SUL and JBH are trading on an 10-11x multiple EV/EBITDA...

SUL and JBH are trading on an 10-11x multiple EV/EBITDA multiple. Their earnings growth looks poorer than GXL. JBH is growing like for like sales at 6.3% at JB HiFi, but Good Guys is only growing at 0.2%. SUL grew revenue at 2.2% and 'normalised' NPAT of 0.7%.

Just remember, only $2.9 million of the hit to underlying earnings is an actual change from previous trading. The other revisions to underlying EBITDA (rightly or wrongly) are merely changes to the accounting treatment of expenses that were already being incurred in previous years - i.e. growth is still strong. Even the Vet division's LFL sales growth is strong taking into account the revised forecast.

The only (significant) negative for GXL is the high level of debt. It is actually quite enormous, I am sad I did not bother reading the report earlier. But, this isn't an issue if they can pay it off, which hopefully they can.

FYI, GXL is now on a 7x EV/EBITDA multiple (based on the lowered guidance of $98m EBITDA). If they are to trade on the same multiple as SUL and JBH, they should be at $6.50ish, funny as that was my original target. SUL and JBH have a 1.5x Debt/EBITDA ratio compared to GXL's 2.5 :S


By way of contrast, MYR is trading on a 5.5x multiple (based on a very quick calculation where I excluded all the restructuring expenses that otherwise leave it in a very serious loss position). So yes, GXL could still fall further if you think this company is doing as poorly as MYR.