) this won't flow through to that number, but the positive affect on OCF will, to the tune of about $42m at today's fx rate.
> 
> The positive side of this is that they do appear to be trying to rein in working capital.
> 
> I think the selloff today probably has more to do with the negative OCF forecast in the first period, and the heavier weighting toward the second half.




Been thinking about this a bit more. SGH has now owned QPP/PSD/SGS for 5 months now... so they know a lot better what they actually acquired. The acquisition included 3 major assets... 
1. A huge amount of in-progress cases.
2. Existing staff
3. Existing business processes and relationships.

From the AGM update, there are hints that 1 and 3 are severely impaired. The reduction in WIP growth, originally stated growth to 95k cases in FY16 (from 83.5k in FY15), will now be down to ~73k (of which 6k due to Swinton, which was supposed to be immaterial). The reason given is that they will stop taking in cases that occurred over 12 months ago as they have poor resolution rate. 

How many cases did SGH actually acquire from QPP (I couldn't find the number)? What is the average age of those cases (I don't think it was disclosed)? Given that QPP has had poor cashflow, you'd think they would have targeted those low hanging fruits quickly, while building up an increasing amount of stale cases. Makes you wonder how representative are those 8000 "due diligence" cases that SGH undertook before the acquisition. Does SGH keep spending cash on hoping they will be resolved? Or should they just bite the bullet and walk away from them (Are they legally allowed to do that)? My guess is there'd be some writedown coming.

Before introduction of the new EBITDAW measures, PSD was supposed to earn GBP 95m in FY16. The change in case intake reduced the number by 20m. So that's a big downgrade regardless of the troubles of their EBITDA definition. 

Good thing that they didn't pay anything for the NIHL cases - so at leaset there won't be any writedowns. But my guess is that they are also bleeding there for the same rationale. They have 360 staff working on these and each wants to be paid monthly regardless of case resolution rates. And btw, hearing loss cases are most definitely a lot older than 12 months.

To make matters worse, SGH's own UK business (non-QPP part) is also off to a slow start. It's not possible to tell what proportion of the negative $30-40m cashflow stems from SGS vs SGH UK... but the timing couldn't be much worse. This is particularly worrying because it coincided with regulatory review and recent process changes. It's too early to tell when things will turnaround.

This is a passage from another article. http://www.legalfutures.co.uk/lates...-ex-quindell-business-to-improve-pi-win-rates



> Mr Grech said the firm has taken “important strides in charting a clear direction for [SGS], which is markedly different from how it was run by its previous owners”.
> 
> He explained: “In multiple areas, we are seeking to reset relationships with counterparties, including insurers, business introducers and suppliers, in line with [our] corporate values.”




This reads to me that everything they acquired in terms of business relationships were unworkable. 

Anyhow... the worst part of the AGM address was probably this.



> Given the slower than expected start to the year in the UK business and the risk that we may not be able to recover the lost ground by 31 December there is now a likelihood that Group operating cash flow will be negative in the range of A$30-40 million in the first half, with a strong recovery expected in the second half.  We are taking a range of actions to mitigate this risk and we are confident that we will achieve  our  financial  year  guidance  and  that  *we  will  remain  in  compliance  with  our obligations to financiers. *




That's a throwaway line that's really highlighting how stretched SGH's cash situation might be. That's not a line that you need to include if you are confident of a turnaround, or that the negative performance is only transient.

So to me there are enough hints in this AGM to suggested that SGH acquired something hairy, yellow, that may or may not smell like a lemon. It will take another period to confirm what fruit it actually is. SGH may be so talented that it may be able to eventually turn it all around. They can write off Asset 1, retain/improve Asset 2 and rebuild Asset 3. But this probably will only happen over the very long term (3+ years) and probably with an unpleasant near-death experience in between.

Let's see how the market judge SGH on Monday after digesting the news over the weekend. Some massive Day 2+ moves after AGMs of late.


----------



## galumay (23 November 2015)

skc said:


> Been thinking about this a bit more.




Typically detailed analysis, skc. 

Quite a bit to absorb and reflect on there!


----------



## skc (23 November 2015)

skc said:


> Let's see how the market judge SGH on Monday after digesting the news over the weekend. Some massive Day 2+ moves after AGMs of late.




Day 2 = more one way traffic. 





Where's the bottom? Still a company with EV $1.4B FWIW.


----------



## notting (23 November 2015)

I have decided to help them with my marketing business advisory services starting with a new logo;
to better reflect their recent metamorphosis.




In *short* it continues to be a good one.

Perhaps they should grow into merger and acquisition solicitation, more creative they will have a plethora of first hand experience will generate further self employment for vertical integration, won't help those staffing costs but they could add the 7-Eleven model to help with that- it's all good.


----------



## Rainman (23 November 2015)

skc said:


> ...  Let's see how the market judge SGH on Monday after digesting the news over the weekend. Some massive Day 2+ moves after AGMs of late.




You can say that again!  Down 20% today after dropping more than 20% on Friday.


----------



## Rainman (23 November 2015)

McLovin said:


> ... The funny thing is that this is actually a pretty simple business. John gets hit by Joe, has $x in medical fees and missed work, threatens to sue Joe's insurer, insurer pays up, before it goes near a courtroom. ...




But occasionally a matter will go to court, particularly a matter involving a few hundred thousand dollars or more.   

I haven't read SGH's financial reports but how does it account for a matter that it wins at first instance in FY1, then loses on appeal in FY2 (in which it would have to pay the other side's costs) and then loses again after appealing that appeal in FY3 (again, paying the other side's costs)?  If the other side appeals a decision which SGH's client won at first instance, does SGH make provision in its reporting for the possibility that it may have to pay the costs of losing an appeal?

There is then the long drawn-out process of costs assessment should one or the other party dispute a party's claim for costs.  

In short: the amount that SGH thinks it might have earned on any one matter would often remain uncertain for a considerable period of time after a matter has settled or been the subject of a court judgment.  This feature of SGH's business requires very conservative accounting, in my view.


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## Valued (23 November 2015)

Rainman said:


> But occasionally a matter will go to court, particularly a matter involving a few hundred thousand dollars or more.
> 
> I haven't read SGH's financial reports but how does it account for a matter that it wins at first instance in FY1, then loses on appeal in FY2 (in which it would have to pay the other side's costs) and then loses again after appealing that appeal in FY3 (again, paying the other side's costs)?  If the other side appeals a decision which SGH's client won at first instance, does SGH make provision in its reporting for the possibility that it may have to pay the costs of losing an appeal?
> 
> ...




Law firms don't pay costs to the other side out of their own pockets, it's the client's liability. Why do you think they pay costs? Did they say that anywhere? That's not how it works in Australia, but I suppose that could be the case in the UK, especially if they bought a litigation funder? A company like IMF Bentham becomes liable for costs because it is a litigation funder, not a law firm, and they have to engage a firm. 

If they lose the case though it means a lot of time was spent on the case and there was no reward, so the loss is the employee wages that went to not producing any income.


----------



## Rainman (23 November 2015)

Valued said:


> Law firms don't pay costs to the other side out of their own pockets, it's the client's liability.




True.  I should have put that better.  

What I meant was: when an SGH client succeeds at first instance and is awarded an amount of damages plus his/her legal costs on an ordinary or on an indemnity basis, I presume that SGH will recognise those costs (once they have been quantified) as revenue in the financial year in which they are awarded.  However, how does SGH deal with a situation where the party ordered to pay damages and costs successfully appeals?  Now the costs that SGH has previously recognised as revenue will have to be reversed.  Does it make allowance for that possibility at the time that costs/revenue is recognised?  

Also, while I understand that the legality of the practice varies from jurisdiction to jurisdiction, some plaintiff law firms agree to indemnify their clients for any costs that they are ordered to pay following unsuccessful litigation.  This practice often occurs where the law firm has advised a client to reject a settlement offer and to press on to trial and the client then fails at trial.  It is a practice that is permissible and increasingly common in the UK: _Sibthorpe and Morris v London Borough of Southwark_ [2011] EWCA Civ 25 (see also http://www.internationallawoffice.c...o-indemnify-clients-against-costs-liabilities).

Does SGH disclose when and where its UK practices enter into these sorts of costs indemnity arrangements?


----------



## McLovin (24 November 2015)

skc said:


> Been thinking about this a bit more. SGH has now owned QPP/PSD/SGS for 5 months now... so they know a lot better what they actually acquired. The acquisition included 3 major assets...
> 1. A huge amount of in-progress cases.
> 2. Existing staff
> 3. Existing business processes and relationships.
> ...




I think what is happening under the bonnet is that SGH thought they could get increase case resolution speed, how I don't know. That's turned out to be harder than they imagined and so they've had to dial back taking on new cases and go for "easier" cases with quicker resolution. SGS when it was Quindell was taking on ~80k cases/year but only closing ~40k. Obviously that puts a huge strain on working capital, and I wonder if SGH has woken up to the fact that while the cases they have may be strong, they don't have the balance sheet to fund them for x number of months/years. I'm not sure the cases are impaired as much as "delayed". Maybe I'm being too glass half full. Regarding point 3, I think that appears to be the case.

This leads into this...



> That's a throwaway line that's really highlighting how stretched SGH's cash situation might be.




The pitfalls of being a public company: Every insurer knows what SGH's position is. What's the effect on claims settlement? The second half recovery will be truly epic. Negative OCF in the first half of $30-$40m, but sticking to FY OCF of $205m. I'm happy to watch from the sideline.


----------



## McLovin (24 November 2015)

Valued said:


> It would be hard to exclude cases unless it was very clear. All firms will have a questionnaire to start off with. Some clients because of their injuries or background won't be able to read/write or understand the form. The questions have to be very basic and just ask things like the date of the injury and what happened. A computer won't be able to say whether there is a case or not, they would be screened by a person. In terms of excluding a case based on questions, I don't see how you could do that. You could have a question like "When did the injury occur?" and if it was over statutory limitation the firm could reject it but they could lose work because sometimes the limitation can be extended and you can still settle out of time cases. There are also exceptions such as being under a legal disability and then clients won't know what constitutes a legal disability without legal advice. If they are excluded because the automated process tells them they were not under a legal disability when they were then the firm could potentially be exposed to liability. Examples of a legal disability are being a minor, being in prison or not being of sound mind.
> 
> The only way to know if someone has a case is to get a medico-legal report. The client is made to pay for it. The firm has to collect information from the client and send a letter of instruction to a doctor. If it is a complex case the letter of instruction may take some time and possibly involve instructing a barrister. They would have precedents for the simple cases like the standard motor vehicle accidents. This means the firm has to put in a couple of hours of work at this stage.
> 
> ...




Thanks for the overview, valued.


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## skc (24 November 2015)

McLovin said:


> I think what is happening under the bonnet is that SGH thought they could get increase case resolution speed, how I don't know. That's turned out to be harder than they imagined and so they've had to dial back taking on new cases and go for "easier" cases with quicker resolution. SGS when it was Quindell was taking on ~80k cases/year but only closing ~40k. Obviously that puts a huge strain on working capital, and I wonder if SGH has woken up to the fact that while the cases they have may be strong, they don't have the balance sheet to fund them for x number of months/years. I'm not sure the cases are impaired as much as "delayed". Maybe I'm being too glass half full. Regarding point 3, I think that appears to be the case.




The inventory doesn't spoil... according to the Andrew Grech. In theory that's true. It's just hard to trust the inventory quality coming from Quindell.



McLovin said:


> The pitfalls of being a public company: Every insurer knows what SGH's position is. What's the effect on claims settlement? The second half recovery will be truly epic. Negative OCF in the first half of $30-$40m, but sticking to FY OCF of $205m. I'm happy to watch from the sideline.




It's clear that nobody expect them to be able to meet guidance. By mid Feb they should adjust their guidance. If they so much meet the negative $30-40m in H1 and guide to a $100m OCF for the full year, they'd probably get a nice bounce.


----------



## Ves (26 November 2015)

Still running really hard to the downside,  and the volume is still well above average.   Wonder if there have been a few whispers from the banks re the covenants? If they were forced to raise capital, how much could they raise  (see: bruised reputation) and what is the likely discount (pretty big IMO)?

ASIC is the other wild card.

Or maybe it's just the market having a panic or the evil shorters running wild.


----------



## McLovin (26 November 2015)

Ves said:


> Still running really hard to the downside,  and the volume is still well above average.   Wonder if there have been a few whispers from the banks re the covenants? If they were forced to raise capital, how much could they raise  (see: bruised reputation) and what is the likely discount (pretty big IMO)?
> 
> ASIC is the other wild card.
> 
> Or maybe it's just the market having a panic or the evil shorters running wild.




This is where this cognitive dissonance that I have with SGH comes in. These guys do shareholder class actions. Having such a high, as to almost be unbelievable, turnaround forecast in the second half is surely very strong grounds for a class action if they miss that milestone in a big way, which the market seems to be suggesting is inevitable. The AGM was an opportune time to say things are going slower and adjust down their OCF forecast at least. I just can't imagine a bunch of lawyers being that dumb.

Here's their BBG case...



> Billabong is an Australian surf wear, accessories and action sports apparel company, founded in 1973.  Its products are licensed and distributed in more than 100 countries.
> 
> The claim against the company relates to Billabong’s announcement to the market on 19 December 2011 that, contrary to prior earnings guidance given on 18 February 2011 and 19 August 2011, it no longer expected strong underlying growth in earnings before interest, tax, depreciation and amortisation (EBITDA) for the financial year ending 30 June 2012 (FY12) and, further, that the company now expected its EBITDA performance for the first half of FY12 (1H12) to be 20-26% below its 1H11 performance.
> 
> In response to the announcement on 19 December 2011, Billabong’s share price fell from $3.64 immediately prior to the disclosure to $1.77 on 20 December 2011, a fall of about 51%.




https://www.slatergordon.com.au/class-actions/current-class-actions/billabong-shareholder


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## VSntchr (26 November 2015)

And if things couldn't get any worse for SGH, an announcement from the UK government that they are looking into increasing the small claims court max payout. Industry legislative risk has now been brought to the mix after what has largely been company specific risk smashing the stock.

A bit of a left-field jab, but perhaps explains a bit of todays re-acceleration in the selling.


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## skc (26 November 2015)

VSntchr said:


> And if things couldn't get any worse for SGH, an announcement from the UK government that they are looking into increasing the small claims court max payout. Industry legislative risk has now been brought to the mix after what has largely been company specific risk smashing the stock.
> 
> A bit of a left-field jab, but perhaps explains a bit of todays re-acceleration in the selling.




I wish I red that overnight... would have been a year maker!

They can kiss their UK business goodnight me thinks.


----------



## Ves (26 November 2015)

Wow,  another 30% fall.   SGH were obviously a bit slow in releasing that announcement,  but a few of the early sellers appear to be following the news.  

Surely it's now being priced for a massive capital restructure by the market?


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## Ves (26 November 2015)

McLovin said:


> This is where this cognitive dissonance that I have with SGH comes in. These guys do shareholder class actions. Having such a high, as to almost be unbelievable, turnaround forecast in the second half is surely very strong grounds for a class action if they miss that milestone in a big way, which the market seems to be suggesting is inevitable. The AGM was an opportune time to say things are going slower and adjust down their OCF forecast at least. I just can't imagine a bunch of lawyers being that dumb.



That's amazing.  The BBG case is almost a perfect fit (in more ways than one) if it plays out like most people think it will.  

This is quickly becoming the binary situation that you earlier predicted.   It's way too hard to figure out how it plays out for me, and the fact that the underlying business,  is far from excellent, means I'm just happy to watch.


----------



## VSntchr (26 November 2015)

skc said:


> I wish I red that overnight... would have been a year maker!
> 
> They can kiss their UK business goodnight me thinks.




Oh mate! Looks like it could have been a year maker from the re-open!


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## VSntchr (26 November 2015)

In my somewhat limited experience watching the market trade I don't think I've ever seen the depth move as fast as what SGH is doing right now...


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## McLovin (26 November 2015)

skc said:


> I wish I red that overnight... would have been a year maker!
> 
> They can kiss their UK business goodnight me thinks.




Yes. I would say so. But they're only proposals at this stage. The Tories are probably on the side of the insurers so I imagine they'll be trying their hardest to get this through.


----------



## joeno (26 November 2015)

What the hell is going on??? It's basically crashing to $0


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## Ves (26 November 2015)

McLovin said:


> Yes. I would say so. But they're only proposals at this stage.



I was reading elsewhere that something similar happened in NSW at some point and the impact on legal firms there that relied on those sorts of frivolous claims was fairly big.   Any info on this?

Apparently this move would save the UK government about 1 Billion pounds in claim payments a year (50% or so reduction). In times of low growth in Europe (and in some cases austere budgets),  you'd think there wouldn't be much opposition to these proposals if they sell them as cutting out frivolous or borderline fraudulent claims,  which they no doubt will try. Not like it's a high-profile public issue either AFAIK, so why wouldn't they wave it through?


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## McLovin (26 November 2015)

Ves said:


> I was reading elsewhere that something similar happened in NSW at some point and the impact on legal firms there that relied on those sorts of frivolous claims was fairly big.   Any info on this?
> 
> Apparently this move would save the UK government about 1 Billion pounds in claim payments a year (50% or so reduction). In times of low growth in Europe (and in some cases austere budgets),  you'd think there wouldn't be much opposition to these proposals if they sell them as cutting out frivolous or borderline fraudulent claims,  which they no doubt will try. Not like it's a high-profile public issue either AFAIK, so why wouldn't they wave it through?




Don't have any info on that sorry. I'll have a dig around. I believe it will save the insurance industry 1b pounds, not the government. But they're talking about 40-50 pound savings on car insurance which isn't exactly a hard proposition to sell.

Now how about that debt SGH used to buy a motor accident compo outfit in the UK...


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## Ves (26 November 2015)

McLovin said:


> I believe it will save the insurance industry 1b pounds, not the government. But they're talking about 40-50 pound savings on car insurance which isn't exactly a hard proposition to sell.



Yep,  spot on.  My error.

http://www.theguardian.com/uk-news/2015/nov/25/cash-payouts-whiplash-claims-banned-autumn-statement


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## skc (26 November 2015)

McLovin said:


> Yes. I would say so. But they're only proposals at this stage. The Tories are probably on the side of the insurers so I imagine they'll be trying their hardest to get this through.






Ves said:


> I was reading elsewhere that something similar happened in NSW at some point and the impact on legal firms there that relied on those sorts of frivolous claims was fairly big.   Any info on this?
> 
> Apparently this move would save the UK government about 1 Billion pounds in claim payments a year (50% or so reduction). In times of low growth in Europe (and in some cases austere budgets),  you'd think there wouldn't be much opposition to these proposals if they sell them as cutting out frivolous or borderline fraudulent claims,  which they no doubt will try. Not like it's a high-profile public issue either AFAIK, so why wouldn't they wave it through?




I remember posting something before about UK being the whiplash capital of Europe. Screwing the government is lucrative when it lasts, but doesn't always last too long. Who in their right mind (politician wise) would want to stand up and fight for the ambulance chasers?!

Talk about a perfect storm. I wonder if there'd be a recapitalisation... it's not a turnaround story. It's a "regulation makes revenue disappears overnight" story. Like MMS a few years back. The Australian business and other practice ares will certainly still retain value... but you'd think debt holders might even need a haircut at this rate.

Wouldn't it be funny if ASIC comes out tomorrow and give them the all clear?


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## notting (26 November 2015)

SHJ The dyslexics are shorting this too.
Not me but.



> PRINCIPAL ACTIVITY
> Shine Corporate Ltd (SHJ) is an Australian plaintiff litigation company
> providing damages based litigation services in personal injury and emerging
> practice areas. SHJ operates through its Incorporated Legal Practice, Shine
> Lawyers Ltd, and has over 39 offices located across QLD, NSW, VIC and WA.




Announcement - Oh for God's sakes your halfwits - 







> "Shine Corporate Ltd confirms that it has no presence in the United Kingdom and that the proposed regulatory changes do not impact its operations"


----------



## notting (26 November 2015)




----------



## McLovin (26 November 2015)

Did they really not know change was coming? If you're in a highly regulated industry surely as part of due diligence you'd study the regulatory landscape and the prospects for change before splashing out $1b....Hmmm.



> While the change has come as a surprise to Slater & Gordon, analysts were well aware of the potential for changes in the UK.
> 
> CLSA analyst Oscar Oberg told clients in September that industry contacts pointed to a potential regulatory change  as an increase in the Small Claims Track from £1,000 to £5,000 damages.
> 
> ...






Read more: http://www.afr.com/business/legal/s...ury-law-changes-20151126-gl8iwz#ixzz3sZDx0IVt


----------



## skyQuake (26 November 2015)

Still cant believe news was out around 1am Aus time overnight. 

My guess is shorters had no more ammo left - But they called up the co' and let them know they need to address this issue to keep the markets updated


----------



## notting (26 November 2015)

skyQuake said:


> Still cant believe news was out around 1am Aus time overnight.
> 
> My guess is shorters had no more ammo left - But they called up the co' and let them know they need to address this issue to keep the markets updated




Guess that would make it a long then!


----------



## skc (26 November 2015)

McLovin said:


> Did they really not know change was coming? If you're in a highly regulated industry surely as part of due diligence you'd study the regulatory landscape and the prospects for change before splashing out $1b....Hmmm.




It's not like they were new to the UK. Their UK business was already larger than the Australian operations from memory.

Now.. their operating cashflow across the group was something like $40-50m. Assuming half from the UK which will be reduced by 50%, you get ~$30-35m.

SGS is worse because it's 80% fast track stuff (according to Macquarie)... you can easily assume that it won't make any cash.

SGH with $650m in debt @ 5% interest = $32.5m in interest expense alone.

It's bye bye SGH if the law gets passed. 



skyQuake said:


> Still cant believe news was out around 1am Aus time overnight.
> 
> My guess is shorters had no more ammo left - But they called up the co' and let them know they need to address this issue to keep the markets updated




I still can't believe no one picked it up this morning. I traded it before the announcement but really didn't know why the sell off accelerated after 2 days pause. I was flat going into the news but was able to re-enter at the match again.

I am also surprised that the news was marked "market sensitive"... it was immaterial to FY16 and not even passed as law yet. It would have been even better trade.

Now hands up who's even seen a Reg_Halt on an ASX100 stock.


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## So_Cynical (26 November 2015)

In the space of 6 months my SGH holding has gone from a $7000 open profit to a $700 open loss...and this is basically because i didn't want to pay tax on the profits last financial year, wanted to wait until 1st July, and then that ****ing bookbuild came along and i figured id just take that lazy $1000 on offer.



Actually my largest unrealised loss, matched this week as fate would have it by my largest ever single day unrealised gain...what's the chances of that.


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## Rainman (27 November 2015)

SGH's recent woes remind me of Claudius' line in Hamlet:

"_When sorrows come, they come not single spies
But in battalions_".​


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## skyQuake (27 November 2015)

skc said:


> Now hands up who's even seen a Reg_Halt on an ASX100 stock.




HA! At this rate everyone will be experts on Chi-X halts

Also, please return your borrow so I can get some


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## McLovin (27 November 2015)

Wow.



> In August, Skippen told the Company Directors magazine that one of the most important considerations for the board of Slater & Gordon when it paid $1.3 billion for the Quindell business in the UK was assessing regulatory risk.
> 
> "People sometimes underestimate or don't understand regulatory risk in new markets," he said in a feisty interview that included an attack on hedge funds and short sellers.
> 
> "Every country has its approval process, which varies across industry, and it's easy to overlook how much damage can be done from legislative change."




Read more: http://www.afr.com/brand/chanticlee...regulatory-risk-20151126-gl93ff#ixzz3seCjmWmk


----------



## skc (27 November 2015)

skyQuake said:


> HA! At this rate everyone will be experts on Chi-X halts
> 
> Also, please return your borrow so I can get some




NEVER!

Actually I only have minimal shorts overnight and actually traded long OK today as well.

Probably worth monitoring the shorts situation. I can see why the hedge funds might start to cover...

71M shares traded today and we are not even at lunchtime.



McLovin said:


> Wow.
> 
> Read more: http://www.afr.com/brand/chanticlee...regulatory-risk-20151126-gl93ff#ixzz3seCjmWmk




You can't write this stuff... Someone in your family is a writer? May be _you _can... but I am still shaking my head. Transformational acquisition... in every sense.

The truth will never really be known on why they go so hard and paid so much on QPP. Their acquisitions in the past usually isn't that much more than the WIP acquired. But with QPP they paid $1B in goodwill with some very questionable WIP to start with. 

There is a theory that SGH was like a mouse in the wheel - its needs ongoing acquisitions and WIP growth in order to keep the story going... well they certainly went out with a massive BANG.


----------



## McLovin (27 November 2015)

skc said:


> It's not like they were new to the UK. Their UK business was already larger than the Australian operations from memory.
> 
> Now.. their operating cashflow across the group was something like $40-50m. Assuming half from the UK which will be reduced by 50%, you get ~$30-35m.
> 
> ...




Yeah, I agree, especially re the fast track stuff. That, last Friday, was how they were going to get cashflow moving again, or at least that was my take on things! I can't even see a scenario where the laws get passed and SGH does a cap raising, there is just too much debt, and who would trust management now?

Who's going to file the class action against SGH?


----------



## VSntchr (27 November 2015)

McLovin said:


> Who's going to file the class action against SGH?
> View attachment 65121


----------



## chops_a_must (27 November 2015)

We haven't seen a death spiral like this for a while!


----------



## McLovin (27 November 2015)

skc said:


> You can't write this stuff... Someone in your family is a writer? May be _you _can... but I am still shaking my head. Transformational acquisition... in every sense.
> 
> The truth will never really be known on why they go so hard and paid so much on QPP. Their acquisitions in the past usually isn't that much more than the WIP acquired. But with QPP they paid $1B in goodwill with some very questionable WIP to start with.
> 
> There is a theory that SGH was like a mouse in the wheel - its needs ongoing acquisitions and WIP growth in order to keep the story going... well they certainly went out with a massive BANG.




I'm shocked by it all. I haven't seen anything like this ever. I've seen plenty of bad acquisitions, but an acquisition that goes so bad, so soon, and is big enough to sink the acquirer. Never. And all the reassurances on top of that...

I am flabbergasted.


----------



## Rainman (27 November 2015)

McLovin said:


> I'm shocked by it all. I haven't seen anything like this ever.




This is an object lesson that is priceless.


----------



## DeepState (27 November 2015)

McLovin said:


> I haven't seen anything like this ever..




It happens...some acquisitions aren't easily digested and can produce poor synergies.  The acquisition target might even have prickly risks which seemed obvious and are there for all to see, yet turn out to be harder to swallow than expected.


----------



## shouldaindex (27 November 2015)

Good lesson to know what you're investing in.

It's really sad to see 'the other place' where the majority have a very basic mental make up, trying to barrack for the SP every hour, having very little idea about what affects the shareprice and earnings of the company.


----------



## fraa (27 November 2015)

shouldaindex said:


> Good lesson to know what you're investing in.
> 
> It's really sad to see 'the other place' where the majority have a very basic mental make up, trying to barrack for the SP every hour, having very little idea about what affects the shareprice and earnings of the company.




What is this other place ? You talking about hot copper ?


----------



## skc (28 November 2015)

shouldaindex said:


> Good lesson to know what you're investing in.
> 
> It's really sad to see 'the other place' where the majority have a very basic mental make up, trying to barrack for the SP every hour, having very little idea about what affects the shareprice and earnings of the company.




I looked there a few times. I deduced that everyone on the other forum must be delusional... the 85% who still think this will go back to $6 are delusional by their posts, while the remaining 15% who keep posting there with rational thoughts are delusional by association.

The funniest was probably someone with the name "TechnicalsSayItAll" keep ramping it up every minute or so. Cashflow problems? Good news. Regulatory change? Good news. Price crashes 50%? Good news. Most Monty-pythonish. 





DeepState said:


> View attachment 65130




Love it. The question is... would the snake starve to death if it didn't swallow the porcupine? 



McLovin said:


> View attachment 65121




One of my favourite characters from the Simpsons.





Rainman said:


> SGH's recent woes remind me of Claudius' line in Hamlet:
> 
> "_When sorrows come, they come not single spies
> But in battalions_".​




Beautifully put. Can you come up with another Shakespearean quote when ASIC gives them the all clear... yet nobody cares anymore?


----------



## Ves (28 November 2015)

skc said:


> Beautifully put. Can you come up with another Shakespearean quote when ASIC gives them the all clear... yet nobody cares anymore?



No... but can we assume they may change their name to "SlaterGordon" to keep up with their good mates at "LendLease."

Thanks for all of the posts guys,  fascinating reading.


----------



## Rainman (28 November 2015)

skc said:


> ... Beautifully put. Can you come up with another Shakespearean quote when ASIC gives them the all clear...




Yes I can.

_The rest is silence..._​


----------



## McLovin (28 November 2015)

DeepState]It happens...some acquisitions aren't easily digested and can produce poor synergies. The acquisition target might even have prickly risks which seemed obvious and are there for all to see said:


> I looked there a few times. I deduced that everyone on the other forum must be delusional... the 85% who still think this will go back to $6 are delusional by their posts, while the remaining 15% who keep posting there with rational thoughts are delusional by association.
> 
> The funniest was probably someone with the name "TechnicalsSayItAll" keep ramping it up every minute or so. Cashflow problems? Good news. Regulatory change? Good news. Price crashes 50%? Good news. Most Monty-pythonish.




The other forum is hysterical. One guy posited the question "will SGH go bankrupt or be taken over?" First response: "What an idiot statement". Second reply: "Without a shadow of a doubt - NIL CHANCE"


----------



## Klogg (28 November 2015)

McLovin said:


> The other forum is hysterical. One guy posited the question "will SGH go bankrupt or be taken over?" First response: "What an idiot statement". Second reply: "Without a shadow of a doubt - NIL CHANCE"




For a laugh, visit the Mesoblast threads there as well. Absolutely hilarious!


----------



## Rainman (29 November 2015)

SGH and its management no doubt offer many lessons to novice and pro investor alike.  But surely one of the most telling that it offers is this one:  This is what happens when you thoroughly destroy investor's and the investing public's faith in the company that you manage and in your ability to manage it.


----------



## Risk Manager (29 November 2015)

It seems to me that you are already so sure about everything while the reality is that in the UK no law has changed yet and even if it does, nobody can assess the real impact on SGH's revenue yet.


----------



## Rainman (29 November 2015)

Risk Manager said:


> It seems to me that you are already so sure about everything while the reality is that in the UK no law has changed yet and even if it does, nobody can assess the real impact on SGH's revenue yet.




With respect, I think you're missing the point.

Whether the proposed changes are introduced in the UK or not is irrelevant.  The point is that these changes appear to have completely blindsided SGH and they did not factor at all into SGH's purchase price of Quindell which, most people agree, SGH not only paid full freight for but overpaid for.  So much for due diligence.  

But even that is only half the story.  SGH's management, whether on the accounting issue, the Quindell issue, the 2016 guidance issue or the proposed legislative change issue in the UK, have clearly been behind the 8 ball on each occasion.  

It is not a very reassuring look - particularly when you have a balance sheet that looks increasingly overleveraged.


----------



## Stratagist (29 November 2015)

New to this forum and no do not post under any other user name

Have been perusing a number of forums since the SGH saga
Seems to me some of the other forum posts are for manipulative purposes only
Pull me up if I am wrong but the grasp of the English language seems to be sadly lacking with off the cuff comments based on speculative ideas with the hope of manipulating the market to gain an advantage
Sure at this stage SGH based on current price does not look good and everyone is guessing what will happen this coming week
It is the shorters who have created this crash and panic 
Referring back to Quindell before the SGH acquisition they lost around  80% of thier market value after falling victim to one of the most infamous short selling attacks in trading history falling victim to market rumour and gossip. 
Since then the share price made double-digit gains 
Surely SGH were aware of this and did not fly in blind

In this respect an interesting read http://www.investopedia.com/articles/analyst/030102.asp

The catalyst for this sudden depletion in the share price appears to be based on a lone announcement by the British Government re third party claims and pending inquiries into the accounting practices consequently the shorters jumped in creating market panic

I am a substantial holder in SGH and have managed to average down to a respectable price and will be looking for an out with profit in the coming months
Next week will tell the story 
It is not a sinking ship yet and yes I do have the life jacket on


----------



## Rainman (29 November 2015)

Stratagist said:


> ... It is not a sinking ship yet...




I don't think that it is a sinking ship either - yet.  But I wouldn't rule out a capital raising in the not-too-distant future if SGH's debt convenants come under further pressure.


----------



## skyQuake (29 November 2015)

Stratagist said:


> New to this forum and no do not post under any other user name
> 
> Have been perusing a number of forums since the SGH saga
> Seems to me some of the other forum posts are for manipulative purposes only
> ...




Proof?



> Referring back to Quindell before the SGH acquisition they lost around  80% of thier market value after falling victim to one of the most infamous short selling attacks in trading history falling victim to market rumour and gossip.
> Since then the share price made double-digit gains
> Surely SGH were aware of this and did not fly in blind



More interesting that slaters purchase was nowhere near the old highs but rather close to the lows. So there must have been a grain of truth to the short selling attacks since SGH's lowball offer was accepted



> In this respect an interesting read http://www.investopedia.com/articles/analyst/030102.asp
> 
> The catalyst for this sudden depletion in the share price appears to be based on a lone announcement by the British Government re third party claims and pending inquiries into the accounting practices consequently the shorters jumped in creating market panic
> 
> ...




What is your life jacket? stops?


----------



## McLovin (30 November 2015)

Stratagist said:


> Referring back to Quindell before the SGH acquisition they lost around  80% of thier market value after falling victim to one of the most infamous short selling attacks in trading history falling victim to market rumour and gossip.
> Since then the share price made double-digit gains
> Surely SGH were aware of this and did not fly in blind




SGH gave them £637m. Their market cap is £445m. They're going to hand back £414 and keep £90m, don't ask me where the rest has gone -- it looks like they repaid some debt and the rest has just funded the biz, and I guess there is some tax to pay. The market values Quindell ex the return of capital at £31m, that's a company with net assets of £285m (mostly made up of intangibles) hardly a ringing endorsement. The rally in the price represents nothing more than the fact SGH just gave them a big sweaty wad of money. If someone comes and ponies up $1.25b for SGS I'm sure the SP of SGH will rally.


----------



## Triathlete (30 November 2015)

Stratagist said:


> New to this forum and no do not post under any other user name
> 
> Have been perusing a number of forums since the SGH saga
> Seems to me some of the* other forum posts are for manipulative purposes only*
> ...




If this was a substantial holding for you I would like to know what *risk management you had in place*.

So what if their is short sellers or others manipulating the share price blah blah.If you had the right strategy to get out it does not matter obviously you did not.

I just took a look at a weekly chart of the stock and anyone who rode the stock price up to $8 had plenty of time to get out before this chaos.

 Their was plenty of exits to show that something was not quite right with the company and I do not need to read any balance sheets to see that ,the chart clearly showed it was time to get out at least in the short term and then waited to see what happens and if everything turned out to be ok you could have bought back in.

I for one would certainly not have averaged down, that is just plain suicide in my opinion.
I hope it recovers for you but do not see it at the moment.


----------



## qldfrog (30 November 2015)

*gambled  *a minimal allotment below 70c last week.
decent average down? 
.xmas spirit might cheer me up.But that firm's directors should have to take responsability.Why is it that australian companies are such suckers when it come to O/S investments.Remember NAB or Telstra forays O/S


----------



## Wysiwyg (30 November 2015)

Very soothing announcement out today with complete ignorance of recent price action. Like it didn't happen ... did it?


----------



## Risk Manager (30 November 2015)

Short squeeze is coming.


----------



## Risk Manager (30 November 2015)

2146 GMT [Dow Jones] Shares of compensation lawyers Slater & Gordon (SGH.AU) could rebound soon, as traders will eventually need to close a huge pile of open short positions. The stock, which slumped more than 74% to A$0.69 last week following mounting concern over accounting errors of its U.K. business, was the fifth most shorted company on the Australian Securities Exchange last week, according to most recent regulatory data. "*There is a potential for a massive short cover rally*," said Matt Felsman, a private wealth adviser at APP Securities in Sydney. He recommends avoiding Slater & Gordon as an investment. *However, Felsman says it is an interesting one to watch, as private-equity investors may be eyeing the firm now*. (vera.sprothen@wsj.com; Twitter: @verasydney) 

(END) Dow Jones Newswires

November 29, 2015 16:46 ET (21:46 GMT)


----------



## Gringotts Bank (30 November 2015)

SGH will probably set the scene for DSH and a bunch of other stocks which have had heavy falls over the last month.

Meaning that the chart will be mirrored in other stocks because so much attention on it.

Might get up tp the line at the very most, but I doubt it.  1.30$


----------



## Ves (30 November 2015)

Since there's a lot of WiP on the balance sheet for UK cases,  I wonder if any of it is at risk,  if for some reason these aren't completed before the proposed legislative changes are enacted?    Would these be "grandfathered" and exempt from any changes if they have reached a certain level of progress?


----------



## qldfrog (30 November 2015)

out at 93.5c all good...


----------



## Risk Manager (30 November 2015)

Gringotts Bank said:


> SGH will probably set the scene for DSH and a bunch of other stocks which have had heavy falls over the last month.
> 
> Meaning that the chart will be mirrored in other stocks because so much attention on it.
> 
> ...





Please, remember me that once I sell over $3


----------



## McLovin (30 November 2015)

Ves said:


> Since there's a lot of WiP on the balance sheet for UK cases,  I wonder if any of it is at risk,  if for some reason these aren't completed before the proposed legislative changes are enacted?    Would these be "grandfathered" and exempt from any changes if they have reached a certain level of progress?




I would take a semi-educated guess that cases that have already been filed will be completed. Otherwise the insurers could just sit on their hands from now and drag it out until the legislation makes the claim invalid.


----------



## notting (30 November 2015)

McLovin said:


> insurers could just sit on their hands from now and drag it out until the legislation makes the claim invalid.




Which insurance companies are notoriously good at doing!


----------



## Stratagist (30 November 2015)

Triathlete said:


> If this was a substantial holding for you I would like to know what *risk management you had in place*.
> 
> So what if their is short sellers or others manipulating the share price blah blah.If you had the right strategy to get out it does not matter obviously you did not.
> 
> ...




Perhaps I should explain my strategy
Am not a long time holder of SGH and trade for profit playing the latest turmoil in the share price over the last week
Have been watching the price decline closely of recent days
Entered the market at .98 and have averaged down to .915
Looking for a price of 1.00 or plus
Will then take profits

Re Quindell share chart http://www.lse.co.uk/ShareChart.asp?sharechart=QPP&share=quindell


----------



## shouldaindex (30 November 2015)

The most popular forms of gambling are the most likely to lose money - Lotteries, Sports Betting, Casino, Pokies etc...

Just something to realise about human behaviour - that logical thinking can go out the window when people see big variations in numbers / money.

Not saying don't get involved in SGH, but your reasons for it shouldn't include lots of people on the internet thinking they'll get rich.


----------



## skc (30 November 2015)

Risk Manager said:


> He recommends avoiding Slater & Gordon as an investment. *However, Felsman says it is an interesting one to watch, as private-equity investors may be eyeing the firm now*.




Private equity investors _may be _eyeing the firm? How can that be wrong?

I am not sure SGH makes a good PE target. It's doesn't have any real hard assets that a PE player often look for. The problems with SGH isn't cyclical or necessarily operational, and it already has enough debt that there isn't much low hanging fruits on the balance sheet. It also poses problem with exits... the IPO route is probably closed for a long time given the recent carnage, while there isn't an obvious acquirer for trade sales both in Australia and the UK. 



McLovin said:


> I would take a semi-educated guess that cases that have already been filed will be completed. Otherwise the insurers could just sit on their hands from now and drag it out until the legislation makes the claim invalid.




There is probably a bull case for SGH. Let's say they meet guidance of $200m operating cashflow this year and next year before any regulatory changes come through. They cancel the dividends, maximise cash, squeeze something out of NIHL, and pay down debt to say $350m. At the same time, they morph the best they can to generate earnings elsewhere... so say they still manage $80-100m in real sustainable earnings. The market gives it 10 x EBITDAW and you get ~$1.50-1.60 in equity value. Definitely within the realms of possibilities but there needs to be some sign of cash coming in before this scenario can even be considered as aspirational. Then again, there's also the chance that the proposed regulatory changes don't come through, or a more water-downed version is passed, or some other loophole emerges. 

The update today could have contained so much more information. For example, SGH could have announced what portion of the current revenue / profit relates to cases under the proposed change. Why was that not announced? Do they not know? Or they know but don't want to tell investors? Or they know but don't think investor need to know? None of these possibilities are particularly comforting. 

If I was management, given where the share price is and how trust is severely strained, I would have offered a lot more transparency - unless of course what lies underneath is likely to introduce even more panic.


----------



## Triathlete (1 December 2015)

Stratagist said:


> Perhaps I should explain my strategy
> Am not a long time holder of SGH and* trade for profit playing the latest turmoil in the share price over the last week*Have been watching the price decline closely of recent days
> Entered the market at .98 and have averaged down to .915
> Looking for a price of 1.00 or plus
> Will then take profits




My previous comments was based on thinking you may have been in the stock at $8 and watched the share price decline to $0.69

Good luck with your strategy...sounds like high risk trading to me though.


----------



## Gringotts Bank (1 December 2015)

Break out, break down or break wind?

This is the only possible 3 touch trendline.


----------



## McLovin (1 December 2015)

skc said:


> There is probably a bull case for SGH. Let's say they meet guidance of $200m operating cashflow this year and next year before any regulatory changes come through. They cancel the dividends, maximise cash, squeeze something out of NIHL, and pay down debt to say $350m. At the same time, they morph the best they can to generate earnings elsewhere... so say they still manage $80-100m in real sustainable earnings. The market gives it 10 x EBITDAW and you get ~$1.50-1.60 in equity value. Definitely within the realms of possibilities but there needs to be some sign of cash coming in before this scenario can even be considered as aspirational. Then again, there's also the chance that the proposed regulatory changes don't come through, or a more water-downed version is passed, or some other loophole emerges.




They may not have that much time...



> Proposals to abolish general damages for ‘minor’ soft-tissue injuries will be effective from April 2017. *However it is thought that the small claims limit change could be introduced as early as next spring.*




http://www.lawgazette.co.uk/news/th...sing-george-osbornes-pi-plans/5052485.article

That really pulls the rug out from under SGH. They'll basically have 3-4 months to sort things out. 

They tried to do this a few years ago and it flopped, but I guess back then the Tories were in coalition with the Lib Dems, and now they're not. The reason the change to small claims court can be done quickly is because there is no need to pass legislation.

To be honest, the more you read about the industry the more you appreciate what a total rort it is. It's hard to have any sympathy.


----------



## McLovin (1 December 2015)

skc said:


> The update today could have contained so much more information. For example, SGH could have announced what portion of the current revenue / profit relates to cases under the proposed change. Why was that not announced? Do they not know? Or they know but don't want to tell investors? Or they know but don't think investor need to know? None of these possibilities are particularly comforting.
> 
> If I was management, given where the share price is and how trust is severely strained, I would have offered a lot more transparency - unless of course what lies underneath is likely to introduce even more panic.




I don't think they know the timeline. Why they reaffirmed guidance when there's the possibility that from March they may not have a small claims business anymore I don't know. It seems to me that they don't really know what the effect will be on their business so they've stuck with "it won't affect us yet". Maybe the change will give them a chance to write down some acquired WIP under the guise of change to legislation.


----------



## Gringotts Bank (1 December 2015)

Gringotts Bank said:


> Meaning that the chart will be mirrored in other stocks because so much attention on it.





SGH up 28%
DSH up 25%


----------



## CanOz (1 December 2015)

Gringotts Bank said:


> SGH up 28%
> DSH up 25%




The inevitable short covering, always good to suck in more punters and give hope the weak longs still holding...


----------



## Gringotts Bank (1 December 2015)

CanOz said:


> The inevitable short covering, always good to suck in more punters and give hope the weak longs still holding...




I have left both alone.  Have you traded them in either direction?


----------



## CanOz (1 December 2015)

Gringotts Bank said:


> I have left both alone.  Have you traded them in either direction?




No, but i was tempted to check them out for a short covering trade...to many other things on the go!


----------



## Gringotts Bank (2 December 2015)

Gringotts Bank said:


> SGH up 28%
> DSH up 25%




DSH +11%
SGH +13%

Going to keep mirroring.  You could pair trade them.


----------



## skc (2 December 2015)

Gringotts Bank said:


> DSH +11%
> SGH +13%
> 
> Going to keep mirroring.  You could pair trade them.




They've moved 90% down and 100% up from the bottom... and keep monitoring is your plan? 

You could pair trade them... but you shouldn't. Except for the fact that they both fell a lot around the same time, there is no premise for a pair trade.


----------



## skyQuake (2 December 2015)

skc said:


> They've moved 90% down and 100% up from the bottom... and keep monitoring is your plan?
> 
> You could pair trade them... but you shouldn't. Except for the fact that they both fell a lot around the same time, there is no premise for a pair trade.




The good old long-both-sides strategy!


----------



## Gringotts Bank (2 December 2015)

skc said:


> They've moved 90% down and 100% up from the bottom... and keep monitoring is your plan?
> 
> You could pair trade them... but you shouldn't. Except for the fact that they both fell a lot around the same time, there is no premise for a pair trade.




Watching with interest more so than monitoring.

I think there is a premise, but not one which is well known perhaps.  When there's a lot of attention on a particular stock, other charts of stocks in a similar situation can start to mirror them.  Or maybe they mirror each other.  

key words - emergent systems, coherence, mirroring    I haven't cracked the code, just saying there's something there.


----------



## CanOz (2 December 2015)

Gringotts Bank said:


> Watching with interest more so than monitoring.
> 
> I think there is a premise, but not one which is well known perhaps.  When there's a lot of attention on a particular stock or sector, stock charts start to mirror one another.
> 
> key words - emergent systems, coherence, mirroring





Isn't a pair trade usually to take advantage of a divergence, so a usual correlation that has diverged, the bet being it will converge?


----------



## Gringotts Bank (2 December 2015)

CanOz said:


> Isn't a pair trade usually to take advantage of a divergence, so a usual correlation that has diverged, the bet being it will converge?




afaik, yeh.  

So right now, with DSH running ahead of SGH by 10%, you'd short DSH and long SGH.


----------



## Gringotts Bank (2 December 2015)

Another example would be RMS popping up like that on good news.

Other gold stocks with a similar chart pattern and starting with *'R'* suddenly come into the spotlight and should benefit.  RSG for example.  I bet it follows up.


----------



## McLovin (2 December 2015)

Gringotts Bank said:


> afaik, yeh.
> 
> So right now, with DSH running ahead of SGH by 10%, you'd short DSH and long SGH.




Why? They're completely different stocks.


----------



## Gringotts Bank (2 December 2015)

McLovin said:


> Why? They're completely different stocks.




Yeh but similar in enough ways that people will start to think they should behave the same way.

Both have:

- big drop/shock news
- similar chart pattern
- household names

Obviously fundamentals will rule in the longer term, but I'm seeing mirroring.


----------



## CanOz (2 December 2015)

SKC and Co., are the pairs trading gurus and i'd reckon they'd only look for similar industries, like Pepsi and Coke, GM and Ford, etc...


----------



## Gringotts Bank (2 December 2015)

CanOz said:


> SKC and Co., are the pairs trading gurus and i'd reckon they'd only look for similar industries, like Pepsi and Coke, GM and Ford, etc...




Yeh of course.  That's how pair trading is done!

I'm talking about *my *observations.  I'm throwing up something novel for discussion.

I would never question a guru.  That would be...just...unthinkable.


----------



## McLovin (2 December 2015)

Gringotts Bank said:


> Yeh but similar in enough ways that people will start to think they should behave the same way.
> 
> Both have:
> 
> ...




Hmmm...Sounds pretty far fetched to me. Good luck with it.


----------



## VSntchr (2 December 2015)

CanOz said:


> SKC and Co., are the pairs trading gurus and i'd reckon they'd only look for similar industries, like Pepsi and Coke, GM and Ford, etc...



Yes.
And the reason why is to reduce industry and market specific risk. In the example above, any announcement on changing regulations within the legal field will have zero impact on DSH but will obviously affect SGH.

If your going to pair-trade SGH then maybe look at SHJ. Again, there is differences here as SHJ doesn't have UK exposure - but its a heck of a lot closer than DSH. 


I see what your suggesting GB, I just don't think it's a strong enough premise to allow someone to have conviction to take proper size in a pairs trade - there's too much risk at stake.

Just IMO of course and I'd be happily proved wrong through some running examples.


On another note, taking a read-through approach to trading SHJ on the SGH jump worked well- with the price recovering from ~180 to 200. Whereas in the case of DSH, a short on JBH was the read through..which has also worked well with price falling from ~1920 down to 1800 (despite a roaring market).


----------



## skc (2 December 2015)

Gringotts Bank said:


> I think there is a premise, but not one which is well known perhaps.  When there's a lot of attention on a particular stock, other charts of stocks in a similar situation can start to mirror them.  Or maybe they mirror each other.




May be (probably not). Let's see if you can come up with a way to back test this theory.

FWIW I think you are drawing the wrong lesson here. You could certainly learn from the price behaviour of one stock and try to project that to another stock (i.e. the mirroring). But to pair them up would be the wrong way to make use of that knowledge.



Gringotts Bank said:


> Another example would be RMS popping up like that on good news.
> 
> Other gold stocks with a similar chart pattern and starting with *'R'* suddenly come into the spotlight and should benefit.  RSG for example.  I bet it follows up.




You can certainly develop trading ideas from historical correlations... but company specific news tend to override them. Look for industry-specific news - where you can get all sorts of readthru, read-across etc. A good example would be PRY coming out with a profit warning and you look for weakness in SHL. A bad example would be buying RSG because RMS found some gold. Unless there is a revenue sharing agreement between all gold stocks starting with "R"?


----------



## skc (2 December 2015)

VSntchr said:


> On another note, taking a read-through approach to trading SHJ on the SGH jump worked well- with the price recovering from ~180 to 200. Whereas in the case of DSH, a short on JBH was the read through..which has also worked well with price falling from ~1920 down to 1800 (despite a roaring market).




Much better examples than mine.


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## skyQuake (2 December 2015)

Interesting concept. I'd say the correlation right now is due to the same _type_ of traders punting around. When you have slaters rolling over, the same traders are probably already liquidating DSH positions.

Once the activity dies off they'll go off on their separate paths again


----------



## skyQuake (2 December 2015)

Holyyy ****, did anyone else frontrun that big dumb buy order into the close? 

1000bp slippage


----------



## notting (2 December 2015)

skyQuake said:


> Holyyy ****, did anyone else frontrun that big dumb buy order into the close?
> 1000bp slippage




Do you want to spell out what your saying on this one and thinking on that?


----------



## CanOz (2 December 2015)

notting said:


> Do you want to spell out what your saying on this one and thinking on that?




He was asking if anyone got in before a large order paid to much for too long....


----------



## Stratagist (2 December 2015)

Well there was a lot of playing around with SGH last few days
Pre close orders were 1000 plus on a couple of days yet post close dropped to 800 - odd
And someone was playing with the market as there was a 100000 order in the market on a couple of days yet pulled before close of trade 
Being a short term trader have been following the PSAR and SMA using candle stick charts on both five day and one day charts The stocks I choose are on my watch list based on good volume and mostly chosen with a weekly  scan with charting software. I prefer to use stocks under $5.00 staying away from the mining stocks as at this stage it is a dangerous market
Punch up SGH in your charts and use the candle stick chart which gives an indication of high/low support and add the SMA(simple moving average) and PSAR(parabolic SAR)
I actually entered too early at $0.98 then again at $0.85 to average down. I should have waited until the PSAR was in an upward trend then could have entered again at around the $0.70 mark - but that is the learning curve
Monday confirmed this upward trend as the candle stick chart was trading above the SMA and the PSAR still trending upward
I rode the upward trend paying attention to the 1 day and 5 day charts until the Candle stick crossed below the SMA and the PSAR began a downward trend about 1pm today - I pulled at $1.40 and made a healthy profit 
I have used this principal with a number of stocks and pulled three figure profits but SGH would be one of my bigger trades pulling four figures. I will buy SGH again if the charts indicate a trade
Some of my trades only turn a small profit and yes I have made small mistakes but if you do not make mistakes you will not learn the art of trading short term. I started with a cash reserve of $50000 which has generated a healthy income
This trading option may not suit you but do a few paper trades using the candle stick charts, SMA and PSAR indicators - see how you go


----------



## Gringotts Bank (2 December 2015)

CDD, SPO...

It continues.


----------



## VSntchr (17 December 2015)

Guidance update: No longer expecting to achieve guidance based on a worse H1 outlook. H1 was already bad before...!


----------



## McLovin (17 December 2015)

VSntchr said:


> Guidance update: No longer expecting to achieve guidance based on a worse H1 outlook. H1 was already bad before...!




For a company that requires confidence in management they've certainly done a good job ensuring they don't have any.

Guidance was so over the top they were either completely certain or this was going to happen.


----------



## skc (17 December 2015)

McLovin said:


> For a company that requires confidence in management they've certainly done a good job ensuring they don't have any.
> 
> Guidance was so over the top they were either completely certain or this was going to happen.




They are almost daring someone to engage them to file a class action against itself.

Luckily they could argue in their defense.... that nobody really believed their forecast anyway..


----------



## Ves (17 December 2015)

skc said:


> Luckily they could argue in their defense.... that nobody really believed their forecast anyway..



What about the old faithful over at Hotcopper?

I think they _still_ believe the original forecast,  in fact today's announcement is a massive positive according to some over that way.


----------



## Rainman (17 December 2015)

Who ever would have thought that management could be amateurish?


----------



## McLovin (17 December 2015)

Ves said:


> What about the old faithful over at Hotcopper?
> 
> I think they _still_ believe the original forecast,  in fact today's announcement is a massive positive according to some over that way.




Lol. I went over and read some of the comments. It's just wishing and hoping.

Also this little tid bit this afternoon...



> The corporate watchdog will intensify its investigations into Slater & Gordon, sources said, after the law firm shocked the market with yet another change to its earnings outlook.
> 
> Slater & Gordon's second downgrade in the past 18 days could also spark a class action, with rival firm Maurice Blackburn revealing it is monitoring its competitor.




Read more: http://www.afr.com/business/legal/s...res-plunge-21pc-20151216-glpkrs#ixzz3uZFG1OwW

Given everyone is about to go on holidays I reckon the class action won't be announced until Feb.


----------



## Knobby22 (18 December 2015)

Rainman said:


> Who ever would have thought that management could be amateurish?




The company is run by lawyers, just like the country.


----------



## Ves (18 December 2015)

McLovin said:


> /slater-and-gordon-dumps-earnings-guidance-shares-plunge-21pc-20151216-glpkrs#ixzz3uZFG1OwW[/url]
> 
> Given everyone is about to go on holidays I reckon the class action won't be announced until Feb.



Looks like everyone is circling around SGH now.

I'm not sure how much "added beat-up" AFR is doing in this case,  but ACA Lawyers are saying they are investigating a potential class action now too  (as well as Maurice Blackburn).

Some small Sydney law firm also filed an urgent court claim against SGH fearing they are insolvent and will not make what sounds like a payment owing as part of SGH's acquisition of their firm?

http://www.afr.com/business/legal/s...action-amid-insolvency-claims-20151218-glqpag


----------



## Rainman (18 December 2015)

Ves said:


> Looks like everyone is circling around SGH now.





Whether an action is launched against SGH and whether it succeeds, SGH deserves everything it gets.  The performance of management has been absolutely appalling .  The whole board should be sacked.  They are not fit to oversee a pub raffle.


----------



## So_Cynical (23 December 2015)

Rainman said:


> Whether an action is launched against SGH and whether it succeeds, SGH deserves everything it gets.  The performance of management has been absolutely appalling .  The whole board should be sacked.  They are not fit to oversee a pub raffle.




Looks like it's on, i was going to sign up but they appear to only be interested in shares bought between 1 April 2015 to Wednesday 16 December 2015, counts me out.



			
				mauriceblackburn.com said:
			
		

> *If you purchased SGH shares in the period from Wednesday 1 April 2015 to Wednesday 16 December 2015* (inclusive) then we encourage you to register your details with us in order to get the best legal representation possible should a shareholder class action ensue.




https://www.mauriceblackburn.com.au/current-class-actions/slater-and-gordon-shareholder-class-action


----------



## McLovin (23 December 2015)

Sooner than I expected. The delusometer on the other forum is about to explode. Stephen Long from the ABC is trying to get an aggrieved shareholder for a story he's doing tonight and some punter asked if he'll also interview a shareholder who is happy with the price fall because it gives him the ability to buy more.

God Lord.


----------



## qldfrog (23 December 2015)

just registered


----------



## notting (23 December 2015)

"Clearly your honor this case is a beat up.  
There are a wealth of savvy investors out there who are very happy with our performance - case in point - 



McLovin said:


> some punter asked if he'll also interview a shareholder who is happy with the price fall because it gives him the ability to buy more.




such sophisticated investors are also very happy with our disclosure practices for the wonderful opportunities we have created for the wise and prudent punter. 

In light of the above evidence your honor, we feel this case is a mock up, based on irrational populist, emotional responses being taken advantage of by our competitors, the accusations hold no basis in fact and there for request an immediate dismissal and a recommendation that the plaintiffs be requested to fund costs and purchase more shares. Clearly this would generate the fairest outcome for all and waste no more of the courts time.


----------



## skyQuake (23 December 2015)

So_Cynical said:


> Looks like it's on, i was going to sign up but they appear to only be interested in shares bought between 1 April 2015 to Wednesday 16 December 2015, counts me out.
> 
> 
> 
> https://www.mauriceblackburn.com.au/current-class-actions/slater-and-gordon-shareholder-class-action




What if say you bought stock to cover shorts? Do you get to participate? 



McLovin said:


> Sooner than I expected. The delusometer on the other forum is about to explode. Stephen Long from the ABC is trying to get an aggrieved shareholder for a story he's doing tonight and some punter asked if he'll also interview a shareholder who is happy with the price fall because it gives him the ability to buy more.
> 
> God Lord.




If you can take it with a grain of salt its hilarious reading. 100% prem drama


----------



## McLovin (24 December 2015)

skyQuake said:


> What if say you bought stock to cover shorts? Do you get to participate?




I assume you're being tongue-in-cheek, but no, you would need to show loss.



skyQuake said:


> If you can take it with a grain of salt its hilarious reading. 100% prem drama




I think it's bloody fantastic comedy. I've seen everyone, except SGH management, get blamed. ASIC, shorters, super funds, hedge funds, the AFR, auditors, SFO in the UK. If you wanted to study the psychology of investing I reckon this is a great place to start.

Tonight's edition is suing Fairfax for leaking the fact ASIC was probing SGH, back in June. There are even suggestions that Maurice Blackburn should be starting a class action against Fairfax and ASIC not SGH. Good luck with that.


----------



## qldfrog (24 December 2015)

Indeed, le level of self denial...so my registering for the class action..come what may


----------



## Triathlete (24 December 2015)

I find this saga of SGH so hilarious. 

It seems everyone wants to blame the company for their losses but what they should also be doing is* taking a long hard look at themselves and their investing or trading style.*

We have seen the same thing happen with companies such as Forge group, ABC learning etc

The one thing I certainly never do is believe everything you read in a report and to me my chart is my insurance policy if something is not quite right inside the company then it will certainly start to show up much sooner in a chart then waiting for an announcement or a half yearly report etc.

 Looking back at SGH for those that may have ridden the stock to $8.07 they had many opportunities to get out of the stock, $7.16 a Dow exit on the daily chart, $6.85 a 15% stop loss from the high and should have definitely been out by  $5.76 for a 28% move down from the high.

I guess some people are not as knowledgeable and sophisticated as they think they are....


----------



## So_Cynical (24 December 2015)

Triathlete said:


> We have seen the same thing happen with companies such as Forge group, ABC learning etc




The same thing happened as in all 3 stocks fell heavily, Forge and ABC went under laden with debt, SGH not so...a little silly to lump them in together as the same thing didn't happen at the business level other than stupid decisions were made, that happens a lot anyway, BHP, Santos etc


----------



## galumay (24 December 2015)

Triathlete said:


> I guess some people are not as knowledgeable and sophisticated as they think they are....




*sigh*


----------



## Triathlete (24 December 2015)

So_Cynical said:


> The same thing happened as in all 3 stocks fell heavily, Forge and ABC went under laden with debt, SGH not so...a little silly to lump them in together as the same thing didn't happen at the business level other than stupid decisions were made, that happens a lot anyway, BHP, Santos etc




I take your point....but regardless of either debt or other issues there was signs that not all was as it seems with this company.

As for being silly lets take a look at Forge group...Two of the countries leading Fundamental investment advisory firms had this company as a buy at the time. Here we have them charging for their services so their balance sheets was obviously good at the time but having a look at their chart showed that the view was not being backed up technically and of course a few months later they were out of business. 

I will say it again your chart is your insurance policy.

We all know that it is human behaviour that people do not want to be wrong so they hold on for the turnaround which may or may not happen.

Better to cut your losses and be ready to fight another day then watching your investment being wiped out.

It is just a view nothing more...


----------



## skc (24 December 2015)

skyQuake said:


> What if say you bought stock to cover shorts? Do you get to participate?






McLovin said:


> I assume you're being tongue-in-cheek, but no, you would need to show loss.




I covered my shorts too early. If I knew about their troubles I wouldn't have covered my shorts. I suffered significant lost profit. I think there is definitely a case for a class action by the shorters.

Also, why is the class action only available for people who bought during April to Nov? Surely if I hold SGH shares, I make the "not selling" decision based on management disclosure as well...



McLovin said:


> Tonight's edition is suing Fairfax for leaking the fact ASIC was probing SGH, back in June. There are even suggestions that Maurice Blackburn should be starting a class action against Fairfax and ASIC not SGH. Good luck with that.




May be the ASX should be sued for allowing trading in SGH... without ASX surely the share price couldn't fall.



So_Cynical said:


> The same thing happened as in all 3 stocks fell heavily, Forge and ABC went under laden with debt, SGH not so...




SGH is laden with debt. All $700m against annual cashflow of <$50m. I don't think SGH will exist in it's current form by the end of FY16 (if not earlier).



Triathlete said:


> I will say it again your chart is your insurance policy.




You can either be really good with analysing company fundamentals (so you are the person who created the chart pattern that others are following), or you can be good with your charts. What most people do however is that they are no good with analysing fundamentals and they don't respect the chart. Add on top of that... being emotional, ignoring position sizing, applying silly logic, relying on hope and luck, then blaming others.

By and large... applying silly logic is often the funniest.

"I am buying because, SGH has done heaps of due diligence in its acquisition". Thereby implying that no large acquisition ever fail.

"I trust management. The CEO must be confident in achieving the forecast: his head is on the line if he doesn't deliver". Thereby ignoring the fact that CEO's often get fired for failing.

"I am not selling because some hedge fund secretly wants to buy my stock at a cheap price".


----------



## skyQuake (24 December 2015)

Triathlete said:


> I will say it again your chart is your insurance policy.




Not always... There are the rare occurrences when there is little to no warning.




Stop limit wouldnt have helped here. Or if your broker's stop market had internal circuitbreakers in place



New highs followed by maybe never seeing ur money again...

Position sizing is pretty paramount too.




skc said:


> I covered my shorts too early. If I knew about their troubles I wouldn't have covered my shorts. I suffered significant lost profit. I think there is definitely a case for a class action by the shorters.





Look its an evil short seller! Target him in the class action too! 

What's more, he wouldnt even return his borrow :O


----------



## skc (24 December 2015)

skyQuake said:


> View attachment 65398
> 
> New highs followed by maybe never seeing ur money again...




Have to admit I have never seen this before.



skyQuake said:


> What's more, he wouldnt even return his borrow :O




I don't have any borrow anymore. 

They are charging an arm and a leg and two first born children for the borrow. Yes... that's right, two first-born's.

A colleague of mine is requesting some borrow after the recent birth of his twins but they said only one of them could be a true first born.


----------



## Triathlete (24 December 2015)

skyQuake said:


> Not always... There are the rare occurrences when there is little to no warning.
> 
> View attachment 65397
> 
> Stop limit wouldnt have helped here. Or if your broker's stop market had internal circuitbreakers in place




I make it an exit at $6.90 on the open 9/4/2015 using Gann swing on the weekly chart.


----------



## skc (7 January 2016)

Investigative accountants appointed by the banks. What a great start to the new year by McGrathNicol (first DSH then the SGH gig). SGH made an announcement after market regarding the news. Interestingly the wording is different between Grech's comments in the AFR and those in the announcement.

The AFR news quoted 


> This is a part of the process and *you can be assured that we remain strong *and will continue to deliver excellent outcomes for our clients, just as we have done for the past 80 years.




http://www.afr.com/business/legal/s...-in-investigative-accountants-20160107-gm1d0d

While the announcement said


> Slater and Gordon will continue to deliver excellent outcomes for its clients, as it has done for the past 80 years.




What did they mean by "strong"? Financially strong? Or strong willed in their client work? It seems odd that they chose to mention that they will deliver for the client... when they should be working to deliver outcome for the shareholders. I guess with a potential class action, they are really being careful with their words.



skc said:


> SGH is laden with debt. All $700m against annual cashflow of <$50m. *I don't think SGH will exist in it's current form by the end of FY16 (if not earlier).*




Looks like earlier... one doesn't just appoint McGrathNicol for fun. The question now is whether the banks can do better by appointing receivers, or let SGH trade on a bit longer and hopefully generate some cash. Putting SGH under will most likely further delay recovery of potential cash (supposedly) trapped in the WIP. 

My guess is there will be the promised Jan update in the next week or two, coupled with a trading halt which turns into a suspension. The banks will ask for a capital raising or a restructure of sorts, which will take some time to arrange (if at all possible). Existing holders will face serious dilution, but have no choice but to vote in favour of the deal. Unless SGH is to announce that Dec was a cracker month for cashflow... this seems unlikely, however, on seasonal factors alone. The timing of the appointment also coincides with the possibility that Dec numbers were provided to the banks which warranted further action.


----------



## Ves (8 January 2016)

I guess the SGH board are still technically meeting their disclosure requirements in a legal sense with that after-market announcement  (well,  I guess we don't find out unless someone tests it in court ).   But,  as a shareholder,  you'd know very little about the real situation playing out behind the scenes unless you were really widely read and spending a fair bit of time joining all the pieces together.   

It's too hard for someone who is pretty risk-tolerant like myself  (ie.  what would I miss?),  but it's a good exercise to play along with in real time.  I've learnt heaps.

AFR (and others) probably do write in a way that sells papers at times  (duh),  but credit to them for actually investigating these situations and at least bringing them to light well beyond what we are given in the announcements by companies like SGH that seem to be par for the course on the ASX.

I can't believe how quickly some of these situations (VET, DSH, FGE, SGH) have been playing out in recent years.  Mind-boggling.  From profitable accounts & current profitable guidance to bust in mere months.  Yep, the business models and financial structures were all very exposed to torpedoes,  but arguably none of this was priced into the market for long periods of time in every one of these cases.


----------



## skc (11 January 2016)

Ves said:


> I can't believe how quickly some of these situations (VET, DSH, FGE, SGH) have been playing out in recent years.  Mind-boggling.  From profitable accounts & current profitable guidance to bust in mere months.  Yep, the business models and financial structures were all very exposed to torpedoes,  but arguably none of this was priced into the market for long periods of time in every one of these cases.




Market is very short term focused despite the amount of seemingly intelligent and educated people who cover them. The usual analyst coverage 5 years out are not forecasts or even projections... they are mostly extrapolations. The better ones will use a bit of macro/micro factors to adjust those extrapolations. But by and large, the target price of a stock lags the actual market price on the way up and also on the way down.

Interesting to note that the 4 companies you mentioned met their demise very differently. 

VET was scamming the system with the VET-FEE scheme and got caught out. It wasn't a left field regulatory change or something. Indeed it was their (and other dodgy educator's) action that prompted regulatory changes. They then proceed to lie to the market about the situations. So VET deserves everything that happened. Perhaps the market should discount VET a bit due to the regulatory exposure... but not for it being a dodgy operator.

FGE was in an industry that is prone to bombshells... so bad luck might hit once in a while. They got the hit at a very bad time and evidently they didn't manage it well enough. It wasn't trading at a massive multiple (it was slightly below sector from memory) so perhaps the market has already discounted it properly.

DSH had poor foundations coming out of PE and poor management thereafter. But I am also surprised by the speed of it's demise. Then again, a lot of retail businesses die that way. I don't think the market need to price every retail business as an impending timebomb... most businesses usually can withstand and recover from a bad period or two.

SGH is totally self inflicted... It is (before all this) a business that can be heavily affected by regulatory changes, so the market should probably apply some degree of "bombshell discount" (think MMS before and after the novated lease drama). But it was going along nicely (perhaps with problems not yet revealed), and the QPP acquisition attracted the world's gaze and exposed it like the emperor's nakedness. 

An investor has plenty of time to assess the deal and exit their position with minimal damage. I remember that, on first glance I was quite positive on the deal announced (see post here https://www.aussiestockforums.com/forums/showthread.php?t=6931&page=2&p=865310&viewfull=1#post865310) but later that night I already had my doubts. The share price was >$7 at the time, it took me <2 hours and I didn't even hold a position at the time. So as much as the media reports the rapid demise of SGH's share price... it's not like anyone was trapped in a sudden trading halt.

Beyond the acquisition, the market overall was ignorant of the WIP/cashflow/reconcilation issues within SGH. However, the numbers were there for anyone able and willing to do the work. I guess the shorter's work ethics were rewarded.


----------



## skc (1 March 2016)

SGH released the numbers today and came out of suspension. 

The numbers were pretty bad and bleeding cash badly in the UK... an outcome that anyone who spent 30 minutes reading up on QPP could have envisaged. There is no guidance on H2 - I guess there is not much point of giving guidance given that there need to be wholesale changes to the business if it was to survive the bank's imposed deadline for an updated operational (debt repayment) plan.

Indeed I was surprised that the company is allowed to trade in this state. The numbers are released in time (frankly that's quite an achievement for this company) but with financier's support on a very thin edge, one could argue that the stock should be suspended until such time that any plan is approved by the lenders. On the bright side it allows holders to salvage something.


----------



## shouldaindex (1 March 2016)

Anyone know if their cases would continue through another firm (NCM class action for example) if they went into administration?  Or would it have to start again.


----------



## Knobby22 (1 March 2016)

skc said:


> SGH released the numbers today and came out of suspension.
> 
> The numbers were pretty bad and bleeding cash badly in the UK... an outcome that anyone who spent 30 minutes reading up on QPP could have envisaged. There is no guidance on H2 - I guess there is not much point of giving guidance given that there need to be wholesale changes to the business if it was to survive the bank's imposed deadline for an updated operational (debt repayment) plan.
> 
> Indeed I was surprised that the company is allowed to trade in this state. The numbers are released in time (frankly that's quite an achievement for this company) but with financier's support on a very thin edge, one could argue that the stock should be suspended until such time that any plan is approved by the lenders. On the bright side it allows holders to salvage something.




I can't see the company continuing. Maybe they will close it down and sell the Slater and Gordon business to an entrepreneurial organisation, maybe Anchorage Capital?


----------



## McLovin (29 March 2016)

D-Day approaching, and it looks like some are trying to jump ship already. They supposedly had until the end of this month. Clock's ticking.



> Slater & Gordon's chief in-house lawyer has resigned from the embattled listed legal firm after less than two months in the role.
> Moana Weir who commenced her position as general counsel and company secretary on January 29, resigned on Thursday with immediate effect, the company said in a statement to the exchange late on Friday.
> 
> [and]...
> ...





Read more: http://www.smh.com.au/business/slat...to-new-low-20160328-gns3sw.html#ixzz44FBTyeDd


----------



## skc (29 March 2016)

McLovin said:


> D-Day approaching, and it looks like some are trying to jump ship already. They supposedly had until the end of this month. Clock's ticking.
> 
> Read more: http://www.smh.com.au/business/slat...to-new-low-20160328-gns3sw.html#ixzz44FBTyeDd




She probably has regrets the moment she signed up... 

FWIW, I think SGH will most likely be kept on life support for some time. Without hard assets and with regulatory risks and class action risks, it feels like the banks are just as stuck as the shareholders.

The banks will retain control while they try to sell the debt. If they could force a capital raising (it'd be a struggle to find an underwriter) to repay some debt then even better. I don't see the self-imposed deadline by the banks actually helps in maximising recovery.

Unless of course that the recent cashflow numbers are so bad that debt is still being drawndown. That's the line in the sand imho.

There are quite a few zombies on the ASX that have lingered on a lot longer than SGH... names like MCS, ARI, AGO... so anything is possible. Staying alive, however, doesn't necessarily mean better outcome for shareholders.


----------



## McLovin (29 March 2016)

skc said:


> She probably has regrets the moment she signed up...
> 
> FWIW, I think SGH will most likely be kept on life support for some time. Without hard assets and with regulatory risks and class action risks, it feels like the banks are just as stuck as the shareholders.
> 
> ...




I reckon the banks are the equity holders now. What's the Australian operation worth now that the acquisition business model has been shut down? A few hundred million at most? God knows what the mess in the UK is worth. Net debt is ~$750m, which is about $400m-$500m more than the Australian business. 

I agree with you that they will have to keep it as a going concern if they're going to get anything back, and to be fair, if you strip out the awful decision making of management and the bank debt there's a reasonably profitable business underneath all that. 

The question then becomes if the listed law model has been proved a failure who will buy it? It doesn't seem like the type of thing PE goes for (no tangible assets, no IP) which really only leaves a trade sale. Do private law firms have that sort of cash? I guess on the +ve side equity markets don't have a long memory.


----------



## VSntchr (2 May 2016)

And SGH lives on, with the banks offering some agreeable terms out to 2018. 
Market likes it, probably a high % of the rise is short covering given that ~7.5% was short interest before today. 
34m vol in the morning session.


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## skyQuake (2 May 2016)

VSntchr said:


> And SGH lives on, with the banks offering some agreeable terms out to 2018.
> Market likes it, probably a high % of the rise is short covering given that ~7.5% was short interest before today.
> 34m vol in the morning session.




The gents across the pond are absolutely foaming at the mouth today!

Its only 2 days of volume to cover so it ain't so bad for the shorts. Besides, that ~20m short interest has remained pretty steady for the past 6m on price spikes so its probably a strong hand.

If you want to see high short interest check out the banks - most of them at 10+ days to cover!


----------



## kid hustlr (2 May 2016)

Do you think 'days to cover' is a stronger indicator than % of short interest?


----------



## skc (2 May 2016)

skyQuake said:


> The gents across the pond are absolutely foaming at the mouth today!




Not sure what that means?!



skyQuake said:


> Its only 2 days of volume to cover so it ain't so bad for the shorts. Besides, that ~20m short interest has remained pretty steady for the past 6m on price spikes so its probably a strong hand.
> 
> If you want to see high short interest check out the banks - most of them at 10+ days to cover!




Great news that shareholders are still alive... but I can't help but notice that there is a lack of details in EVERYTHING - debt convenants, restructuring plans, operating cashflow updates etc etc. If the news is good you can bet your house that they'd mention it. 

Now let's see if the banks offload their debt over the next few months. I don't doubt there'd be some private equity players willing to punt on a slice or two.


----------



## McLovin (2 May 2016)

Call me skeptical...




It seems more like the banking syndicate has restructured the debt so it can be sold. I just can't see how they can service this debt unless lenders take a haircut. There's lots of WIP, but who knows how much more money needs to be poured into those cases to realise the invested WIP? With no operational update at all it's pretty clear who's driving the ship and it's not Captain Grech.


----------



## skyQuake (2 May 2016)

skc said:


> Not sure what that means?!




460 SGH posts on hotcopper today so far. Every single one factual, well thought out, and informative, oh and certainly not smug

Great trading stock though


----------



## shouldaindex (2 May 2016)

Getting randomly timed positive reinforcement just prolongs a gambling addiction.


----------



## skc (2 May 2016)

skyQuake said:


> 460 SGH posts on hotcopper today so far. Every single one factual, well thought out, and informative, oh and certainly not smug
> 
> Great trading stock though




I see. I thought you said "across the pond" as in someone from UK...

I am too scared to go and check out the posts there today. I really don't have a spare 6 hours.



McLovin said:


> Call me skeptical...
> 
> It seems more like the banking syndicate has restructured the debt so it can be sold. I just can't see how they can service this debt unless lenders take a haircut. There's lots of WIP, but who knows how much more money needs to be poured into those cases to realise the invested WIP? With no operational update at all it's pretty clear who's driving the ship and it's not Captain Grech.




The funny thing about this stock is that there is no insto holders anymore... .plus there is no borrow anymore. So there's a good chance that it might go higher yet. 

Is the bank allowed to receive more regular operational updates (while the market remains unguided) while attempting to sell SGH's debt? Is there such thing as insider trading for debt? Or is it all OTC so _caveat emptor_?


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## banco (2 May 2016)

McLovin said:


> Call me skeptical...
> 
> View attachment 66497
> 
> ...




Anyone on the other side of the WIP would be offering them low ball settlements right about now in the belief that they need the cashflow.


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## McLovin (3 May 2016)

skc said:


> The funny thing about this stock is that there is no insto holders anymore... .plus there is no borrow anymore. So there's a good chance that it might go higher yet.





It's a HC special. The trading in the shares was very predictable yesterday. Massive open then fade into the morning then base for a post lunch rally.



skc said:


> Is the bank allowed to receive more regular operational updates (while the market remains unguided) while attempting to sell SGH's debt?




Surely whoever buys the debt will want some pretty detailed info on the state of play.


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## skc (24 August 2016)

Haven't heard from SGH for a long time since the bank facility amendment. And today they released a earnings guidance a week before actual earnings are due (I wonder why?).

It got punters excited in the morning but the stock ended down 10% by the close. So what did they say?

Normalised EBITDAW for full year expected to be $36.6m. H1 was -$17.8, implying H2 normalised numbers = $54.4m. Reported H2 EBITDAW is $8.9m, so the one-off's are some $46m.

Remember that the original FY16 guidance was for EBITDAW of $205m and operating cashflow of 100% EBITDAW. So management turns out to be off by about 80% on their transformative acquisition.

If you annualise the H2 normalised number, you can potentially hope for $100m+ EBITDAW for FY17... so there's hope. What we don't know is whether the H2 EBITDAW comes from NIHL cases which are probably not recurring.

They reported net debt to be $682m... compared to H1 figure of $741m. That's a drop of $59m in the books. However, much of that is Fx related. GBP to $A was 2.02 on 31 Dec 2015, and 1.787 on 30 Jun 2016. I don't know how much of their debt is in GBP (375m GBP is a number I have in my head somewhere)... but if it's 375m GBP then Fx alone would show a debt reduction of ~$87m. So it seems to me that they are still cash flow negative in H2.

However, if their GBP debt in a smaller number, and you consider $46m one-off's to be much cash, then there's a chance that they are cashflow neutral to slightly positive.

Let's see the actual numbers next week.


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## SmokeyGhost (30 August 2016)

Well, some numbers came out.  Many didn't like them.  


$1.02 billion full-year loss.

$876.5 million impairment.

Full year normalised profit of $49.7 million EBITDAW.

Negative net operating cash flow of $104.2 million.

Negative gross operating cash flow of $57.6 million.

A $27.8 million adverse movement in WIP.

I'll leave this one to those who know what they are doing.


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## ReXXar (17 September 2016)

Now this is an interesting stock, interesting because it is just a ticking time bomb, a stock with explosive debt pushing EV to $1 billion by my calculation (incl. off balance sheet items) and a market cap about $150m, with EV/MC of 673%!  This stock is on the very bottom of my list.  There's four things I despise most in life: cockroaches, lawyers, politicians, big 4 accountants.  In that order.  And SGH doesn't have a good market reputation to say the least.  Which is what surprised me when the directors are buying in early September.. any thoughts?


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## Boggo (17 September 2016)

That is a nasty looking chart !!

(click to expand)


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## ReXXar (17 September 2016)

I won't be surprised if that chart drops to 0 in 2018 if the banks don't refinance



Boggo said:


> That is a nasty looking chart !!
> 
> (click to expand)


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## So_Cynical (17 September 2016)

I sold out last week, my one realized loser for the year over and done.


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## dpgrubesic (12 October 2016)

Maurice Blackburn class action about to kill Slater and Gordon with a massive class action representing 3000 share holders.


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## skc (7 November 2016)

McLovin said:


> Call me skeptical...
> 
> It seems more like the banking syndicate has restructured the debt so it can be sold. I just can't see how they can service this debt unless lenders take a haircut.




6 months later... a tranche of debt has been sold at 38c in the dollar.

http://www.afr.com/street-talk/slat...8-cents-in-the-dollar-sources-20161106-gsjcl4

When debt trades at 38c, surely there's not much value in equity. Billabong's debt once traded around 80/85c before the eventual re-capitalisation, so perhaps there's hope. Still, 38c is a lot less than 80/85c.


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## galumay (7 November 2016)

skc said:


> When debt trades at 38c, surely there's not much value in equity.




With out any real depth of thinking, the thought occurs to me that its possibly a case of 'a bird in the hand is worth two in the bush' - or in this case 38% now is better than waiting to get an indeterminate amount later.  (meaning that there may not be a direct corelation between the debt and equity valuation.)


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## McLovin (8 November 2016)

skc said:


> 6 months later... a tranche of debt has been sold at 38c in the dollar.
> 
> http://www.afr.com/street-talk/slat...8-cents-in-the-dollar-sources-20161106-gsjcl4
> 
> When debt trades at 38c, surely there's not much value in equity. Billabong's debt once traded around 80/85c before the eventual re-capitalisation, so perhaps there's hope. Still, 38c is a lot less than 80/85c.




The only value probably left in the equity is probably the ability to have first say in what happens to the debt. 

You've got to read the delusion in the other place. I'm pretty sure when/if the liquidators are called in and start selling off desks and chairs that will be seen as positive news because it shows they're reducing headcount.


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## skc (8 November 2016)

galumay said:


> With out any real depth of thinking, the thought occurs to me that its possibly a case of 'a bird in the hand is worth two in the bush' - or in this case 38% now is better than waiting to get an indeterminate amount later.  (meaning that there may not be a direct corelation between the debt and equity valuation.)




Well it's a single OTC transaction so there could be a host of one off factors at play. However, we are talking about 38c in the dollar... so I think it's a pretty good indication of what at least one debt holder think of the equity value.



McLovin said:


> The only value probably left in the equity is probably the ability to have first say in what happens to the debt.
> 
> You've got to read the delusion in the other place. I'm pretty sure when/if the liquidators are called in and start selling off desks and chairs that will be seen as positive news because it shows they're reducing headcount.




I do venture there every now and then... I am pretty sure I read someone think it's positive when a stock is suspended. It means shareholders won't be facing losses.


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## MrChow (8 November 2016)

Latests posts I read there:

Someone posted fair value is $5.70 by 2020 and then people congratulating each other for saving new investors who would have sold if not for their efforts to stamp out wrong opinions.


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## joeno (10 November 2016)

Hey guys does anyone have the link to join the Class Action against SGH? I bought last year (within the class action date range) and lost a lot. I heard it's not too late but can't seem to find the link for applying.


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## Hodgie (10 November 2016)

joeno said:


> Hey guys does anyone have the link to join the Class Action against SGH? I bought last year (within the class action date range) and lost a lot. I heard it's not too late but can't seem to find the link for applying.




https://www.mauriceblackburn.com.au...s/slater-and-gordon-shareholder-class-action/

They say "As proceedings have now been commenced, online registration for the SGH Class Action is no longer available."


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## MrChow (10 November 2016)

Even if class actions wins, typically you might get back 3% if you're lucky.


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## galumay (30 December 2016)

I have been doing some thinking about my investment in SGH, it has had a significant negative impact on my SMSF, I am up over 14% on my benchmark, but would have been up 22% without the impact of SGH - so its pretty important for me to understand what went wrong.

Was it a bad decision or bad luck?

When I go back and look at my spreadsheets, research and analysis for my initial parcel bought in September 2014 for $6.14, i had decided they were the best of the businesses in the sector and also the best value at that price. I dont think it was a bad purchase at that price at the time, so to that point, not a bad decision.

I briefly considered selling out when SGH hit $8, it was then trading well above my calculated IV, but after some consideration I decided there was future growth likely to support the share price and I stayed in.

Then I bought more in the retail allotment in April 2015 at $6.37 - at the time SGH had recently hit its high of $8.00 and was still trading at over $7.50 so it looked a sensible decision to pick up another parcel - in hidsight it made things worse because I had averaged up into a company that was about to fall off the edge of a cliff.

I was away overseas on our gapyear when events started unfolding with the Quindell acquisition, so my focus may not have been as sharp as it should, but reading back thru the announcements around late June 2015 there is not anything too alarming coming into the public arena. I obviously wasnt happy with the price drop and issues arising but felt that the company would be able to ride them out.

The next big fall came in late November 2015 when the regulatory/legislative changes were proposed by the British government and was shortly followed by guidance about profit downgrades, by this time the market had enough and the end was nigh! 

In hindsight the opportunity for me to exit and take a substantial loss, but protect my remaining capital was between June & November 2015 - but I chose not to and left my capital invested in SGH.

So the big question for me is, can I avoid future capital losses like this and if so how?

I guess step one is should I have invested at all? In hindsight I still think it was a reasonable decision with the information I had at the time, I think I have improved my analysis over time and I am not sure I would buy into a company with similar metrics now. So my increased rigour, expanded metrics and better understanding of businesses may be enough to avoid another SGH - but i have no real certainty about that!

Step 2 is should I have sold at $8, was that my big error? Again, in hindsight I dont think so, if I sold out of companies where their price had exceeded my initial IV then my portfolio would be much worse off. You dont get multi-baggers by selling when they go up 50%!

Step 3 is should I have not taken up the retail allottment? Given what I knew at the time, and the range of recent trading it seemed like a good opportunity and as per the prior point, if I had not taken up similar offers from other companies I have invested in my returns would be much lower.

Step 4 Should I have sold in Jue 2015 when SGH first gapped down significantly? The same problem arises, if I assume that is where I went wrong and in the future sell out of businesses that are subject to some bad news and the share price falls heavily - if I applied that retrospectively to my portfolio the losses would be much larger. (NWH is a good example)

Step 5 Was the mistake in not selling when the final straw came in late 2015 and any support for SGH evapourated? By then the capital loss was so significant that it wasnt something I even considered, trouble is that fall came pretty quickly and there is no certaintly that I would have been quick enough to get out anyway. 

Writing down these thoughts has probably helped clear my thinking and my summary would be that there is probably not anyway for me to avoid the risk of a catostrophic outcome like SGH, sometimes I will get it wrong and lose money, but overall my strategy still sees me performing well ahead of my benchmark. 

The main thing is that my initial analysis was probably sound enough, but there are a couple of aspects that I think were poorer thinking and I have already eliminated them, one was a sense that it was a sector that I should have exposure to, so I went looking for the best business to buy in the sector. I now no longer consider sector exposure as a metric. I only look at the quality of the business. I am also much more wary of debt and while it wouldnt have stopped me investing initially, it may have prompted me to exit sooner.


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## notting (30 December 2016)

galumay said:


> I have been doing some thinking about my investment in SGH, it has had a significant negative impact on my SMSF, I am up over 14% on my benchmark, but would have been up 22% without the impact of SGH - so its pretty important for me to understand what went wrong.
> 
> .............it may have prompted me to exit sooner.




Just thought you might like some music with that.



Tip as soon as you hear the word accounting questions or problems - don't just sell, go short!


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## galumay (30 December 2016)

notting said:


> Tip as soon as you hear the word accounting questions or problems - don't just sell, go short!




That may be good advice! 

I have uncovered something else about companies like SGH that had I known I would have probably never made the initial investment, "a business that is trying to build scale should show characteristics of operating leverage, or in simple terms, a 10% increase in revenue should lead to more than a 10% increase in profits for the business." - SGH were growing revenue by over 100% but were only able to translate that into NPAT growth of just above 20%. Thats a horrible conversion rate for something as simple as a rollup of legal practices!

So thats a learning for future reference!


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## galumay (30 December 2016)

I realised that in my original post I had not updated my returns on the SMSF, its actually up 21.4% for the 6 months of this FY so would have been 28% without the mistake of SGH.


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## notting (30 December 2016)

The yearly performance being a little less glorious one feels!!


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## galumay (30 December 2016)

Getting a bit off topic, but yes, the 12 months calendar year would be less impressive, roughly 26.5%. For me its the performance relative to the benchmark that is important more so than the outright gains/losses.


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## skc (3 January 2017)

galumay said:


> I guess step one is should I have invested at all? In hindsight I still think it was a reasonable decision with the information I had at the time, I think I have improved my analysis over time and I am not sure I would buy into a company with similar metrics now. So my increased rigour, expanded metrics and better understanding of businesses may be enough to avoid another SGH - but i have no real certainty about that!




In hindsight there were lots of things wrong with SGH without Qunidell...  So the initial investment decision was definitely incorrect. The caveat is that it fooled many other investors as well. The lesson here is to improve your assessment as you have already done. So bad decision, lessons learnt, life goes on.

The perfectly correct time to sell was soon after the Qunidell acquisition. It really didn't take much research to see that QPP was a big risk (if not a guaranteed lemon), and the balance sheet of SGH was transformed for the worse. The share price was still holding up so a sell then would have been ideal. The lesson here is to make sure you make an objective assessment when a company makes some wholesome changes... being objective is the difficult part given that you already hold.

With regards to capital raising... it's rarely wrong to buy at a discount to prevailing market price... even just for a quick trade. You could sell some existing parcel or short some with another broker so your overall exposure is kept at the desired level. 



galumay said:


> Writing down these thoughts has probably helped clear my thinking and *my summary would be that there is probably not anyway for me to avoid the risk of a catostrophic outcome like SGH, *sometimes I will get it wrong and lose money, but overall my strategy still sees me performing well ahead of my benchmark.




I don't think your summary (bold part) is correct based on the above.


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## Knobby22 (3 January 2017)

I never bought SGH but I had a few duds. One example was MYX, great win but gave up a third of the gain before I sold. If I had kept holding I would have given it all back. It is hard to0 sell at the top but not that hard to get out reasonably quick. There are always "bargain hunters" or better named "unquantifiable risk takers" who who will buy them off you. Hat held HHL up yesterday? Big fall now.

I was pretty please with my return this year of 19% including dividends so 21.4% sounds pretty good to me Galumay.


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## galumay (3 January 2017)

skc said:


> I don't think your summary (bold part) is correct based on the above.




Hi skc, happy new year, and thanks for adding your thoughtful contribution to the thread and my post in particular.

I think what I said holds true in the context I posted it, I am not confident that I have identified and would again identify the specifics that would have warned my that SGH was not a good company to invest in at the time I did. 

Its easy to be less than honest with myself, and say, "yes, lesson learnt, I wont make that mistake again." - but thats exactly what people say all the time when they really have no idea what they did wrong and therefore are actually doomed to repeat it!

I am genuinley not convinced that I can identify the elements that made SGH a poor investment when I first took a position. When I look back at my notes, research and analysis it all looks convincing enough!

I agree the warning signs may have been there with the acquisition, I certainly didnt spend enough time analysing the changed company.

Also i get your point with capital raisings. Thanks again for the input.


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## So_Cynical (4 January 2017)

skc said:


> The lesson here is to make sure you make an objective assessment when a company makes some wholesome changes... being objective is the difficult part given that you already hold.




The $8 top got me, selling for less seemed just wrong, ended up selling for 50c eight months later.

My objectivity is suspect when it comes to selling.


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## galumay (4 January 2017)

So_Cynical said:


> The $8 top got me, selling for less seemed just wrong, ended up selling for 50c eight months later.
> 
> My objectivity is suspect when it comes to selling.




Good point, and an abject lesson about anchoring bias! I find the decisions about if and when to sell are the most difficult ones to make in investing. 

I know for every SGH I can quote many other examples where I have held on to companies after considering taking profits at some point and they are worth much more now! 

At least you had the sense to get out at 50c, i am still holding at whatever SGH is now.


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## Klogg (4 January 2017)

galumay said:


> I am genuinley not convinced that I can identify the elements that made SGH a poor investment when I first took a position. When I look back at my notes, research and analysis it all looks convincing enough!
> 
> I agree the warning signs may have been there with the acquisition, I certainly didnt spend enough time analysing the changed company.




Galumay - firstly, your results are great - good work. I can only assume you aim to improve on them by looking into any investment losses. Great idea.

In regards to SGH - I'm not sure the only time to identify an issue was at the time of the Quindell acquisition. The EGP blog (which I believe you read) had a few mentions of SGH and the rising WIP but poor cash flow before this point - he hit the nail on the head. That said, it's not that it's blatantly obvious, just one of many risks.
If it were obvious, everyone would have seen it. But there's a risk there that wasn't identified.

I've made similar mistakes where the risks were there but I failed to identify them (every time I think I'm doing well, I look at the IQE share price. How did I think that many acquisitions would just go smoothly...)


@Knobby - I think MYX is a totally different case. The company is not in danger of not meeting its interest payments, and directors are very much aligned with shareholders. In fact, if I owned MYX 5 years ago, I'd probably still own it.


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## galumay (4 January 2017)

Klogg said:


> .... The EGP blog (which I believe you read) had a few mentions of SGH and the rising WIP but poor cash flow before this point - he hit the nail on the head.




Thanks for the words of encouragement klogg, unfortunately I had already taken a postiion in SGH when Tony wrote his most detailed post on SGH. I fell victim to a couple of biases in my decision to continue to hold despite his analysis! I hadn't read his earlier posts on SGH at that point because I wasnt aware of them.

Again I am reminded that nothing is concrete or absolute in this game (life?) - Tony also has sold out of a few positions in businesses where I chose to continue to hold and have been well rewarded for my patience and conviction. I am constantly reminded of how easy it is to persuade ourselves of what we want to believe, when it suits us! 

So the 'easy' and wrong path is to say "Tony was right about SGH, therefore my error was in not selling when I read his blog post about SGH and the path for improvement is to avoid buying anything he sells or posts negative analysis of." This would give me the false comfort of assuming that I had learnt from my mistake, and had put a process in place to avoid repeating it.

This is similar to the point I made in reply to skc - if I am honest with myself, I have tried to understand where I went wrong investing in SGH, but I remain less than convinced that I might not make a similar mistake in the future.

Sorry for those bored by my lengthy waffle, which is probably more about psychology than SGH!


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## skc (17 March 2017)

SGH came up with an announcement this morning confirming what most already knew.... that the senior debt has been sold to distress debt funds at <25c in the dollar, and that a debt to equity swap deal is close to happening. What I don't understand is why did the stock rally? Did the punters read a different announcement to what I read?

The announcement read to me "SGH now officially belongs to the lenders, prepare for the dilution announcement". Yet punters seem to have read "SGH is saved with debt holders taking a big haircut".

Yes the original debt holders have taken a large haircut and yes the company most likely won't fold (it still could, like MBN), but this really is only good news to the employees and future equity holders. Just because the debt changed hands at <25c in the dollar, the amount of SGH's liability hasn't actually been reduced. The face value of the debt was over $700m, and there's no way that SGH is worth that much on an enterprise value basis. So there's little doubt that the existing equity is worthless. Any scheme may throw a bone to the existing holders, like a notional $5-10m value, but it's beyond doubt that the existing equity holders will be diluted substantially from current levels. 

For the record, MBN recap was done by the debt holders who put the company into administration such that a shareholder's vote is bypassed. The original MBN shareholders ended up owning just 1.8% of the company.... MBN shares went into suspension @ 1.6c and came back onboard at 2.6c after 9 months... a good outcome? If you ignore the fact that shareholders with 100k shares before the suspension ended up with ~1800 shares when trading resumed.

P.S. The massive spike in MBN share price in the week after trading resumption remained a mystery to me. It appeared to be a major error by market participants as they mis-interpret the impact of the recapitalisation?
P.P.S. Unfortunately MBN is now dead, again.


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## galumay (17 March 2017)

Its probably mainly the HC crowd!! Seriously though, I can only assume you correct with your analysis that the market is saying, "SGH is saved with debt holders taking a big haircut". 

So much for the efficient market hypothesis! I can imagine there being plenty of sellers today, but the mind boggles at where the buyers come from to pick up shares up nearly 50% in a company like SGH! Is it also shorters being panicked out of their position?


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## Knobby22 (17 March 2017)

galumay said:


> Its probably mainly the HC crowd!!




I know someone who bought heaps at 7c and 10c as well as other low prices. I thought he was crazy but he would have sold today at a nice profit to the new buyers.


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## skc (20 March 2017)

Knobby22 said:


> I know someone who bought heaps at 7c and 10c as well as other low prices. I thought he was crazy but he would have sold today at a nice profit to the new buyers.




The hindsight outcome doesn't justify the action. I know a guy who never put on his seatbelt when he drives. He's never been caught, never had an accident and saves almost 2 seconds getting in and out of the car each time. Still not a sound decision though, is it?

The correct position size to trade SGH is assume 100% loss. So if he's trading anything bigger than that, I would consider it unwise.


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## skyQuake (20 March 2017)

skc said:


> The hindsight outcome doesn't justify the action. I know a guy who never put on his seatbelt when he drives. He's never been caught, never had an accident and saves almost 2 seconds getting in and out of the car each time. Still not a sound decision though, is it?
> 
> The correct position size to trade SGH is assume 100% loss. So if he's trading anything bigger than that, I would consider it unwise.



60m shares @ 10c= $6m of turnover which is quite low relatively. As with SCU, the buying frenzy can really go off if there's no instos to sell!
Agree with 99% dilution for the poor equity holders!


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## skc (19 April 2017)

skyQuake said:


> 60m shares @ 10c= $6m of turnover which is quite low relatively. As with SCU, the buying frenzy can really go off if there's no instos to sell!
> Agree with 99% dilution for the poor equity holders!




AFR is reporting 95% dilution...



> Slater & Gordon shareholders should expect to lose 95 per cent of the company's equity to its hedge fund lenders.
> 
> Read more: http://www.afr.com/street-talk/slat...xpartners-hired-20170418-gvmoiw#ixzz4efAPIzX0
> Follow us: @FinancialReview on Twitter | financialreview on Facebook


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## skc (29 June 2017)

Finally, there's confirmation of the recap. 95% of the company for the lenders, with ~$40m of debt outstanding. It's a saga of epic proportion... a monumental mistake by management that's kind of beyond comprehension.

http://www.afr.com/street-talk/slater--gordon-poised-to-announce-restructure-sources-20170628-gx0vtt

So how much is SGH-reborn worth? There are lots of moving parts so it's difficult to pin down... but let's say the company can go back to making $40m operating cashflow per year, then a $500m market cap is probably not out of the question given a low debt balance sheet. It won't happen immediately of course due to market sentiment and stock overhang, but a eventual market PE of 12x is not totally unrealistic. 

If total shares on issue (~350m) stays the same after the re-cap, that equates to $1.40 per share. Obviously those buying today @ 9c won't necessarily be better off... for every 100 shares one buys, it will be "shrunk" back to 5 shares upon the recap's completion. Given the re-cap is yet to complete, and the $1.40 guesstimate is some years away (and just a guesstimate), the current price of 9c is arguably a bit too high.


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## Klogg (29 June 2017)

skc said:


> The hindsight outcome doesn't justify the action. I know a guy who never put on his seatbelt when he drives. He's never been caught, never had an accident and saves almost 2 seconds getting in and out of the car each time. Still not a sound decision though, is it?




I like it. Sounds like the modern version of 'picking up pennies in front of a steamroller'


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## galumay (29 June 2017)

skc said:


> The hindsight outcome doesn't justify the action.




Agree totally, the danger is that you then assume it was skill that provided the outcome, I would suggest it was nearly all luck and could just as easily ended up with a total loss of capital.


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## Garpal Gumnut (29 June 2017)

SGH was a funny share for me. I bought low at $3.60 and then exited at $4.49 bit early with a good profit and then it took off, and up and up.

I was very annoyed. It went up and up and if I'd sold at the top I would have had a banger.

I thought of re-entering, but it's not my style.

I guess trading medium to long term is as much gut feeling as charting. 

gg


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## McLovin (29 June 2017)

skc said:


> If total shares on issue (~350m) stays the same after the re-cap, that equates to $1.40 per share. Obviously those buying today @ 9c won't necessarily be better off... for every 100 shares one buys, it will be "shrunk" back to 5 shares upon the recap's completion. Given the re-cap is yet to complete, and the $1.40 guesstimate is some years away (and just a guesstimate), the current price of 9c is arguably a bit too high.




So 5% of the post recap equity is currently being valued at $31m. That does seem a bit high. It's probably worth way less than 5c at the moment.. A few lawyers I know reckon that reg risk is a real issue and that the government might seriously curtail PI law in the next few years. On the plus side, the new owners have deep pockets which probably removes the concern of SGH lawyers being poached, in smaller markets.


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## skc (30 June 2017)

McLovin said:


> So 5% of the post recap equity is currently being valued at $31m. That does seem a bit high. It's probably worth way less than 5c at the moment..



I spent a bit more time reading up on the restructure last night, and it's probably a bit worse than what my post suggested due to various other stuff in there like warrants (which brings existing holders to 4%), convertible notes (which removes most upside from any claims out of Watchstone group) and class action threats. So very limited incentive to buy now or after the recap...



McLovin said:


> A few lawyers I know reckon that reg risk is a real issue and that the government might seriously curtail PI law in the next few years. On the plus side, the new owners have deep pockets which probably removes the concern of SGH lawyers being poached, in smaller markets.




It's been a 2 years since the wheels start coming off... you'd think the good ones would have left already. The worst deal is still those who sold their own practice to SGH for escrowed shares. I wonder if any were market-astute enough to short the stock and lock in the price.


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## OmegaTrader (8 July 2017)

http://www.theaustralian.com.au/bus...l/news-story/fd40d778ba62ff4b1220e07cc765fdd7

http://www.theaustralian.com.au/bus...n/news-story/e36110d15bcd4b47864d9ea86c8c6d73

Rehashing alot of whats here and a couple of questions

But here is my limited thought process.

The hedge fund buys the debt from the big banks for a discount the quoted figure was 146 million.

Prints everybody else out of existence by issuing new shares and controls the company board etc etc.

So effectively the debtors own the company.

Reduce the debt and also get the earnings if any from suing the people they bought the Uk company from.

If I am reading this right the funds have bought the company for around 146 million??

146 mil  for assumed 40 mil in cash flow looks like an amazing deal?

Given the current rudimentary assumptions :



McLovin said:


> So 5% of the post recap equity is currently being valued at $31m. That does seem a bit high. It's probably worth way less than 5c at the moment.. A few lawyers I know reckon that reg risk is a real issue and that the government might seriously curtail PI law in the next few years. On the plus side, the new owners have deep pockets which probably removes the concern of SGH lawyers being poached, in smaller markets.





.09* 350 million gives value of about 31 million

now if you get get in now and get diluted at say 4% that would be a factor of 25.

Valuing it at approx  .09* 350*25 
=789 million???
or if you want 1 share in the future it will cost you 25 shares .09*25=

$2.25 per share ???

Is that right?

Now if  cash flow is 40 million estimated that is PE 19.725 or discount rate of about 5%.

 I don't know the value in that. 5% discount for all that risk?

Also there could be the risk of further dilutions or the funds could just run it into the ground after collecting the cash flows.



skc said:


> Finally, there's confirmation of the recap. 95% of the company for the lenders, with ~$40m of debt outstanding. It's a saga of epic proportion... a monumental mistake by management that's kind of beyond comprehension.
> 
> http://www.afr.com/street-talk/slater--gordon-poised-to-announce-restructure-sources-20170628-gx0vtt
> 
> ...






So my next question is what is the play for the funds after they  now own the company.

Do they resell the company for more than the approx collective 146 million paid or try and get the public back in at a later date.

Or just collect the cash flows from normal business and the major lawsuits then salvage the residual.

At what point if any can the small guy jump on. Any discount can be eroded away easily. But in the future if the company is built up/ re marketed to reissue to new blood.

Say in 2-3 years with some shiny new prospectus brochures??

Using reverse psychology if it is that overvalued why not just short it??



Secondly why would the banks sell the debt for such a deep discount?

 They can't be that stupid? Why didn't the banks just muscle in like the hedge funds, print out others or  collect the cash flows.

my two cents


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## skc (9 July 2017)

OmegaTrader said:


> If I am reading this right the funds have bought the company for around 146 million??
> 
> 146 mil  for assumed 40 mil in cash flow looks like an amazing deal?




I don't know the exact transaction figure.. but I think it'd be a bit more than $146m. Total debt was ~$800m and even if all debt were bought at 25% it'd still be $200m. 

That $40m cash flow is not a forecast or a given. It's a very optimistic scenario where every planets align and all the hard work pays off and it might earn $40m cash flow in a few years time. It was a number I used to illustrate whether the current share price represents a bargain or not. The actual FY17 free cash flow is probably some large negative number, and it might be so for another period or two. So there could be further capital requirement.

The hedge funds took an investment with plenty of risks.. things may or may not work out. I personally don't think they bought an obvious bargain. And if they end up making hundreds of millions in 5 years time, it will be more because of the hard work they put in to actually increase the company's value, as opposed to buying well below the company's current value.



OmegaTrader said:


> now if you get get in now and get diluted at say 4% that would be a factor of 25.
> 
> Valuing it at approx  .09* 350*25
> =789 million???
> ...




Correct. It doesn't sound like a good deal to buy now. You can also think of buying now as paying a few times more than what the hedge fund paid.



OmegaTrader said:


> So my next question is what is the play for the funds after they  now own the company.
> 
> Do they resell the company for more than the approx collective 146 million paid or try and get the public back in at a later date.
> 
> Or just collect the cash flows from normal business and the major lawsuits then salvage the residual.




Probably some combination. There is still debt in the company so cash flow will go towards paying that off. They might separate the UK assets and find a buyer for them (although it'd be hard to see who's game enough). They might even take it all private (with 96% ownership I think they can legally compulsorily acquire) and rejig it before floating it in 4-5 years time (again, hard to see anyone buying into such tainted name but some hedge funds are good at marketing and some investors have short term memory).



OmegaTrader said:


> At what point if any can the small guy jump on. Any discount can be eroded away easily. But in the future if the company is built up/ re marketed to reissue to new blood.




Too many variables... but my guess is there's no hurry.



OmegaTrader said:


> Using reverse psychology if it is that overvalued why not just short it??




There has been little or no borrow for years.



OmegaTrader said:


> Secondly why would the banks sell the debt for such a deep discount?
> 
> They can't be that stupid? Why didn't the banks just muscle in like the hedge funds, print out others or  collect the cash flows.




Because the company's and its debt's value are different in different hands. The banks are not in the business of owning and turning around a business over a period of 5 years. The debt is arguably worth $0 in the banks' hands. In deed they've already written them off before the debt was sold to the hedge fund.


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## OmegaTrader (10 July 2017)

skc said:


> I don't know the exact transaction figure.. but I think it'd be a bit more than $146m. Total debt was ~$800m and even if all debt were bought at 25% it'd still be $200m.
> 
> That $40m cash flow is not a forecast or a given. It's a very optimistic scenario where every planets align and all the hard work pays off and it might earn $40m cash flow in a few years time. It was a number I used to illustrate whether the current share price represents a bargain or not. The actual FY17 free cash flow is probably some large negative number, and it might be so for another period or two. So there could be further capital requirement.
> 
> ...




Really in depth response thanks.

Just a crazy idea only that is all I am alluding to.

If hedge fund is getting it a x price. Does that mean there is value for retail Joe at that x price and ride on the back of their efforts. Given a discount would be implied already in that x price.

Ignoring the reported 146 million figure

Ok so just say the debtors bought the whole company for effectively $200 million.
This means that in their mind it is providing value at $200 million.


So if the price drops below what the debtors think it is worth-their price.

305*25*.0262 

~ 200 million 

305 million shares dilution 25  price would need to be ~ 2.6 cents 

Without further dilution and the other risks of being bought out+ the rest of the kitchen sink.


without short or  other downward betting derivative,  that is all my limited brain has to offer.

cheers


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## skc (11 July 2017)

OmegaTrader said:


> If hedge fund is getting it a x price. Does that mean there is value for retail Joe at that x price and ride on the back of their efforts. Given a discount would be implied already in that x price.




If the hedge fund is right then you are right. If the hedge fund is wrong then you are wrong. There are examples where a company doesn't turnaround (or even dies again) after a recapitalisation (think BBG or MBN), and I am sure there are examples where a company has flourished after a recapitalisation (just can't think of any off the top of my head). 

So just buying at a price <X on it's own right probably isn't a guaranteed winning strategy.


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## OmegaTrader (11 July 2017)

skc said:


> If the hedge fund is right then you are right. If the hedge fund is wrong then you are wrong. There are examples where a company doesn't turnaround (or even dies again) after a recapitalisation (think BBG or MBN), and I am sure there are examples where a company has flourished after a recapitalisation (just can't think of any off the top of my head).
> 
> So just buying at a price <X on it's own right probably isn't a guaranteed winning strategy.




I get your point that is why I said idea.

Of course there is alot of risks.

Nothing is a guaranteed strategy. People rely on fund managers,super funds and passive investment. Definitely no guarantee there but still fees.

Even though the funds get a special deal paying down the debt which is basically a transfer to the funds own coffers and also basically all of the proceeds from suing the UK seller.

All I am saying is that if the fund pays x, they think it is worth x. That means something if they have put in all that work and committed funds to the company. 

What that means or the importance is up to *each person to decide for themselves and take their own responsibility.*


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## PZ99 (31 October 2017)

Slater and Gordon's long-suffering shareholders will be nearly wiped out in the company's rescue plan and many will be left with parcels of shares so small they cannot be sold on market.

http://www.smh.com.au/business/slat...ay-price-for-rescue-plan-20171030-gzatox.html

A very expensive YES vote


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## greggles (2 March 2018)

Slater and Gordon is up from $1.80 to $2.80 over the last few days. First good news SGH has had for a while.


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## greggles (6 March 2018)

SGH continuing to make good gains on renewed confidence. Surprising turnaround. I thought Slater and Gordon was finished not so long ago.


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## galumay (6 March 2018)

greggles said:


> SGH continuing to make good gains on renewed confidence.




If it goes up another 120 times I will be in the black!


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## MrChow (17 March 2018)

Now that's a selective graphic if I've ever seen.


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## greggles (11 September 2018)

Slater and Gordon launch Australia's largest ever class action against Colonial First State and AMP over misconduct stemming from super funds charging exorbitant fees while failing to get the best possible cash interest rate for their clients.

It is expected that up to 18 further class actions could follow against other bank-owned and retail funds.

https://www.news.com.au/finance/bus...s/news-story/e2fa23644d189b742e24cee49b40a84c

https://www.slatergordon.com.au/getyoursuperback/


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## Ann (23 December 2018)

galumay said:


> LOL! Thats like my 55 $SGH shares, cost me $626 each adjusted for consolidation, now worth $2.16 per share for a total of $118.80




galumay, what a shocking Consolidation, thank you for telling me. I am so sorry you have also been a victim of robbery under arms of the rich. In a very small way I am going to try to address this situation.
_
Shareholders who clung on through the catastrophic consequences of the $1.3 billion Quindell acquisition have been all but wiped out anyway, after the restructure involved a 1-for-100 share consolidation, with the implied value of the post consolidation equity around 30 cents to $1.10 per share.

https://www.fool.com.au/2018/08/31/...warns-shareholders-its-shares-are-overvalued/_


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## Ann (23 December 2018)

*This is a stock I would suggest everyone avoid like the plague, you run an excellent chance of losing all your money through a future stock Consolidation. It is a Rotting Souls stock.*


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## Smurf1976 (23 December 2018)

greggles said:


> Slater and Gordon launch Australia's largest ever class action against Colonial First State and AMP over misconduct stemming from super funds charging exorbitant fees while failing to get the best possible cash interest rate for their clients.



Now we just need them to launch a class action against themselves for failing to look after shareholders' best interests. 

They may have a conflict of interest there however.


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## SirRumpole (24 December 2018)

I'm not sure that a law firm that has to serve its clients and shareholders at the same time doesn't have conflicts of interest all the time.

I suppose you could say that about any business, but to me providing a service does not necessarily mean doing it at the highest possible price.

Like the electricity network really.


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## bigdog (19 January 2019)

https://www.theage.com.au/business/...s-he-fights-legal-action-20190117-p50ry4.html

*Ex-Slater and Gordon boss defends new role as he fights legal action*

The former chief of beleaguered legal giant Slater & Gordon has defended his new role on the company's payroll even as he and other directors face legal claims they omitted details of the company's allegedly botched 2015 accounts during an external audit.

Andrew Grech left Slater & Gordon in 2017 after the group completed its life-saving restructure caused by the disastrous acquisition of the professional services arm of UK group Quindell.

Mr Grech confirmed he became a director and half owner of Equal Access Funding (EAF), a company that has had a long relationship with Slater & Gordon within a few months of stepping down from the Slater & Gordon board in December 2017.

EAF provides litigation funding services to the no-win, no-fee law firm so that cases can be funded ahead of settlements being paid.

In turn, Slater & Gordon guarantees its clients' obligations to repay EAF. EAF's sole client for many years was Slater & Gordon and all current representatives listed on its credit licence are current senior staff at the law firm bar one who is a former lawyer at the firm who left in 2018.

Speaking for the first time since his departure from Slater & Gordon, Mr Grech said he did not see any issue in him becoming a director and half-owner of Equal Access Funding.

"I think if you apply the pub test that these are arrangements that are clearly in the clients' best interests because there is no recourse to the clients," he said.

"So I think it does satisfy the pub test but your readers will be able to draw their own conclusions.

"I was approached by the owners of EAF at the time to take on the role. I think they wanted to access my experience in the plaintiff personal injury area."

Mr Grech said EAF's case book was in run out mode and the group was not funding new cases for Slater & Gordon.

Since leaving the listed group, Mr Grech has been consulting to law firms through his business Juris Advisory, which operates out of his multimillion dollar beach house in the Victorian seaside hamlet Anglesea.

He received total remuneration of $1.5 million during his last year at Slater & Gordon.

A spokeswoman for Slater & Gordon said Slater & Gordon's contractual arrangements with EAF commenced several years ago.

"We understand that Mr Grech's involvement with EAF only commenced well after his departure from Slater & Gordon," she said.

*Fresh legal claim*
Mr Grech's new business ventures come as he prepares to face a law suit brought by Slater & Gordon's former auditor Pitcher Partners against the law firm and the group's former directors, including ex chairman John Shippen and former chief financial officer Wayne Brown.

Pitcher Partners lodged the legal claim against Slater & Gordon and its former directors after the accounting and advisory group was hit with two class actions relating to the audit it did of Slater & Gordon's 2015 accounts.

Both class action claims include key allegations that auditors from Pitcher Partners signed off on the accounts without properly identifying issues with how the group was accounting for Quindell post-acquisition.

However, the class action claims - one lodged by Maurice Blackburn and another by Johnson Winter Slattery on behalf of different groups of shareholders - are based on different legal arguments and cover different period over which the alleged breaches occurred.

Pitcher Partners has alleged in its response to the class actions, and in making its claim against Slater & Gordon and the directors, that it relied on the information given to it by the law firm about its accounts.

As such it argues that if there were issues in those accounts they were the result of omissions by Slater & Gordon and its officers and not the fault of Pitcher Partners.

Pitcher Partners, which is being represented by SBA Law, declined to comment about the cross claims it has filed.

The law firm representing the directors, Arnold Bloch Leibler has applied to stay the proceedings brought by lawyers for the two groups of shareholders.

ABL is also seeking to have two claims from Pitcher Partners dismissed.

The lawyers for the directors allege the Pitcher Partners cross claim is outside of the terms of Slater & Gordon's court-approved restructure that was completed in 2017.

That restructure sought to ring fence Slater & Gordon from future claims by including a "shareholder claimant scheme of arrangement" which protected the company and its directors from future class action claims, including any legal claim against the company by a third party as a result of a shareholder claimant bringing action against that party.

Under the terms of the restructure deal, the shareholders could be held liable for any findings against the directors that result in a monetary payment.

ABL is not representing Slater & Gordon, which instead is being represented by Minter Ellison as is one of the former directors -- former head of Slater & Gordon UK, Ken Fowlie, who stepped down from the board but remains an executive at the firm.

Slater & Gordon shares were trading at $2.33 at lunchtime on Friday.

The application will be heard on February 13.

6684


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## Ann (26 February 2019)

I do hope no-one here is holding this dreadful company.

*Slater and Gordon slips to $10.3m H1 loss*


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## fiftyeight (26 March 2020)

The volume of disruption to any and all contracts must be HUGE. All terms and conditions will become negotiable.

Seems like SGH will be busy after the dust settles


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## JTLP (27 March 2020)

fiftyeight said:


> The volume of disruption to any and all contracts must be HUGE. All terms and conditions will become negotiable.
> 
> Seems like SGH will be busy after the dust settles
> 
> ...




Would have thought a lot of the contracts and disruptions were out of the respective parties control, thus meaning they can’t be sued.


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## MovingAverage (27 March 2020)

JTLP said:


> Would have thought a lot of the contracts and disruptions were out of the respective parties control, thus meaning they can’t be sued.



I suspect all contacts will have a force majeure clause. This Corona outbreak will undoubtedly be covered by the force majaeure


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## fiftyeight (27 March 2020)

JTLP said:


> Would have thought a lot of the contracts and disruptions were out of the respective parties control, thus meaning they can’t be sued.





MovingAverage said:


> I suspect all contacts will have a force majeure clause. This Corona outbreak will undoubtedly be covered by the force majaeure




You may both correct or maybe not, it does not matter. As long as there are 2+ parties who disagree, I am sure lawyers will find a way to make a $$$


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## MovingAverage (27 March 2020)

fiftyeight said:


> You may both correct or maybe not, it does not matter. As long as there are 2+ parties who disagree, I am sure lawyers will find a way to make a $$$



Indeed...and this, as you point out, is why lawyers and courts exist


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