a catalogue of errors, page-9

Thanks. I think all investments need luck even very ‘safe’ ones. For instance given the multiple my csl shares are trading on, I need everything to continue going smoothly otherwise I’ll lose money (obviously tax implications effects how I can manage this risk/luck).

In terms of pmp, it’s had a horror run since you sold. Given the misses, it’s been duely punished.

But in terms of looking forward, now capacity has reduced and competition matured (hopefully), we’re apparently seeing price rises (according to Gohdi).

As you suggest the biggest factor here is the stable ebitda level/Dcf runoff. But I think given the vast difference in outcomes I think a probability weighting of outcomes is probably reasonable.

Option 1: pmp can’t make a margin on their work due to high fixed costs, and they can’t sevice their debt, and this goes to zero. This will result in there being one bulk printer in aus.
Maybe I’m biased but I think this is a very low possibility maybe 10% at most. Value $o.00 (actually probably the Nta would give some value)

Option 2: they continue stumbling along making enough to stay in business maybe at an ebitda of 30mil (margin of 3-4% cf IGL is at 10.7%). They’ll still have plenty to service and repay their debt very quickly. Capex will suffer, IGL will thrive. Once this seems stablises and they are debt free paying a small dividend ev/ebitda probably reverts to about 4. Share price of 0.23c. Maybe a 20% chance this happens.

Option 3: the restructure and costs spent reducing costs results in them achieving reasonable margins but the horrible dynamics of the industry continues with fierce competition with Ive (by all accounts the competition over the last decade has been as fierce as any sector in living memory hence the carnage), or revenues falling significantly (Myers goes to the wall etc), maybe 6-7% ebitda margin, ebitda of 50-60, ev/ebitda 5ish, debt repaid, share price of 45-50c maybe 50% chance.

Option 4: restructure works, margins for Ive and pmp improve given the duopoly (to 12% from 10.7% for IVE). Revenues stabilise with cost increases offsetting volume and automation takes out some labour costs. Ebitda 100mil. Ev/ebitda up to 7 (IVE already at >6). Share price >$1. Maybe a 20% chance.

Now this is obviously very vague in nature but on a probability weighted value there’s a lot of upside. so this gives my assumptions a lot of margin for error imo.

At current price there’s a high chance, again imo, of a>30% fcfe in 2019.