I also have my money on a big recovery over the next few months....

I also have my money on a big recovery over the next few months. But it is still a gamble! I believe the 2 main issues are:

1) The potential breach of banking covenants....This should go one way or the other when the results are released in a couple weeks. I am gambling that Savcor has a strategy for resolving this. The lack of announcements in July/August seem too quiet for a company in serious stress? Also given it has been buying back it's own shares prior to May/June 2009 and was planning to continue, it must be generating good cash flows. I can't imagine it's Aussie bankers would pull the plug on this company for a couple of bad months.

2) The 65% ownership by the CEO means that he pulls all the strings. His personal financial position and whether he puts the company or his own interest first is critical if capital is needed. You only have to look at Bravura solutions (BVA) and their bad bail out to see what happens in a similar situation when a good company is impacted by ownership issues. Savcor seems to have put effort into governance and the appointment of an independant company secretary a few weeks ago (previously only a CEO family member) may be positive from this perspective.

As you say, the profit problems appear short term and Savcor may be a relatively simple sound business that is dramatically undervalued based on it's potential and has some real products to offer world wide. The company might potentially generate 7c earnings per share in 2009/10 and this makes a share price of under 13c look amazing.

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I hold Savcor shares and am not an advisor. Comments are intended as general debate and conversation and are not advise.