RE:RE:Letter from the CEO
colourama wrote:
Torontojay, if we hypothesize a future acquisition being another Code Bleu sized company with similar metrics, what would your estimates for the increase in fair value be? Even a fairly conservative valuation gets me to $1.50 per share.
Code Bleu achieved $3.9m in ebitda in its previous 12 months prior to acquisition and had a purchase price at only $17m. Currently Premier has a ttm ebitda of $6.1m with $4.4m in cash and $11.2m in debt. If they can acquire a similar company with similar metrics then they could achieve $10m + in ebitda while adding around $20m to its enterprise value. We know they've been given a credit line of $27m to fund future acquisitions so this is within reason.
Current enterprise value ~ $40m (60 cent share price)
future ebitda potential excluding organic growth ~ $10m+
Estimate debt ~ $16m + $11.2m = $27.2m
cash ~ $0.5m
Total share count = 54.09m
Using a 14.8 times ebitda multiple which is the market weighted average of US stocks for the personal healthcare services I get the following:
enterprise value = $10*14.8 = $148m
marketcap = EV - debt + cash = $148 -$27.2m + $0.5 = $121.3m
divide this number by ~ 54 m shares and we get a share price of $2.24 !
What is an appropriate ebitda multiple?
If you believe 10 is more appropriate then you'd get a share price of $1.35 post acquisition. So there you have it. Premier Health is being severely discounted by the market and nobody is paying attention to it.
https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/vebitda.html