PGC is well set to achieve its medium term revenue target of A$30 million by FY14.
The healthcare industry in Australia is experiencing strong growth that is expected to continue going forward on account of favorable demographic factors.
We have used DCF methodology to value PGC and are initiating coverage on the stock with a target price of $0.061. In our view, PGC provides a great opportunity for investors looking for direct exposure to the growing healthcare sector in Australia. Through its ambitious expansion plan and aggressive growth strategy, PGC is a lucrative growth play within the Australian healthcare industry.
We have valued PGC using a beta of 0.91 with a target price of A$0.061, an upside of ~69%. The company is currently trading at an EV/EBITDA multiple of 9.4x on ourFY12E. The options and the convertible notes issued by PGC earlier are an overhang on its shares. However our target price takes into account dilution resulting from exercise of all the options and dilution from convertible notes. The options exercise would also result in an inflow of A$3 million, which will strengthen PGC?s financial position.
Seems they are very bullish on PGC and their growth prospects. The report doesn't mention the recent sale of Lifetime Planning and Tender Living Care. The sale of these assets could help to mitigate two of the weaknesses outlined in the report. One being an options overhang due to convertible debt and the other being the difficulty and expense of integrating these acquisitions.
I'm not entirely up with the convertible debt issue but the cashflow generated by the sale will surely be used to pay down some of the debt.
PGC Price at posting:
36.0¢ Sentiment: LT Buy Disclosure: Held
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