Do the math people! Management stated that they would do two tuck in aquisitions before the end of this calendar year.
They have done one so far: Last month, for $1 Mil they purchased Costal Med Tech (CMT) at $4 Mil annual revenue and $875G EBITDA. They now have 61 days to complete the second transaction if they are want to be seen as credible. On or about tomorrow they will close the brokered deal which will give them around $8 Mil in the bank. But what does that mean to us as shareholders.
Let's break it down....As of August's report, Beacon has a sp target of $0.45 on FY19 EBITDA of $14.9 Mil. This forecast included average industry CAGR growth, did not factor in aquisitions, and put a forward sp multiple of 12X FY19 EBITDA (average for industry is 12X, but some trade as high as 16X)
My Assumptions...
Assuming (1) that management purchases a company with similar financial metrics as CMT (which is plausable since management has stated multiple times that they will remain disciplined), and (2) that they use $4 mil of their available cash (even though they have $8 Mil available AND the credit facility), it follows that the next aquisition would have annual revenues of $16 Mil ( 4 x $4 Mil) with EBITDA of $3.5 Mil. (4 x $875G). Together, the two aquisitions would represent an addition of $20 Mil to FY19 Revenue and $4.3 Mil to EBITDA above Beacon's forecast.
Assuming that the street wakes up to the fact that, presently, the stock is severely undervalued at less that 4X FY19 EBITDA and assuming it starts to trade at the industry average of 12X forward EBITDA, these aquisitions represent upside of $0.14 per share ($4.3 Mil/370 Mil shares x 12 ) added onto the Beacon forecast. This would raise the sp target to $.59.
What it breaks down to is this:
With the existing float, every $308,333.33 of EBITDA that the company purchases represents $0.01 in sp forecast appreciation (or 7.14% from yesterdays close).
Management has in the past, put on the table that they would be open to larger aquisitions as well as smaller tuck in ones. As per the January 29, 2018 press release: "There are larger acquisitions which come our way," continued Mr. Greenberg. "These are generally between $20 million and $30 million in revenue. While our focus is tuck-in smaller acquisitions, if we can find the right deal that meets our acquisition requirements, at the right pricing and acquisition structure, we may also complete larger acquisitions." These larger targets fall well within their cash position (again assumingn they pick up a company with the same metrics as CMT)