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Ann: Xped Strengthens Board with Key Appointment-XPE.AX, page-144

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exberliner1

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22/04/16

23:04

Post #: 17584158
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Originally posted by elphamale ↑

'So 2 million cash is only just above one years revenue to buy the company essentially?
Which is a pretty low purchase price for a business of any kind.'

hmmm, would have to entirely disagree with you on that point Hudson.

Myself and other partners I'm in business with would never purchase a business based on it's revenue.
Typically for a smaller business I would look at an income multiple of between 1 to 3 times, however I guess one could argue for more if it is an established and slightly larger business in a lucrative space.
Ever heard of the owner benefit formula?

Obviously there are other methods for determining fair value for a business but for smaller businesses I would not rely on revenue, cash flow, income capitalisation nor asset-based valuations.

Based on the little that we know about JCT's financials, I've assumed 5 x multiple on estimated pre-tax income of $400k to arrive at $2m.

btw I derived $400k pre-tax income (as a very rough guess) from
$1.8m revenue at 55% gross margin = @$1m gross profit less approx. $600k overheads (inc. 13 staff x $45k pa avg + rent, transport costs etc.) Have probably underestimated the overheads but as I said it's all a very rough guess.

So my point is why are we paying $3mil (in cash and guaranteed shares) plus a further 1.5% of the total scrip (in performance shares) for a business that probably generates less than $0.5m in profit

Am also theorising that JCT were possibly struggling to grow their business without a major cash injection (hence the immediate drawdown facility offer and up to $1.5m in working capital) not to mention some pretty nifty technology otherwise known as ADRC to generate new business.
So... are we are not the ones sitting in the box seat here? And if so, why are we offering JCT the world?

Also let's not forget that we recently acquired 35% of Vital Xense in exchange for.... the non-exclusive use of our technology plus financial, BD and technical support. i.e. no cash and no shares for consideration as once again we are in the box seat and the gents at Vital Xense obviously recognised the benefit to align themselves with us.

Over at SRT, there is an RTO underway whereby consideration for a profitable company with a revolutionary fintech solution will be performance based only. i.e. no cash or shares up front. Admittedly that is ground breaking for an ASX listing but everyone seems happy.

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Maybe you're just a bit spooked because the number of shares looks pretty scary for JCT and the management performance shares.

Imagine though if the SP was 43c and we had 170mn shares but the same mkt cap - we would be then talking about 1/10th the number of shares to be issued and the management bonus shares would be just 15mn not 150mn.

Under those circumstances while the finances would be the same it would look much better.

EB

XPE Price at posting: 4.2¢ Sentiment: Buy Disclosure: Held
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Last 7.0¢		Change 0.001(1.45%)		Mkt cap ! $1.889M

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No.	Vol.	Price($)
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Price($)	Vol.	No.
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Ann: Xped Strengthens Board with Key Appointment-XPE.AX, page-144

Wealth Within considers potential takeover targets in Australia's booming infrastructure industry

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Lake Resources implies news article on job cuts made up; non-core sales "not material" and no rule 15.7 breach

Talking Australia's very competitive property landscape: Realty Talks

Warren Tredrea’s weekly sports business wrap: the latest on business in sport

AI stocks: What to expect in 2024-25

Flynn Gold flags mid-grade drill hits and always eye-catching rock chips

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Imricor raises $35M to pursue growth and expansion into Australia and NZ

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Ann: Xped Strengthens Board with Key Appointment-XPE.AX, page-144

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Lake Resources implies news article on job cuts made up; non-core sales "not material" and no rule 15.7 breach

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Sellers (Offers)

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