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  "documentTitle": "SMART Global Holdings, Inc. (SGH)",
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  "authorName": "Wolfpack Research",
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  "sourceTypeLabel": "Short seller",
  "presentationDate": "2019-09-25 00:00:00",
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  "notes": "This is a research note page focusing on financial skepticism and management critique.",
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      "kind": "callout",
      "text": "SGH's baffling diversification strategy since mid-2018, after the WTO ruling became clear, is incapable of back-filling the loss of its subsidy-dependent profitability.",
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      "text": "SGH's executives have chosen to obfuscate the Company's profitability by division and geography. However, we have been able to put pieces of the puzzle back together. Our analysis shows that Brazil has been SGH's primary profit generator.",
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      "text": "We expect this harsh reality to bite hard.",
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      "text": "Even with some accounting shenanigans, we see a high likelihood of disappointment over SGH's 4Q19 earnings, given the market's high expectations.",
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      "text": "Even though SGH has chosen not to provide investors with any transparency over segment profitability, it is possible to see how important Brazil has been. The following chart demonstrates the strong correlation between group operating profits and SMART Brazil revenues:",
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      "text": "The approach management has taken to change the rhetoric around the investment case is disingenuous. A careful review of how and when they have changed the script indicates a calculated effort on their part to shroud the harsh reality.",
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      "kind": "paragraph",
      "text": "quarter basis. When the Company was generating upwards of $50 million a quarter in net income, the effects were not obvious, but given the collapse in earnings, such activity could become significant to reported EPS.",
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      "text": "We urge investors and the sell-side to watch for increased capitalization of expenses in the upcoming quarters. Based on historical trends, we believe this could be used to artificially boost EPS by as much as $0.10 per share.",
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      "text": "In this sense, SGH's baffling diversification strategy since mid-2018, after the WTO ruling became clear, is incapable of back-filling the loss of its subsidy-dependent profitability. They are replacing easy predictable profits with a low-margin grind.",
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      "kind": "paragraph",
      "text": "However, we are much more interested to see their guidance. The short-to-medium-term outlook for SGH looks extremely bleak. Will management come clean or keep peddling?",
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      "text": "2. Diversification Away from Brazil – And from Profitability",
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      "kind": "title",
      "text": "Brazil Was SMART's Golden Goose:",
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