GREY:ACEXF - Post by User
Post by
TallerCraigon Feb 19, 2019 8:11pm
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Post# 29385566
20% Cashflow Yield, Buy Back Every Share You Can…
20% Cashflow Yield, Buy Back Every Share You Can…Management finally said enough is enough and is coming around to a way of thinking about how grossly undervalued this stock is. The acknowledgement of this through the announcement of a 10% buy back of the company.
The stock can be quite illiquid, which has been part of the problem the last month. Bring in a buyer in size will be a large help to that as it brings a potential bid into the market everyday.
Let’s Dig In…
Cashflow Cashflow Cashflow
You have to pay for the buyback somehow, If you annualize the first 3 Qs of the fiscal year you get Free Cashflow of $17.25 USD ($22.8M CAD) less NCI payout at 40% you have Cashflow attributable to QIC shareholders of $10.35 USD ($13.75M CAD) for a Cashflow Yield of 20%.
With Quarterly principal payments on its credit facilities of $1.6M USD ($2.1M CAD) there is close to $11M USD of cash left over. Add to the fact there is prepayment penalty up to an additional 4% on accelerated debt payments and they are not over levered at around 2.0 – 2.5x Net Debt/EBITDA it makes so much sense to buyback stock.
What does this all mean for QIC shareholders, they can reduce their debt by $5M+ CAD while buying back 10% of the company and still have money left over to invest and grow the business!!!
On Valuation
With net debt of $41.8M USD attributable to QIC shareholders and a $19.8M USD EBITDA estimate attributable to QIC shareholders for Next 12 Months I get to a price 4.5x EV/EBITDA when the peer group is trading at closer to 8 – 9x EV/EBITDA.
For Argument sake lets put a 8x EV/EBITDA multiple on the business gets me to 2.15/share or 150% upside. Now if they buy back the maximum 5.6M shares from the announced buyback on the same numbers it gets to a share price on the current float of 2.35/share or adding 0.20/share in value.
That is why I love the idea of starting a buyback relative to initiating a dividend especially in a consolidating space where the PBL.TO takeout bid is always a possibility and it sure wouldn’t be at 4x EV/EBITDA...
I don’t even think Manu would sell the company for 1.50/share if someone offered him that tomorrow…
LONG