earnings justify buying the stock, page-15

Re. preliminary report
Phew, what a shimozzle.
Having digested the carefully crafted statement, it gives little comfort.

Some points for consideration.

The optimism expressed regards the sale of further tranche of locos to Greentrains when the first sale netted $44m (as opposed to the originally touted $100m) coupled with the leasing proceeds from South Spur unable to offset the interest borrowing costs(interest costs being cited as one of the reasons for the profit downgrade) - suggest that the sale of the second tranche for 09 will be severely discounted again. As regards the sale of the logistics group, the entities within -South Spur and logistics are the most marginal performers profit wise and face steep competition in the marketplace against other rail assets such as Asciano's and Queensland rail. Debt reduction under these conditions is still highly challenging.

The dilution of the register by the issuance of a further 23mil shares at 0.17c and 6.5mil at 20c in the 09 year represents aprox 30% reduction in shareholder value by taking the total shares issued from 116m to 146mil.

Coote went on a buying spree at the height of the market and now surely must be facing huge write downs on the intangible assets (goodwill) - yet to be declared.

Trading conditions are noted to be difficult in some divisions resulting in margins and tendering success being impacted - in other words they are either missing out on the jobs or doing them for nothing.
Its disappointing that restructuring and 22% staff reductions is still a factor in forward projections which perhaps indicates that they are missing out on the work altogether!

It appears that a small profit for 08 ( I read no more than half year profit already declared aprox $2mil)before writedowns - a huge drop from the previously mooted,15% variation to last years result (aprox $23.5mil) This scenario equates to an earnings per share of 1.36c after tax if no writedowns. Future earnings will depend totally on a) survival, b) asset sales - quality assets or the non performers? to effect debt reduction, c) ability to maintain the work flow.

This could have been a fabulous company - but it has been caught in the perfect storm of purchasing at top dollar, diminishing work enquiry, and untenable levels of debt in a very nervous world.Lets hope that they will swing some asset sales although i fear that the quality , niche , money earning divisions are the only saleable assets at the moment.

I am a cxg tragic but am very concerned!!