Makes you wonder why long time owners (presumably more knowledgeable in the childcare industry than you or I) are happy to vend in at 4x EBIT whilst the market values GEM at 3 times that multiple...
leveraging up you say? not any more! she's one for one debt and equity from here out.
Economies of scale and business synergies? 0!
I suggest that the centres are not at 4x EBIT but more like 5x. when that eventually comes out in the wash post the growth phase, it should wipe 2x EBIT off GEM's price = sub $4.00
remember, a DPR of 98% and ROE of 14% = sustainable growth rate of roughly 0.3%.
besides, it was obvious they needed cash. should have raised in the mid 5s...
GEM Price at posting:
$5.14 Sentiment: Sell Disclosure: Not Held
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