RE:RE:RE:RE:Lots of Insider SELLING - NO BuysYeppers12 wrote: So, I think the stock is going to get hammered on multiple fronts.
- Interest Rates (it's debt heavy)
- Housing market cooling (less transactions)
- Customer Churn
- Reputation
Looking at it solely by it's growth and valuation it's cheap but just because it's cheap doesn't mean it can't become cheaper.
I wouldn't be surprised if it becomes a target of a company that has a good reputation and that can reprice it's product back to fair value and swallow the debt. I think that doesn't happen though until it's in the low teens. Something like Constellation or the folks from Link.
The current net debt (considering the cash they hold) isn't that heavy. Agreed that the acquisition will increase the leverage significantly, however the cost of capital despite increasing rates should still be favorable to shareholders, so long as the cashflow they generate covers it (which it should, even with rates increasing by 3-4%).
The activities they will add from the acquisition (Retirement and Superannuation Solutions, Corporate Markets) will diversify activities, and add a lot of recurring revenue that's not transaction based.
Link group has received an offer of A$1.5bn just for the RSS business at the start of 2022, so it's not like they're purchasing something without value.
Lastly, everything can always become cheaper. Ares capital are smart people and they will be investing an extra $840M at close in pref shares and common shares at $53. It's hard to determine how cheap the stock can become due to perception, but value seems already cheap. Even if they only do 500 millions EBITDA (instead of forecast 700) in FY23 after the acquisition, the company would be significantly undervalued at the current share price. Since the CEO only gets shares and no actual $$$ from his position, he has vested interest to protect the share price.