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@bensterz, I hear you. It's just that I have had considerable...

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madamswer

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05/09/16

15:48

Post #: 18939282
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Originally posted by bensterz ↑

I pretty much agree with what you have said in this post.

The only item on which I would deviate from your comments (with the exception that maximum net debt to EBITDA might get to 2x) is on how long it would take to get to the terminal value point.

I don't think roll-up would be achieved in three years. I think the best case scenario would be five years at least but it will probably take longer. There are opportunities for AMA to get to the terminal point of around 200 shops but based on your figures this would require acquiring (based on a 63 shop footprint at Jun-16) 45 shops a year over 3 years or 27 shops in a five year scenario.

In a highly fragmented market there are fewer businesses which could bring a large number of shops in one transaction. Based on the other acquisitions made (outside Gemini) the businesses acquired have only brought in 3 shops on average. To maintain the same linear roll-up run-rate would require something like 10-15 businesses to be acquired each year for 3-5 years (or 5-7 businesses if they brought 6 shops in per business). I think the current SP, to a large extent, assumes this 3-5 year roll-up will happen but the IRR on an investment today would slip well into single digits if the roll-up takes 5+ years (especially if it requires the development of more greenfield sites for 'rapid repair' work and associated business ramp-up).

Your comments about the accounting/presentations hit a raw nerve with me. I think AMA engages in rather 'lazy' accounting and results presentations (which I have posted about in the past).

In FY17 alone they have kept at least $9m of EBITDA in their back pocket from full-year contributions still to come through from FY16 transactions. When AMA enters the ASX200 those sorts of games won't be accepted when more sophisticated investors enter the share register. Continuing to have a disconnected phone number and non-functioning email address for shareholder comms on their website (even after been told to update them) as well as failing to respond to shareholder correspondence (even just to acknowledge receipt of correspondence) annoys me as well.

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@bensterz,

I hear you.

It's just that I have had considerable financial joy in the past supporting these sorts of industry consolidation plays (I am a long-term shareholder in dental practice aggregator, ONT), so I am naturally attracted to them.

Especially when they are at early stages, which AMA seems to me to be.

AMA Price at posting: $1.04 Sentiment: Hold Disclosure: Not Held
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