Ann: Business update and restructure, page-5

Really interesting.

IMO they are purposefully showing the pre-overhead profitability of the business to see if there are any potential suitors interested in acquiring them, given if it's a strategic purchaser (i.e. another IT services business), they can cut away 90% of that $2m in overhead expense. For the SME telco + IT service segments (which I believe they would bundle together in a potential sale given the overlap), that implies ~$6.5m in pre-OH EBITDA (removing the $0.5m in EBITDA that Global did last year).

A reasonable sale multiple for this would be 8x EBITDA, which equates to a pre-tax transaction value of $52m. Assuming 25% corporate tax, that is $39m of net proceeds.

Deduct the -$5m of net debt they will have at the end of the year, and that is $34m of cash PLUS the global business vs. the current market cap of $25m.

Assuming the global is valued at 8x EBITDA and can grow to $1m of EBITDA over the next year or so, that is $34m of net cash plus $8m of value from Global (could be too conservative here), which equates to $42m of value, or 11c per share assuming 380m shares outstanding. That is +61% upside realizable over the next year on decently conservative assumptions. Upside to that would come from a higher sale multiple on the SME business (these biz's have gone for 9-10x EBITDA in the past) and / or higher revenue & EBITDA growth from Global (let's see what the Vodafone contract amendment announcement says in a couple of weeks).