sure but in a divestment scenario, with ebitda of 140ish and net...

sure but in a divestment scenario, with ebitda of 140ish and net debt of 500mil, what sort of market cap would be realised?

@Just_a_guy

Ok, I see what you mean now, and I don’t really know the answer. But, being ECR a pure haulage business (i.e. without network assets), it is a lot less capital-intensive (hence FCF-generative) than AZJ; if you look at slide 18 of today’s presentation, ECR’s core Capex is running at just <5% of Revenue, as opposed to ~16% for AZJ. Thus, it seems exceedingly conservative to me to assume that it will be valued by the market at a discount to AZJ in EV/EBITDA terms.

If we think in terms of underlying FCF, and assuming a 4.0% cost of debt (consistent with a BBB rating), the business should be generating approximately (140m$-230m$*5%-500m$*4%)*(1-30%) = 76m$; even if the market decides to price the stock at a 10.0% pa underlying FCF yield on Market Cap (i.e. higher than AZJ’s current FCF yield), that would still correspond to 760m$, which is a fair bit higher than your previous 340m$ estimate.

Does this seem reasonable to you?