I am not an expert on the financial side of things but I still believe that there is still market over reaction to the strategic update and also market understanding (by some insto -maybe citigroup, of future potential and current undervaluation. I say this because:
In the last few days (all bad market days) there has been a large volume of off screen selling and buying - both bot operated, but the buyers seem to be really keen. It seems that some insto is accumulating - I dont know whther it is in anticipation that any sale price will be much higher than current price or they are accumulating for the potential buyer before the formal offer.
looking at the strategic update: the doctors will be payed 32% of their excertional EBIT in 2011 and 45% in 2013. when this is applied to 2009 exertional revenue --> we have 25 million remuneration to doctors in 2011 and 35 million in 2013.
this is a 5 million reduction to the current year EBIT of 27 million in 2011(resulting in EBITDA of 22million) and a 15million reduction to EBITDA in 2013 (leaves us with EBITDA of 12 million in 2013)(I note interest cost has not been included)-- but a fundamental flaw in this calculation is that it doesnt incorporated the growth that invariably seems to happen in highly skilled jobs after an incentive based remuneration scheme. So if the practices grow and number of doctors grow then the valuation metrics change dramtically.
Before the update there was no scope of growth. Although the doctors are indeed greedy - Is is a capitalist principle to feed the greed for collective gains. Now there is every reason for growth - that is the big change that has happened here in the last month. I believe that a big conglomerate will put an offer to buy - but they may change the remuneration model subsequent to takeover
I THINK SOMETHING IS COOKING GIVEN THE STEADY BOT TRADING EVEN ON BAD DAYS
VGH Price at posting:
26.0¢ Sentiment: ST Buy Disclosure: Held
