Risk of going under is real
Results released just before the end of last year showed losses in both the power and consumer divisions of this business but the good news, in a sense, is that the results contained no major surprises. We know about Megatron being in business rescue, and while the consumer division making a loss wasn’t expected, it has been struggling. But there was nothing to further frighten investors.
However, the balance sheet remains very fragile and looks like it will need an injection of cash to get it into shape, and I don’t know where this money will come from. Previous rights issues always seemed to be vague on the amount of money being raised, but will investors have appetite to put more money in and if yes, at what discount?
The company is truly at risk of not surviving and we should wait to see real signs of a turnaround before investing. That will mean a higher price to pay but at a significantly lower risk, so well worth the wait, otherwise we could end up with a real dog in the portfolio.