I can ascribe $1.83 per share for HUM shareholders based on some simple assumptions about the deal.
There is an excellent article in the AFR today by Tony Boyd which sets out the rationale for the deal.
Some background facts.
1. LFS has poor liquidity and a whole bunch of shares in escrow
2. On current SP LFS pays a approx 8% Div yield
3. LFS floated at $2.50 and now trades around $2.00
4. LFG also floated recently touched a high of $8.00 and now trades around $5.50 on a similar dividend yield ( I bought some recently for $6.90 for my super fund) and happy to hold as they have a liquidity issue as well.
5. LFS is banking on $70m in cost synergies, mainly through technology and back office rationalisation.
6. LFS will put its bnpl into the Humm system and take the cards into the Liberty system thus having each product suite in the best systems.
7. As LFS is much larger than HUM it should be able to funds its growth at a much lower cost of debt.
8. When HUM fell out of the ASX300 it’s SP fell 10%
9. With increased share liquidity post deal LFS is likely to enter the ASX300 and get a SP uplift
10. With deal synergies alone and no volume growth from Humm the EPS of LFS is likely to increase 6.6% to 17.2 cents per share.
Value:
Shares from LFS (@ $2.00) value to HUM shareholder_________$0.68
Cash Val in HUM ($135m) value to HUM shareholder__________$0.30
Value in Flexicommercial_____________________________$0.68
Uplift in LFS share price from 2.00 to 2.50_________________$0.17
Total value_____________________________________ $1.83
Additional value could also be extracted if there was a special dividend fully franked as a way of distributing part of the post deal $135 m unrestricted cash holdings.
Value of Flexicommercial.
FY’21 cash NPAT $20.3m
Flexicomm revenues likely to increase 100% in FY’22
Firecast cash NPAT FY’22 $30m
Flexirent value 10x NPAT. = $30m being $0.68 per HUM share.
Cheers……Daicosisgod
HUM Price at posting:
91.5¢ Sentiment: Hold Disclosure: Held
(20min delay)