Hi investors of ECX and eveyone reading this article,Wow, wow,...

Hi investors of ECX and eveyone reading this article,

Wow, wow, wow! - What a spectular trading day for ECX today! (27/03/2019) The closing share price of ECX at 4.00 pm was $0.665. At 4.09 pm - the share price was going to be matched at $0.685 but at 4.10 pm. However, the final matching closing share price of ECX was $0.70

Let's discuss a few measuring yardsticks to demonstrate how we determine how undervalue the current share price of ECX is?

Market capitalisation:
To put things into perspective, at yesterday's (26/03/2019) closing price of ECX at $0.57, the total market capitalisation of ECX was only $182 million (based on total number of 319,636,693 ECX shares) ECX bought Gray's Ecommerce in 5/05/2017 for $179 million (shares only used in exchange of 0.3656 ECX share valued at $3.80 for 1 Grays share then valued at $1.39).ECX also bought Right2 Drive for $67 million in 6/05/2016 by issuing 22.2 million ECX shares then valued at $3.01. In effect, based on the ownership of these 2 companies alone, the combined value of both of these businesses at that point in time was about $246 million compared to the market capitalisation of ECX at $182 million yesterday (that is, negative value and not including ascribing any monetary values to the 78% of ECX's profit genreating businesses such as Fleet and Novated and Commercial business).

Please bear in mind, that ECX only offered shares and not cash as consideration for these 2 companies. Even if ECX sell these 2 non core businesses, Grays and Righr2Drive for two thirds price, it would fetch say $165 million or even at half their price, this will amount to $123 million in cash receipts which they can easily deploy to reduce substantially the company's net debt of $284 million as at 28 February 2019 reported today.

Price/earnings ratio
Looking ar price earnings ratio as a measurement yardstick. Previously, the company earned Net Profit after tax and amortisation (NPATA) of $78.1 million at endof financial year ending 30/09/2018. This is equivalnet to $24.4 cents per share. Based on today's share price of 70 cents, the P/E ratio is 2.86 multiple. However, the company in a recent announcement on 20/03/2019 - Market update that its NPATA is now expected to be down 42.4% compared with the first 5 months of FY2018 due to softening performances of Grey Industrial and Right2Drive.

However, it is noted that for the full 2019 year, the core Fleet and Novated business and Commercial which constitutes about 78% of the NPATA is broadly in line with FY2018. Therefore, even on the worst case scenario, based on the assumption, that the NPATA is down 42.4% for the FY2019, the expected NPATA will be $45 million (that is 0,576 x $78 million = $45 million) which is about 14 cens per share. The P/E ratio based on today's price of 70 cent is a low 5 multiple. There are NOT many companies including none of ECX competitors such as MMS, SGF and SIQ have a P/E ration as low as 5 based on our worst case scenario.

Reverse Break Fee
Furthermore, based on our reading of the Scheme Implementation Agreement, if MMS does not intend to go ahead with the merger by 30th April 2019, under clause 12.5 of the Scheme Implementation Agreement, MMS must pay ECX a Reverse Break Fee amount of $7.26 million and there are no conditions precedent such as unexpected poor profit results which could affect or reduce this payment amount.

In conclusion, ECX has plenty of ways and strategies it can used to raise lots of cash to reduce its net debt position of $284 million. At today's closing price of $0.70, the total market capitalisation of ECX is only $223.75 million on an expected P/E of 5 (even on a worst case scenario).

As a result of the above in-depth assessment of the value of ECX, our investors and clients have bought large parcels of ECX shares over the past few days. We are confident of our assessment of how undervalue the current share price of ECX. We sincerely hope you also share the same view.

Cheerio,
Isdhope