they made 106mill net profit b4 abnormals on 290mill shares = EPS of 36.5cents
Now they need an extra $300mill AUD to take debt down! So theyll issue an extra 240mill shares to the register at $1.25 to make the 300mill they seek (some already issued to institutions, the remaining seeked from shareholders)
Assumming shareholders give them the funds therell be an extra 240mill shares on top of the 290mill shares outstanding on the register, i.e 530mill shares!
Now assume they make 10% growth on NPAT of 106mill, i.e 116mill NPAT
What is gonna be the new EPS?? :
116/530mill shares = 0.219 or 22 cents per share
DEBT is still high tho.
Theres STILL $556mill in debt!
Equity goes from 672mill in equity + 300mill raised = 972mill in equity,
so debt to equity is 57%
ROE (return on equity) now drops to 116/972=11.9%
But a better measure is return on capital or return on assets, ie. the return on the debt PLUS the equity (this MUST be used when companys have a lot of debt or greater debt to equity, coz return on equity looks MUCH better if a company uses ALOT od DEBT)
So here now the debt is 556 mill plus the equity is 972mill, so total is 1528mill
return on capital is 116/1528 = 7.6%
*** OK, this is a 'rough' figure of what the new numbers will be assuming a 10% increase in NPAT and the increase in share capital etc
The figures for Return on Equity arent all that bad at 12%. Thats in the 12-15% buffet range.
Return on capital is 7.6% and 8% or over is still pretty good, so we're just below that
EPS is 22cents assuming full take up of the offer by retail shareholders
OK what PE does this type of company deserve???
In these conditions 5
So on a PE of 5 and EPS of 22cents, its worth $1.10!
Not that this is based on 116mill NPAT which is a 10% increase on 106mill NPAT (***before abnormals....they really made circa 86mill after abnormals!)
Im going to assume a NPAT of 100mill for 2009, not 116mill:
In this case 100mill NPAT/530mill shares = 0.188 or 19cents a share.
Say 20cents a share
PE 5 means $1.00 share value!
If u want PE 10, its worth $2.00
Thats the story folks!
Unless ive made a MISTAKE somewhere??? Please someone go over the figures and correct me!
HUNTLEY hasnt added the extra shares in his EPS forecast :):):):)
Why not??
What, he thinks we're all trusting his advice blindly!
This aint worth more than a buck at the moment, max $2 bucks with a PE 10
MARGINS are very very low!!!!
Look at operating margin and net profit margin! Even tho they are locked into long term contracts with gov depos etc, these are very low margin and leave very little margin for error in terms of 'operations management'
i.e operating margin on 3bill worth or revenue is 6.6%, and net profit margin is 3.5%.
Theres 3bill in revenues and their net profit is only 3.5% of that!
But the cash flows are considered 'safer' coz theyre long term contracts with high barriers to entry
Still, on 100mill NPAT instd of 116mill (forecast 10% growth), the ROE is 10.2%, and the return on debt + equity is now only 6.5%
debt is still high at 556mill for my liking and the Return on Equity and return on assets is average
EPS also 22 cents a share, so really on a PE of 5-10 its worth anywhere from $1 to $2 a share
TSE Price at posting:
$1.31 Sentiment: None Disclosure: Not Held
