I need to talk to Dean to fully understand the downgrade. Going...

I need to talk to Dean to fully understand the downgrade. Going forward they will own 20 centres and on the downgrade numbers of $3.5M that's $175K NPAT contribution (on average from each centre). The three new centres will contribute $770K NPAT in 2019, $1.1M less 30%. Assume a 5 month contribution in CY 18 of $305K from the so we can assume in CY 19 there will be at least another $465K coming in. CY19 H1 will be stonger than CY18 H1. Have also assumed the two centres sold were dud centres but if they were how did they do so well in making almost a $1M gain ?

The main point to understand is the return on borrowed funds. They borrow at 4.65% and for every dollar they deploy they recieve a NETT return on average of 12.7%. They bought 3 centres for $6.07M that will contribute $770K NPAT.

As no new shares have been issued this is eps accretive to the tune of $770K/ 30,500,000 = 2.5Cents . Valued on a PE of 7.6 ($3.5M downgrade / 30,500,000 = 11.5 eps. SP 88 cents/11.5 = 7.6 PE. As they announced the downgrade at the same time the latest acquisitions were announced you have to assume the contribution from the acqusitions is baked in, in the CY18 numbers. With that assumption another 60% will follow in CY 19....60% x 2.5 cents x PE of 7.6 = 11.4 cents value in the SP.

Their bank has been incredibily supportive. However I think the market is nervous about 1) oversupply 2) interest rates rises 3) level of debt in the context of a future cap raise.