This is my estimate that I may intend to use for my SMSF valuation. please provide your thoughts
modelling a dilutive M&A scenario,where:
- The company uses 80% of its $333M cash (i.e. $266.4M)
- The remaining 20% cash ($66.6M) stays on the balance sheet
- The target is a Tier 1 hard rock lithium project (pre-FID)
- The M&A is funded 80% with cash + 20% with new shares (dilution event)
Step-by-StepDilutive M&A Valuation (Ex-Dividend)
Step 1:M&A Funding Breakdown
| Source | Amount (AUD) | Notes |
|---|
| 1 | Cash (80%) | $266.4M | From existing $333M |
|---|
| 2 | New shares (20%) | $66.6M equivalent | Dilution occurs |
|---|
| 3 | Total deal size | $333M | Implied valuation of lithium project |
|---|
Step 2:Estimate Dilution from Share Issue
Let’s assume new shares are issued at $0.25/share(private deal valuation).
New shares issued=66.6M0.25=266.4 million shares\text{Newshares issued} = \frac{66.6M}{0.25} = 266.4\ \text{million shares}
| Metric | Value |
|---|
| 1 | Original SOI | 1,204,000,000 |
|---|
| 2 | New shares | 266,400,000 |
|---|
| 3 | Post-M&A SOI | 1,470,400,000 |
|---|
| 4 | Dilution | ~18.1% |
|---|
Step 3:Lithium Asset Value in New Structure
Assume:
- Lithium project fair value = full $333M
- Apply a 30% discount (pre-FID, country risk, project uncertainty)
- Adjusted value = $233.1M
233.1M1.4704B shares=$0.1585/share
Step 4:Other Assets (Cash + Royalty)
A. Remaining Cash
66.6M÷1.4704B=$0.0453/share
B. Royalty Asset (no change)
- DCF value: $28.6M
- Per share (diluted):
28.6M÷1.4704B=$0.0194/share
TotalUndiscounted Value Per Share
| Component | Value/Share (AUD) |
|---|
| 1 | Lithium Project (discounted) | $0.1585 |
|---|
| 2 | Cash (post-M&A) | $0.0453 |
|---|
| 3 | Royalty Asset | $0.0194 |
|---|
| 4 | Total (undiscounted) | $0.2232 |
|---|
Step 5: Apply Delisting Discount (15%–20%)
| Discount | Value/Share |
|---|
| 1 | 15% | $0.2232 × 0.85 = $0.1897 |
|---|
| 2 | 20% | $0.2232 × 0.80 = $0.1786 |
|---|
FinalValuation Summary – Dilutive M&A, 80% Cash Funded
| Scenario | Value/Share (AUD) |
|---|
| 1 | Undiscounted | $0.223 |
|---|
| 2 | With 15% delisting discount | $0.190 |
|---|
| 3 | With 20% delisting discount | $0.179 |
|---|
KeyTakeaways
- Using 80% cash and issuing shares at $0.25 adds ~18% dilution
- Project adds value, but the dilution offsets much of the upside
- Final fair value = $0.179–$0.190/share, assuming conservative inputs
(20min delay)