Concordia Healthcare Corp. T.CXR.R

SOTP analysis for longs

[colt451]

I ran a simplified SOTP analysis to decide whether to hold or sell, it showed the potential for 100% upside from the current PPS therefore I concluded I would continue to hold - however it should be noted that in the case of fraud these numbers are worthless. 

I calculated conservative guidance for 2017 @ $480M EBITDA.

AMCO segment: $480M * 60% = $288M/year EBITDA 
$288M/year * 11X multiple = $3.17B AMCO Segment Valuation.* 

NA segment: 480*40% = $192M/year EBITDA. 
$192M/year * 4X multiple = $768M NA Segment Valuation**

Net Debt: $3.5B - $145M cash - $100M 2H 16' positive cash flow = $3.26B Net Debt

$3.26B debt - $3.17B AMCO sale = $100M in debt outstanding. 
$768M NA segment sale - $100M in debt outstanding = $668M Net Proceeds

$668M/51 = $13/share

*11X multiple is based on high single digit AMCO growth, similar companies with high single digit growth have been acquired in the past year between 12X - 25X EBITDA. 

**A 4X multiple was used  to account for declining growth in NA portfolio, however it should be noted that there has not been a single pharma sale at a 4X EBITDA valuation - the lowest I have come across in the past 2 years is 6X.

[Marky1]

Great analysis Colt! Thank you so much for spending your valuable time on these calculations...Good times will be coming, I truly believe in the company and its future....

[LaticelnExile]

This post has been removed in accordance with Community Policy

[Craigbad]

Hilarious bagholder quotes compilation! I think it would be fun to make a compilation of "the bottom is in" posts on this sinkhole at the end of the week!

[Buriedincxr1]

Colt:  you seem to be quite intelligent and calculated. Your post of the 100% upside possibility was also applicable last week when SP was at 10.60, now we are 8.50 and tomorrow maybe 7, from hoping for 21 now we are hoping for 14.    Not too many funds hold this stock now meaning some is in the hands of people like you and me but most is in the hands of the ones with knowledge

[colt451]

Worth remembering that the market does not always efficiently price stocks.  VTAE was just bought out by Allergan at a 160% premium - it is not in any way a comparable to Concordia, more of just a reminder how the market does not necessarily capture value correctly.