Ann: Altium Pivot to the Cloud with Growing Momentum for Stronger, page-32

Ok so we have the TAM in there, whats the industry growing at, 5-10% pa?

Anyways as a thought exercise, if Altium had 100% market share and applied its top end 5 yr guidance EBITDA margin you'd get A564m. D&A was US6.3m on 80m in revenue last half, so for simplicity 12.5 times (1B/ 80m =12.5) US6.3m = A102m D&A (I know this could be much higher or lower)

Net interest cost 0
25% effective tax rate

564m - 102 - 0 * 75% = A346m NPAT or $2.64 EPS

Currently trading on 11x 100% market share EPS

Based on guidance Alu is on a run rate of about 190m, currently it has about 20% market share.

The US400m 5 yr guidance implies a lot more market share unless the TAM doubles.

Obviously if ALU had 100% market share it would likely have higher margins and prices, but I thought it was worth pointing out how much people are paying. (Who know maybe gross margins would be 80% in the scenario! But they'll never get 100% market share... )

ALU will certainly need that TAM to grow strongly and/or organically or acquire its way into other business lines for people to make money buying at these prices longer term.

To get a 15% pa return over the next decade ALU will need a share price of $120 by then. (excluding divs)
To get a 10% pa return a 10 yr share price of $75.

Even $75/30x earnings by then is $2.50 EPS, or A330m NPAT. Based on the 5yr guidance NPAT might be around A130m, so the next 5 years after that ALU would need to grow profits by a further 150%, and to justify a PE of 30, have a credible growth path for more double digit NPAT growth in the 2030s.

Food for thought