"Based on 10.0x EV/EBIT (so, a modest premium to the long-term...

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vic_wattle

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08/08/23

13:53

Post #: 69223615
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Originally posted by madamswer ↑

I did the "Buy-the-Rumour; Sell-the-Fact" thing today, based on an assessment that the stock is now fairly valued.

Here's the thinking:

Based on my preferred valuation metric, namely 12-month prospective EV/EBIT, fair value is represented by MND's long-term average of around 8.5x to 9.0x (or 10.0x if the outlier years of 2019 and 2020 are included):

View attachment 5462995

Looking now at MND's prospective EV/EBIT for FY2024:

I think the company will certainly be looking at in excess of $100m in EBIT for FY2024 (c.f. FY2022 = $73m and H1, 2023 = $41.5m).

As a base case, margin recovery to around 5.5% (cf. FY2022 = 4.0% and H1,2023 = 4.6%) on Revenue of around $2.0bn (c.f. FY2022 = $1.81bn and H1, 2023 = $897m) would result in EBIT of $110m.

These assumptions are placed in historical context below:

View attachment 5463028 View attachment 5463025 View attachment 5463022

Based on 10.0x EV/EBIT (so, a modest premium to the long-term 8.5x to 9.0x to reflect positive business momentum), that yields an EV of $1.2bn .

Assuming the current Net Cash Balance of around $180m remains unchanged going forward, so the Equity Value is $1,380bn, or $13.2o/share.

Of course, animal spirits could take the multiple higher, but if that happens then we are entering the realm of valuation multiple for the stock that is experienced far less often than not.

But for those who might like to write their own adventure story, the following matrix provides a range of share price valuations for various combinations of EBIT and EBIT multiple:

View attachment 5463061

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"Based on 10.0x EV/EBIT (so, a modest premium to the long-term 8.5x to 9.0x to reflect positive business momentum), that yields an EV of $1.2bn"

Have you made an oversight there? How did you arrive at $1.2bn? Should it be EV/EBIT of 10.9 as shown in your first chart? 10.9 x $110m = $1.2bn?

MND Price at posting: $13.62 Sentiment: None Disclosure: Held
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0 Great analysis

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