"Last 3 years , earnings in the 2nd half have been negative.
Note revenue up 5.7% in 1st 11 weeks and 36.1% in 12 week of Qtr3 of FY20 so assume breakeven in 2nd half of FY20 before abnormals.
Eps= 32.9c in H1 of FY20.
Diluted EPS FY20 = ( 32.9 + 0 ) x 28.9 / 38.2 = 24.9 c
( For simplicity I'll ignore Deprec > capex and savings on interest from the capital raising )
At $5.49 , est P/E FY20 = 22.0
Not CHEAP ."
Fair enough methodology, however I question using the EPS for the current 12-month period, for reasons that DH2019 result of EPS 32.9c is what one could objectively consider to be totally unrepresentative for the company, given that was a period where the performance of the business reflected all the neglect and capital mis-allocation of the preceding 5 years.
For context, previous Dec Half EPS figures were as follows:
DH2012: 76c
DH2013: 58c
DH2014: 44c
DH2015: 63c
DH2016: 60c
DH2017: 60c
DH2018: 36c (Where the problems started)
DH2019: 33c
I'm not suggesting that a Dec half EPS 76c is on the cards and time soon, nor even 60c, for that matter.
But I think that - still using re-dilution number shares on issue from the recent equity raising - between 45cps to 50cps certainly is well within the realms of possibility.
Adjusted for the increased share count, that equates to 34cps to 38cps
Going with your break-even in the current half (although I'd not be surprised in the least if they actually made a profit), that equates to a P/E (at the current share price of $5.40) between:
$5.40/$0.38 = 14.3x and $5.40/$$0.34 = 15.8x
Given the company is now totally financially de-risked, and will be sitting with a fair chunk of net cash over its working capital cycle, I think that those multiples are not overly demanding for a company that is still being turned around, with the optionality of further earnings upside should the turnaround strategy be comprehensively successful.
For context, should the historical EPS of 60cps (45cps, adjusted for the additional shares) be achieved again at some stage over the next two years - which is well within the realms of possibility, I think - that would result in a P/E of less than 12x.
But I can understand someone selling on the basis that the majority of the shareholder value restoration has been delivered in terms of the share price performance, and that the risk-adjusted residual returns now on offer aren't that attractive.
Me; I think the business has been so badly run in recent years, that if some half-decent operators took hold of it, that it is could easily do the same, and even better, than it has ever done in the past.
In short, I'm in the 60c (45c post-dilution) EPS camp.
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