cof cof cof !, page-7

Omex, be careful of net asset value for this stock. Given the aggressive acquisition strategy between 2005 and 2008 (acquisitions over this period totalled $137m), a lot of the balance sheet is made up of goodwill ($213m @ Dec 2009 balance date). Still, I think the stock is considerably undervalued for normalised EBITDA, which I believe to be around $55m to $60m pa. Given COF's market cap of $146m and net debt of $94m (i.e., Enterprise Value = $240m), this implies an EV/EBITDA multiple of 4.0 to 4.5 times. For this sort of business - light on capital-intensity (operating cash flow is historically more than 4 times higher than stay-in-business capital expenditure) - this does not look expensive at all to me. All that is needed for value to be restored is for "normalised EBITDA" to be reinstated, whihc will probably take a year or so. The only reason EBITDA in the June half of 2010 will be less than R20m is because the company retained staff that ended up being underutilised because of the tail effect of the GFC and the fact that the RSPT delayed studies and project commitments in Australia.