What I am saying is that the market has not fully appreciated...

What I am saying is that the market has not fully appreciated the P&L effects of merging Clever. The relevant measure is their combined FY+2 EBITDA forecast- which is quite low compared to peers.

You look at the published projected EBITDA for FY+2 as the basis of a comps set. This is because a high multiple company on a LTM basis could have just fallen into a hole. If a company is expected to rapidly grow then that growth is reflected in its FY2+ EBITDA forecasts. Hence its forward EBITDA multiple is low and its LTM EBITDA multiple is high.

Also when I say NPAT will increase 300% and EBITDA 50% I didn't just pull these numbers out of the air.

According to Capital IQ:

BigAir's Dec10 EBITDA was $3.5m and its NPAT was $1.5m
Clever's Dec10 EBITDA was $1.0m and its NPAT was 2.4m. [The fact that NPAT is higher than EBITDA is explained by their asset sales]

Going into June 2011 these P&Ls will be combined along with the organic growth of both companies.

This means the post-merger effects on NPAT and EBITDA are:

BigAir Dec10 EBITDA post merger= 129% of pre-merger EBITDA.
BigAir Dec10 NPAT post merger= 260% of pre-merger NPAT.

So to go from there to 50% EBITDA and 300% NPAT, all I did was factor in around $1m of organic EBITDA growth sourced from upselling (i.e better asset utilisation) As this means no new infrastructure is required 100% of EBITDA flows to PBT) which takes EBITDA to 150% of pre-merger. And 70% of $1m is $700K, adding this to NPAT takes it to $4.6m which is 307% of BigAir's reported Dec10 NPAT. This is slightly a hack but then I was making a HotCopper post not a board preso.

So take this growth and add Clever's Dec 10 P&L and EBITDA goes up by 50% and NPAT by 300%.

The final thing is that Clever got its $2.4m NPAT substantially from asset sales which aren't really repeatable. However I also considered that delisting a company saves around $1m pa in compliance costs and that you could probably reduce other costs eg occupancy costs (or allow each company to expand into the other for better utilisation) etc to get the missing $1.2m savings in NPAT by reducing expenses and COGS by $1.2m / 0.7 = 10.1% of the merged entity's $17.026m of COGS and expenses.