RE:Rumours Rumours Rumours :)Hello 1HTW,
SInce this is just rumour, lets have some fun with this for a moment.
If there were a serious suitor for SVC, what valuation method would be used and at what multiple?
Would a multiple of total revenue be used or perhaps a multiple based on the net equity of the company?
Once a method and multiple is agreed upon, where would that place the business valuation in terms of SP and could it be considered a serious bid? This of course would depend on what is acceptable to Dave & Co.
I'll take a shot at it -
I will use a multiple of 9 here, based on US figures of where an average telecom service/equipment provider values its business. I did not find and historical info to compare to the sector SVC operates in since it is still relatively new. I will apply this multiple to annual operating revenue and net equity.
(I did not use net profit as a valuation base since SVC has invested so much into R&D and IMO the profitability factor has not yet been fully realized nor does it account for the competitive edge that has been created for SVC.)
1) Using annual revenues of $100 million as a base and a multiple of 9x, this would equate to an approx. business valuation of $900 million or approx. $6.50 per share.
2) Using net equity as a base and again a multiple of 9x, this would equate to approx. $1.1 billion or a SP of approx $8.00.
I say, split the difference and call it a Business Valuation of $7.25 per share or approx. $1 billion.
Another consideration to note is that based on the 3Q f/s the company had a net cash position of $96 million after netting A/R against all liabilities. This accounts for apporx. .70 cents of the total SP.
So, would $7.25 per share satisfy the shareholders as well as Dave &Co?
This price would be approx. 2.74 times the current SP of $2.65.
Does this make sense to others? Let me know.
GLTA
B.