Ann: Managing Director's AGM Presentation, page-4

The Gallery Facades business is an exceptionally capital light business (see the acquired PPE of less than $200k), so I think it will (as the market unpicks this fact) be ascribed a considerably higher multiple than the average of the rest of the business.

The majority of the current work on the GF books is for new construction. To get from where the business is, to where the business will be, we need to make allowance not only for the ongoing construction of new facades, but the considerable additional rectification work that is likely to come out of the many thousands of non-compliant faceades that will require replacement/modicifation in coming years.

The indication from management is that replacement will likely cost at least twice the original installation (re-cladding an operational building versus cladding a new one as constructed). My expectation is that as re-cladding removes supply from the marketplace, margins will expand. I was modelling EBIT margins of between 15-20%, which is a considerable uplift of the present low double-digit margins.

On calls with the company, they indicate there is hundreds of millions of new work currently out for tender, ignoring the re-cladding that is coming down the pipeline.

I would hazard that it is not beyond the capability of the GF business to generate revenues of around $200m annually within 3 or 4 years, with EBIT margins at perhaps 15% (maybe more) which would have EBIT running around $30m+ (of which GCS would speak for about $15m). To justify the and EV of $112m, one need apply an EV/EBIT multiple of about 7.5x, which doesn't strike me as excessive for a capital light business that would have exhibited extraordinary growth to be in such an earnings position. I'd be surprised if over FY18, the business isn't almost halfway to these figures, with a pipeline that demonstrates a clear pathway to the final destination.

Particularly in light of the "tax-advantaged" situation GCS finds itself in for the next couple of years, I consider the EV/EBITDA multiple the GF business should trade on, whilst not deserving of a double-digit number, will be a good deal higher than the rest of the businesses GCS operate.

The point of the piece was more that the downside protection is very good in a situation where a relatively small part of the business had the potential to be worth the EV - Eternalgrowth