The company needs to be valued as a DCF to take into account growth in centre numbers.
The company is forecasting an additional 55 centres over the next 3 years plus they already have 13 centres opened and in their incubator. Therefore they are forecasting they'll go from 56 centres currently to circa 124 centres in 2028.
I am looking 5 years out and have assumed much more conservative numbers - an extra 50 centres total over 5 years rather than managements expectations of 68 centres over 3 years.
FY 2030
Centres: 106
Revenue: $408m
Centre EBITDA: $83m
Group EBITDA: $62m
Net debt: $35m
Enterprise value at 10x EBITDA = $620m
Equity value = $585m
Shares on issue: 232m
Share Price: $2.50 per shareIRR: 29% p.a
Cash on cash multiple: 3.40 x
Obviously there are a lot of variables but key drivers are no. centres and exit multiple. My estimate of growth in centres is about half of what management are guiding to 10 p.a vs 18 p.a and my exit multiple is based on the lower end of the recent AFR article on a childcare sale at 10-12x EBITDA.
There's risks around occupancy (cyclical and i don't worry too much) and regulation (could be positive or negative) but risk/reward this appears a good bet.
Additionally, the operator Mat Edwards owns 50%, has his whole net worth riding on this and has a history of executing and making shareholders $$.
(20min delay)