spp->price->future

Not surprising the CXG SPP was dramatically under-subscribed (it was cheaper to buy on the market). Only 4.6M of the available 38.5M shares were taken up in the SPP at 26c.

Now that all the capital raising is complete, the price appears to be recovering? Perhaps this is not suprising, given the company did not need the SPP money and the low take up reduces the overall dilution factor.

I have read some of the negative comments on the forum. The negative view is understandable given the mess CXG created with Greentrains/Debt and how they put together a solution that was declared unfair by independant experts and is too complex for any of us to understand.

But that is history......the share price will now be set based on CXG's future. If you read the independant experts report and the recent presentations then the picture is looking good for 2010. These are some key points to consider about CXG going forward:

1) The independant expert has put together a conservative normalised FY2010 forecast NPAT of $15.6M before the cap raising interest savings. CXG will have 266M shares on issue after all capital raising and conversion of notes. This equates to more than 6c earnings per share and a P/E of about 4. If you assume the P/E will normalise to at least 8 during 2010 you can expect a price around 47c by the end of 2010. The expert valued Coote shares at between 63c and 74c, pre capital raising.

2) The companies gearing is expected to drop from the 100% a few months ago to a conservative 27%. This gives it significant headroom above any banking covenants.

3) The company advised that contracted works are up 21% since August and tender submissions are up 38%. The revenue is close to budget.

4) Elph requested its convertable notes be converted to shares in Nov (both T1 and T2). This has delivered them unfairly cheap shares at 11.6c but at least it is now history.

5) CXG still have to complete the sale of the Logistics business in the first half of 2010.

Although I think this is all a bit too hard on the retail shareholders, I think the general sentiment is positive for CXG in 2010 and we can look forward to some sound benefits from holding on or topping up.

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I am not an advisor. These notes are intended for debate only and cannot be relied on to be accurate.