3.5 times EBITDA at a cost of $5m = 1.42m EBITDA on $10m revenue (14.2% margin )
The question I would like to know is how much of that 1.42m will be reduced by the ITDA.
If PGC could have revenue of $40 million at 14.2% EBITDA margin the stock is very cheap
On the basis PGC is acquiring Scanmedics without issuing lots of new shares but using their Westpac debt facility is a winner .
Earnings 14.2% on your revenue at a cost of acquisition of around 3% cost of buying that revenue is very EPS accretive
My maths is if the acquisition cost $5m , interest on that at 6% is like buying the revenue at a 3% cost
Even if the ITDA is 420k , which I doubt it will be , add 6 months of LR , improved trading conditions and we might actually see the 1m NPAT in 2013/14 increase above $2.5 to maybe as high as $3m.
Hopefully they maintain the dividend at 1.25 cents and don't increase it , and pay back the debt or use the cash flow to buy more businesses at 3.5 times , going to $1 in my opinion over the next few years
PGC Price at posting:
35.0¢ Sentiment: Buy Disclosure: Held
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