Ann: Trading Halt, page-26

In recent posts I have repeatedly stated that I value TGA at $2.30, and used a simple EPS x 10 formula to get the $2.30, explaining that I had used a high NPAT/Revenue margin of 7.5% to compensate for other factors. It makes more sense to lower the NPAT margin, and increase the PER to reflect that investors attach value to other value-adding considerations – something I hinted at recently when I wrote, “I value NWH at $2.30, but that could transpire to be 23c x 10 = $2.30, or 20c x 11.5 = $2.30, or something else.”

Yesterday I considered the “something else”, and concluded that If I stick to my target of $2.30, then I could lower the guesstimated NPAT margin to 5.75%, and the PER used to 13, and fiddle the revenue to be $1.107b to get $1.107b x 5.75% x 1/370.6m x 13 = $2.30 on an EPS of $1.107b x 5.75% x 1/370.6m =16.6c. That seems to me to be a more reasonable set of metrics to guesstimate the SP value in the relatively short term.

Positive contract-securing Announcements lift the mood of the market to make a PER of 13 seem reasonable now, but it is the changing nature of NWH as a business that will keep the PER higher than it has been historically, when a PER of 10 was considered about right, and higher than that a time to sell. The low-skill NWH of yesteryear probably merited a PER of 10, but the emerging NWH should move closer to the norm of about 15, so a PER of 13 used above is not over the top for now.