you recall I did some EPS analysis for 'what if Zenith never grows, but just stays where they are'. I think I ended up around $1.20 as a valuation with EPS and PE ratios that were fair and reasonable. That is, I hypothesised that with no growth at all, Zenith is still a great company, value-wise, because of their already in the books aggressive depreciation. That is, EPS will grow even as a steady as she goes MW. Now I conclude my methods are better than some other methods, because as an investor I am after profitable (bottom line) companies. So look at eps and if it can be maintained and grown. I am not much of a smoke and mirrors guy.
But, lucky for us, Grant Thornton have also done that. That valuation depends upon what your WACC is (should be). I contend the EBITDA multiples (pointed out by Southern) are ridiculously too low. And I consider the WACC used to be way too high, for such a moated, long term contracts in place, infrastructure company. GT let us know the value of Zenith using a more realistic (in my opinion) WACC assuming no growth (250 MW steady (we are at 232 right now).
Now look at the line above that is below the highlighted. We see 56 cents to 66 cents! We can easily get to the 50 cents our grumpy friend Fred says. So there you go. The value of Zenith is some number between 50 cents and $2. Depending upon what YOU think. The Cabal wanted the number to be $1. So our mates at Grant Thornton came up with $1.
In any case, we now have many different analysis of Zenith. We have Zenith actual accounts and contracts to read. Then we have Euroz, which I assume is 'the broker' in the report, we have GT, and we have ME! And of course, each investor has THEIR analysis.
I also want to point our re the EBIDTA and multiple. The initial offer in March trumpeted the 9.3 multiple to 'look after minority holders'. Now we see the multiples very much lower (to look after the Cabal). It is really very simple: the Cabal want to pay you a $1, and the EBITDA cant change,so you just lower the multiple. Note that I have always said (before all, based on the accounts and contracts) the EBITDA would be $30 mill or more for this fin year. In fact, my most recent post, after Zenith admitted it would be $30 mill, is that I think it will be closer to $31 mill. And we have in this GT report that Euroz agrees with me. (by the way, Euroz in the chart, has $33.8 mill for FY21, and my current analysis has it at $35 mill).
So we are now selling Zenith for a FY21 EBITDA multiple under 7. I dont know what is fair. I just did my values on EPS and PE and a very granular look at all the detail that produces that.
ZEN Price at posting:
98.0¢ Sentiment: Hold Disclosure: Held
