Why do you think I look into Asaleo in the first place? Yea, because I thought there's an opportunity that the market is wrong too. What with the buybacks and directors buying and new investments they've made.
It'd be better if management put in a few millions of their own money than the company's $100m. Why is it hard to use other people's money? We'd all have high conviction too if others give us their money and us spending it would lift our share prices, improve that EPS and the bonus linking to it.
Didn't management got something like $7m on the IPO and the remainder of some $32m that they've sold soon after the IPO? For them, a high conviction would be going out and mortgage their houses and load up. A $50 or $100k is a poor show of conviction.
-----
If you were to run AHY, would you be buying it for $600m or $900m?
How much did SCA sold it to PEP for?
PEP put in $125m as a "loan"/equity in its preference shares at 15% coupon, compounded annually.
Almost immediately, PEP and the current board and CEO load up on debt, repay "loans" to "related parties", pay back $50m in contributed equity - where the contributed equity came from I can't see it in the cash flow; then pay back ~$235m they owed somehow.
So how much did SCA valued what became Asaleo when they invited PEP to the party? $125m? Maybe $235m?
It was a loss-making business for at least the two years before PEP came in. So how much is that worth? $900m?
It's practically the same business PEP and SCA and the current board flogged off two years ago. With soon to be less shares outstanding but still a heck of a lot of debt.
It's not like the business has generated too much cash management don't know what to do with. And the new machinery and investments... yea, that's call replacing plant and equipment to keep the papers rolling. It's not an investment where if you don't do it, the gears stop working or the plant might catch fire.
Speaking of which, Asaelo have two plants in Australia yea? If one of them burn down or a flood hit, half of its business is gone.
Anyway..
AHY Price at posting:
$1.63 Sentiment: Sell Disclosure: Not Held
