Infigen for Sale, page-4

This is something Infigen have canvassed before -

https://www.smh.com.au/business/infigen-energy-exploring-options-to-realise-value-20160517-gowskv.html

At that time it had an enterprise value of around $1.3bn, compared to $900m today (including a $150m capital raising in 2017).

It faces a looming risk that if the value of LGCs craters eg due to Government whims or additional supply of renewable energy coming on line, a large chunk of its revenue simply disappears. The financial statements are opaque on the exact makeup of its revenue, but working backwards from an inventory value of $70 per LGC in FY2018 it seems that they are worth about 40% of the total. (The value of LGCs, at least as represented in the company's inventory, has held up reasonably well in recent years but is a factor entirely outside the company's control.)

In the "positive" scenario of a 5% overall increase in total price per GWh sold (power + LGCs), my estimate is that IFN makes $165m EBITDA and trades on a forward EV/EBITDA multiple of around 5.6x. Its free cash flow yield would be upwards of 25% if it doesn't embark on any significant expansions. Given the company's financial leverage, any slight positive re-rating by the market will result in huge share price appreciation. For example a forward EV/EBITDA of 8.0 on these figures would have its shares return to $1.

In an extreme "negative" scenario where an LGC is worth zero and there is no substantial energy price inflation, the company's EBITDA is approximately $50m and it is barely able to service its debt.

The real numbers will of course fall somewhere in the middle, and I'm waiting for its price to fall a bit further to cover for the downside risk before considering a buy.