SND

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85.5¢ saunders international limited

Ann: Placement & Underwritten Rights Issue, page-9

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galumay

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08/09/17

17:00

Post #: 27095445
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Originally posted by Penny Pincher ↑

Same here galumay - I do not want you or others to think that we are bickering...

However, just to explain my displeasure about the raising in general and the institutional placement in particular:

With a $8.4m net cash position and even allowing for another $2m capex and working capital investment for the CivilBuild acquisition, i.e. a $6.4m net cash position, the prudent way forward would be to let cashflows replenish the balance sheet. Importantly, this ought to be strongly assisted by the contributions of the recent CivilBuild acquisition.

Others will see $0.5m in offer costs in the context of the overall $8.05m capital raised, implying "reasonable" fee rate of 6.21%.

My personal view is that in the absence of more detailed disclosure, the bulk of the $0.5m in offer costs relates to broker fees rather than registry fees relating to the rights offer.

So my calculation is that a $0.5m fee is paid for a $2.25m institutional raising, implying fees of 22.22%.

Or to put it in the context of the most recent result - the $0.5m in fees represents 41.67% of FY'17 underlying NPAT - so yes, the way I see things ".... the big boys have gorged themselves".

Without the institutional placement, the rights offer would see SND's net cash increase to $12.2m after deducting $2m for capex and working capital - again, more than enough cash going forward.

One can only assume that the broker and some institutions might have bent the company's ear arguing that an institutional placement is "necessary" to improve liquidity in SND.

I strongly disagree. Liquidity is only ever a negative for a business or investors when performance is poor. Deliver consistently good results, and liquidity will take care of itself - institutions will scramble for your stock.

I would have been far more impressed with new management if they had done a pure retail offer that was not underwritten, but allowed shareholders to bid for rights not taken up.

Yes, SND could have done much worse in how it structured this capital raising. Consider yourself lucky, if you can draw comfort from that.

However, given the company's history of self-funding its growth and the recent management change, to me this represents a significant change and if it is an indication of how this business will be run in future and who management will take advice from, then I am now simply much more nervous than before.

Let's hope that management and Board will continue to do what is in the best interest of all shareholders and not just a select few.

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Fair enough, I will feed your thoughts into my ongoing analysis of the business and my decsion making process around my holding.

I must admit I hadnt taken much notice of the change in management because I had, perhaps incorrectly, believed it was the same group who controlled and held most of the shares in the business.

SND Price at posting: 57.0¢ Sentiment: Hold Disclosure: Held
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