Firstly I don't believe 10X PE is a stretch. If stock market investors want a minimum 10% pa return this translates into 10 X earnings. This is provided you believe earnings/cash flow you are using will not fall to a permanently lower level (it may fall temporarily due to business cycles). Valution using PE is not too bad now that the company is debt free. EV/EBITDA multiples also confirm my belief that the companny is worth between 10c and 15c.
Also when adding in amounts for tranche 3A of deferred payments bear in mind EBITDA would have to be 53.5m which equates to a better performance than in 2009 (taking account of sale of businesses). This is not the most conservative assumption. Tranche 3A is optimistic. 3B is not even worth considering at this stage. Even if these targets were met the value of the company would increase substantially more than the amounts owing (think 18c to 25c a share valuation using 6/7X EBITDA)
Would be buying if the stock had not become a such a large position due to averaging down.
PGA Price at posting:
$1.08 Sentiment: Hold Disclosure: Held
