It could be useful to throw out a SOTP analysis to illustrate how undervalued the equity is in my view and what an opportunity it could be to scoop up stock:
- Mitel business did $1.85m last quarter or $7.4m annualised
- Because of the flat-ish growth, I think a 5.5x revenue multiple is realistic and fair for this business, valuing this division at $40.7m
- IT Operations business did $814k last quarter or $3.3m annualized
- Because of the flat-ish growth, I think a 5.5x revenue multiple is realistic and fair for this business, valuting this division at $18.0m
- GSX business did $1.73m last quarter or $6.9m annualized, but given underlying growth metrics the company has recently provided (msft user growth), I will use $7.5m annualized revenue. I think the GSX business unit will triumph the Mitel business in quarterly revenue as of this December quarter
- Because of the rapid growth profile in GSX, I think a 8x revenue multiple is realistic and fair for this business, valuing this division at $60m
- SOTP = Mitel unit business value (
$40.7m) + IT Operations business value (
$18.0m) + GSX unit business value (
$60.0m) =
$118.7m less company net debt (
$8.0m) =
$110.7m in total net sum of the parts valuation. Now divide this by the number of shares outstanding (267m) and you get to the implied sum of the parts equity value per share of
$0.415.
In Summary, MTLO shares are wildly undervalued.