I am back. So is SGH, page-372

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Mkr

4,667 Posts.

219

08/04/17

15:08

Post #: 23953209
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Originally posted by steve068 ↑

Umm... no... sorry Krispy - even ignoring that 15% margin on $810M is unattainable at current run rate.

Business valuations are carried out on EBITDA (or EBITDAW for SGH) basis - i.e. PROFITABILITY, not REVENUE.

If you are making $1B a year on razor thin margins, your business is worth far less than a smaller company making $100M a year with healthy margins. Revenue is to some extent a "vanity" metric for a business. I digress.

810M @ 15% margin is $121.5M profit.

At 2.5x multiple, that only gets you to $303.75M

SGH paid 6.9x for Quindell and that was a premium to their normal acquisition multiple - quite high for a professional services firm.

Even at 6.9x multiple, you only get to $838M (and you haven't accounted / discounted for the $810M in debt yet! the "BI" in "EBIT" means BEFORE Interest - so $40M in interest payments has to be factored in).

To reach your valuation of 2.5 Billion dollars, you would need to get a multiple of 20.5x
You would have to ask yourself - does this seem likely?

Total lending debt right now is $810M. $738M original debt + $32M capitalised interest payment + $40M in fresh equity. We don't need to assume.

Best scenario for current shareholders maybe - but not best scenario for Anchorage.

What would motivate Anchorage to take a future-dated option that delivers them a lower return versus what they can simply just take today in a pure debt-for-equity swap?

They can make a 300%+ return on their investment by simply pushing the company into receivership tomorrow morning - converting $240M into $810M.

To convince them to keep the company going, they need a plan that delivers a BETTER return than this.

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Chillax bro i dunno why you even bother with swc and krispyballs
A well informed and qualified bloke like yourself is clearly not their target market... let them prey on the vulnerable and wannabe investors who dream of becoming millionaires overnight.
Will teach them a lesson - never listen to investment advice on HC
Lol these guys are doing a service for HC by getting crowds worked up and posting on the SGH forum

SGH Price at posting: 12.0¢ Sentiment: Sell Disclosure: Not Held
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0 Great analysis

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