Can’t predict. But if I have to, the price will crash be around end of March 2017 – it should be on or a few days after 23rd February 2017 when the preliminary annual report for FY2016 is released, but from what happened with DickSmith, the smart money tend to wait until data vendors update the financials, or until the presentation is issued.
The crash may happen around September 2017 when it’s due to repay all its $191m in currently long-term debt. But I can’t predict what will happen since it is possible that Asaleo managed to convinced its lenders to extend, or new lenders to cough up the cash. But let’s give management their due ability and extend the death line to December 2017.
First, a company would only go bankrupt when it can no longer convince its shareholders, or new shareholders, or bankers and debtors to cough up more cash.
With SCA being Asaleo’s largest shareholder – at 34.67% (increased to about 36% after the share buybacks) – not wanting to potentially lose SCA-branded market share in ANZ and Fiji if anything like a DickSmith were to happen. That is, it better serves SCA’s interest if Asaleo could tick along, long enough that SCA and the Board won’t be dragged in front of the courts, wasting its management time, money and perhaps customer loyalty.
So SCA would go some way to lend a hand to keep it afloat, if that fail then they’d at least gently bring Asaleo to a soft landing… then maybe privatise it in a few years’ time to bring the business back in-house like it was before that call from PEP. This should avoid too much wrath from shareholders and the ensuing class action.
But these are just my conspiracy theories. Let’s stick to the facts and figures in front of us.
To recap, from the Solvency charts we can see that Asaleo’s FY2015 position is not as dire as that of DickSmith. That is, its cash and receivables are just $4m under its current payables – a bit of delay, tweeks and borrowing could see that through; Further, it would only need to turn a bit over 1/3rd its inventory – and with everything being equal – should pay all current liabilities. Contrast these to DickSmith’s final year where all its cash and receivables would only pay off maybe 40% the current payables, and the need to offload some 4/5th to cover all current liabilities.
Though on the flip side, Asaleo has a great deal more total liabilities to its current and liquid assets – you’d want to ignore its non-current assets as Asaleo is in no position to offload any more plants and equipment and still operates properly; that and a large chunk of the NCA are intangibles; Further Asaleo’s cash cycle is 4 times higher than DSH – at 109 days – and has been deteriorating since 2013.
So while bankruptcy or financial distress is not as sure a thing as DSH six months before its collapse, Asaleo’s financial and operating history does not suggest it’s a business whose own cash flows could help itself out of the hole PEP and SCA dug the current shareholders into.
AHY Price at posting:
$1.50 Sentiment: Sell Disclosure: Not Held
