Slater & Gordon Ltd

Restructuring and Recapitalization crucial for sustenance: Slater & Gordon Limited (ASX: SGH) is a leading consumer law firm in Australia and the United Kingdom (UK). The company provides specialist legal and complementary services in a broad range of areas. The company is currently headed by John Somerville. SGH has been lately surging high with a 10.4% rise in stock on March 01, 2018 despite the group’s top-line growth from continuing operation reported to be down by 18.3% year on year (YoY) to $96.3 Mn in 1HFY18 from $117.8 Mn in 1HFY17. Net loss from continuing operation after tax came at $21.2 Mn in 1HFY18 as compared to $14.5 Mn in 1HFY17. It got an impact majorly due to higher provision for doubtful account and rise in rental expense during the same period. Loss per share from continuing operation accounted at 3.159 cents per share in first half of the year as against of 4.109 cents per share in 1HFY17.

Over the period, the group has reduced its outstanding secured debt under the recapitalization event. Following the recapitalization event, the total borrowings (excluding lease liabilities) came at $112.9 Mn during 1HFY18. Of this, $3.3 Mn represented under current liability which is being due for repayment in the month of June 2018. However, theremaining debt is non-current, and the scenario is expected to support the group in lowering financing cost while emphasizing on bottom line for the full year.Net debt to equity stood at 1.1x. The company encourages shareholders and other market participants to make their own assessment of the company’s value.

Meanwhile, SGH stock has fallen 75.7% in six months as on February 28, 2018 with a steep down movement of 17.2% in five days as on February 28, 2018. We give“Hold” recommendation on the stock at the current price of $2.11

Shine Corporate Ltd

Strong Performance: Shine Corporate (ASX: SHJ) is an Australian law firm specialising in personal injury compensation law, operating on a no win no fee basis. The company reported strong revenue growth of 19.30% to $88.23 Mn in 1HFY18 from $73.96 Mn in 1HFY17. During the period, EBITDA stood at $16.48 Mn as against $ 10.19 Mn in the corresponding period of the previous year, up by 61.73%. NPAT increased by 99.78% to $7.83 Mn in 1HFY18 from $3.92 Mn in 1HFY17. EPS of the company stood at 4.52 cents per share in 1HFY18 against 2.26 cents per share in 1HFY17, marking a growth of 100% YoY. The positive momentum has continued through the strong efforts of team work to improve the services and client experience. During the period, the company has launched new marketing campaign that has been successful in attracting new business, strengthen the brand presence in core Queensland market and other states. Additionally, the board of the company declared an interim fully franked dividend of 1.0 cent per share.

Meanwhile, SHJ stock has fallen 4.14% in six months as on February 28, 2018 followed by 6.1% rise in five days. Looking at the revival in performance, we give a “Hold” recommendation on the stock at the current price of $0.675
 
 

Strong half year performance (Source: Company Report)
 

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