52 week high, page-7

As I see it, in order for a 200m$ EV (corresponding to a 9.3x EV/EBITDA) to make sense, the market would basically need to form the view that ISD’s EBITDA has already found a base and will grow from its current level at a rate roughly on par with the broader market (i.e. 5% pa kind of thing).

While that is indeed possible, I suspect it will take some time (and actual results being delivered) before it becomes the consensus view. So, at this stage, a fair value range of 0.50$-0.60$ (corresponding to an EV/EBITDA of 6.0-7.0x) looks more reasonable to me.

Having said that, I too (despite my general lack of interest for “price action” per se) wouldn’t underestimate the impact of momentum here, especially given that crossing the 100m$ market cap threshold (0.50$/share) will put re-inclusion into the ASX300 back on the cards.

As to when it would make sense to sell, if ISD’s underlying rate of deleveraging (i.e. annual improve in NCAV before tax items, which is not exactly the same thing as FCF, but the idea is similar) continues at its current run rate of ~12m$ pa, I personally will be in no rush to exit, even in the event that the SP runs a bit ahead of itself.

Looking one year forward, and assuming that Net Debt will have decreased to 20m$ or slightly less by then, I would personally start having an itchy finger when those hypothetical 12m$ pa give a yield premium to the ASX200 (in Market Cap terms) of less than 100bp pa.

Everything else being the same (i.e. assuming that the ASX200 earnings yield will still be around 6.0% pa at that point), the implied Market Cap would be 12m$/(6.0%+1.0%) = 171m$ (or 0.855$/share).

So, at 0.75$, I think I might still be a happy holder after all (perhaps with a lower portfolio weight, and depending of course on whether things keep going to plan for ISD, on the possible availability of better opportunities in the market, etc.).

Just my two cents as usual.