Ann: Trading Update to 31 December 2020, page-7

I have to say, I read the announcement quite differently; not only was it couched with a high degree of conservatism, but all the information - required to estimate a bottom-line number with a reasonable degree of accuracy - has already been disseminated into the public domain.

Indeed, you reference some of that information in the form of the relationship between Reported EBITDA (including AASB16) and Operating EBITDA (ex- AASB1).

And they've given a pro-forma balance sheet which allows us to estimate items below the EBITDA line, such as Depreciation (on the PP&E and Lease Liabilities of the enlarged group...as you have rightly pointed out), Net Interest Expense and Tax Expense.


So it isn't difficult to model DH2020 numbers:

EBITDA (Operating) = $8.25m (taking the mid-point of guidance)

Add: AASB impact = $3.0m (that was the figure for NTD alone, in FY2019... will be even greater for the enlarged company, but let's use $3.0m for the sake of conservative-ness)

= Reported EBITDA = $11.3m

Less: D&A = $4.8m (reflecting proportionately higher PP&E and Lease Liabilities, pro-rated for 5 months of T4U ownership. Compares to $2.3m in DH19 and $2.8m in JH2020 for NTD standalone )

=> EBIT = $6.5m

Less: Net Interest Expense = $0.9m (Assuming 8% Cost of Debt, pro rated for 5 months)

=> Pre-Tax Profit = ~$5.7m

Less: Tax Expense = $1.7m

=> DY2020 NPAT = $4.0m, corresponding to EPS of 3.5cps



I daresay that even your initial FY2021 EPS estimate of 5.9c was too conservative; I think it will come in at more like somewhere between 7.5cps and 8.0cps, predicated on the following:




As can be seen, I have also taken the liberty of including a stab at what I think FY2020's earnings might look like, which will be the first full-year of ownership of T4U.

The 23%, 37% and 44% expected growth in, respectively, EBITDA, EBIT and EPS is clearly noteworthy, and requires some checks of reasonable-ness.

One of these can be found in the implied EBIT margin for FY2022 which, at less than 4.5%, is no where close to pushing against precedent:





(Of course, assuming that an EBIT margin of 7% is once again reached - a not-implausible prospect given the sheer transformative nature of this acquisition and its scope for significant cost synergies - then that implies EBIT of some $30m, based on the ~$440m revenue base of the enlarged company.

If that happens then NTD certainly won't still have a market value of $80m.)

.