What I suspect few people really appreciate is the impact Covid...

What I suspect few people really appreciate is the impact Covid had on the financial performance of this business; the yellow "wedge in the EBITDA chart below is what I call the "Covid Gap", which is the difference between what EBITDA could have been (if the company was travelling in clear air from the ability to both roll-out terminals as well as for the existing terminal pool to transact normally), and the actual reported results:




The past half-year is therefore a far closer reflection of the true underlying earnings potential of the business.   As such, it exceeded my expectations by quite a large degree (my modelling predicted $6.5m EBITDA... just goes to show what a poor financial modeler I am!)

But even then, that half included wide scale shutdowns over December/January due to the Omnicron variant, so even MH2022 EBITDA of $7.4m is alos understated.  I think a number of at least $8.0m is more representative had the business been operating under normal, non-locked down conditions.

So I think they exited 31 March at an EBITDA run-rate of somewhere between $8.5m and $9.0m , meaning $10m EBITDA is easily on the cards for SH2022, followed by at least $12m for MH2023, for full-year FY2023 EBITDA of $22m.  (All figures in herein in NZ dollars, recall.)

Absent any capital management or dividends (who thought we'd now be discussing SMP in that context?) I expect the company will exit FY2023 with at least $10m in Net Cash (the interest on the company's borrowings is modest and will surely decline as debt is paid down, the con. notes are gone, and the company isn't going to be paying tax any time soon, given the level of accumulated losses).

So at today's Market Cap of A$160m, that's effectively NZ175m and implies a FY2023 prospective EV of NZ165m

Valuation-wise, that's an EV/EBITDA of just 7.5x .... for a business growing its top line probably close to 35% pa and its EBITDA probably around 50%pao ver the next two years.

(There's about $9m pa in D&A, though, so the EV/EBIT is close to 12.5x, but even that is very cheap in the context of the underlying organic growth).

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