AYS to be next ISU, page-6

AYS currently has 210,792,810 shares on issue.

At $0.71, the market cap is $149.66m.

As of Dec 2017, AYS has:
Cash: $18.05m
Current borrowing: $13.6m
Non current borrowing: $82.8m

Net debt = $78.35m

Therefore the enterprise value = market cap + net debt = $149.66m + $78.35m = $228m

AYS first half 2018 result was very disappointing with ARPU and margins all dropping. Considering that the intensity of the competition since then has continued and in fact increased, it is reasonable to expect that second half 2018 will be just as bad or even worse.

Mobile segment:
This is the biggest problem area in my opinion.


A small drop in ARPU & average subscriber numbers can have devastating effect on AYS profitability.

Please note that this is not a prediction, only a simulation:

Let's assume:
- A small drop in subscriber numbers from 1,127,000 (closing number as of Dec 2017) to 1,100,000
- A further drop in ARPU from $19.02 (as of Dec 2017) to $18.00

Based on these numbers, the whole year revenue is now only:

12 months x 1,100,000 x $18 = $237.6m

If we generously assume that AYS is still able to maintain the gross margin around the 30% mark, then:

Gross profit = 30% x $237.6m = $71.28m

Assuming that H2 opex is similar to H1 opex, then full year opex will be around $54m

Hence, EBITDA will be approx. = $71.28m - $54m = $17.28m

Considering that in FY2017, Mobile contributed $43.1m EBITDA, this will represent a drop of 60%.

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If we assume that:
- Energy contributes $20m EBITDA
- Broadband continues to suffer $5m EBITDA loss (In HY2018, Broadband incurred $3.3m EBITDA loss)
- Negligible contribution from Device

Then based on this simulation, the overall underlying EBITDA for the company is: $17.28m + $20m - $5m = $32.28m

Which gives us a EV/EBITDA multiple of = $228m / $32.28m = 7.0

This kind of multiple is quite fair in my opinion, considering that AYS is an ordinary company with no competitive advantage whatsoever, competing in multiple highly competitive markets (mobile, energy, NBN) and has a relatively high level of debt (Net debt / EBITDA is approx 2.4 based on this simulation).

This is why the share price of AYS has been in a consistent down trend. The market is always forward looking and is currently expecting a further downgrade from AYS.

The danger is if AYS breaches its loan covenants and triggers the need to raise capital to shore up its balance sheet. The capital raising will have to be done at a big discount relative to the current share price which itself has already dropped a lot in the past 12 months.