GREY:AIIFF - Post by User
Post by
Johnnycomelateon May 20, 2014 11:06pm
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Post# 22580616
Takeout target or Receivership?
Takeout target or Receivership?
I have been reading the posts on here over the past few days. The think the posts about Armtec being a failing business from the revenue side of the equasion are a little early considering their revenues have been quite stable over the past few years. The Drainage business has been substituted by the precast business so is this the direction the company intends to go by eventually folding up the drainage business and focusing on precast? Who knows for certain.
I think the real issue at hand right now is the massive debt. The company actually had an EBITDA of about $40M last year but paid out over $32M in interest and another $8M in Cap Ex netting the company nothing. I cannot see how the company will ever get out of debt unless they sell shares into the market or do a private placement and use the money to pay down the Brookfield debt of $100M. Until this happens the company will have to take on more debt when they have a bad quarter which will increase the interest payments and the circle will continue. Heard this story before... Ummm probably the US debt clock? LOL
Valuing the company based on an EBITDA of $40M at 4 times would make the company worth about $160M as a take over target but with a negative Equity (stripped of Goodwill and intangables) of approximately (-$100M) would mean lowering the value of $160M down to $60M. Currently trading at $25M it could mean a jump in the stock price of about 1.5 times to get the $60M market cap. Therefore I'd say a take out price could be as much as $2.40. Now the only way this stock ever see's $2.40 again is strictly as a take out target. Otherwise this company will only end up in the hands of Brookfield in receivership.