Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hello MM team, Thanks for always responding to my questions, and providing useful insights. Seven Group surprised the market with a better than expected half year report. This conglomerate is highly dependent on economic cycles, but in building an investment case, it is its current debt level that worries me more. What's your view on this stock? Thanks, Angela
Hi Angela,
SVW have net debt around ~$4bn however it’s an asset heavy business and they do hold a lot of liquid assets underpinning it i.e. a stake in Boral (BLD) worth $3.2bn, a $1.2bn position in Beach (BPT) and a bunch of other investments, collectively these are worth north of $5.5bn. They are a cyclical business as you rightly point out, however share prices follow earnings and earnings in SVW have been strong, while the multiple of these earnings they are currently trading on (~12x) in our view is adequately pricing the cyclicality of them.
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