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Ann: Sale of Retail ICT and Sprout Business, page-48

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SteveSage

2,896 Posts.

1082

28/09/21

16:32

Post #: 56410691
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Originally posted by SteveSage: ↑

Have to agree with most of the sentiment here; the price received for ICE looks exceptionally low
ICT EBITDA:
- FY2019 79m
- FY2020 85m
- FY2021 71m
I would say that there are significant expenses that are not allocated when they provided segment EBITDA (~30m in FY2019 & 2020, ~20m in FY2020); arguably this should mostly be assigned to ICT given what the VTG business does, so this could be possibly the only reason that I can see a $110m sale price in the ballpark....i.e. if 'true' EBITDA is between 50-60m, then you are looking at 100-120m value on 2 times EBITDA multiple.

The notice says that the Board believe the transaction is in the best interest and with mgmt controlling ~20% of the shareholding, I see it pretty hard for other shareholders to gather 50% of the vote to challenge the board (I mean most shareholders are unlikely to even read anything and their vote likely falls with mgmt as a proxy).

From my calcs, there is still some value there as a result of the franking credits:
- 110m for the ICT business
- 30m in cash (perhaps less by Nov given covid)
=> this brings ups to ~140m with no value assigned to NIMA or franking credits which is broadly in line with the current market cap

If we assume they will pay out the 45c (~75m) plus 19c franking credit, then we have post a 64c fully franked div:
- 65m in cash
- Nima business say valued at nil
=> Just the cash should make the shares worth ~39c (65m cash/165m shares)

Looking at it another way, the shares currently should be worth ~103c (64c dividend plus 39c cash) if you assign no value to NIMA. Having said that, fully franked dividends are not worth 100% to everyone, plus NIMA is losing money (and even more given it has to carry ~4m in mgmt salaries all by itself). The shareprice IMO is not far off reflecting all of these factors.

I've also seen a few comments on NIMA....with an expected 65m in cash (and note that if they pay 39c instead of 45c they will have another 10m in cash), I suspect that the board are looking for an acquisition rather than organic greenfield growth or buying out small operators.

Anyway, still percolating on whether to hold or sell

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starting to look a little silly:
- dividend of 45c + 19c franking credit = ~64c
- cash of ~65m after dividend payment which is ~39c per share
Even if you ignore the franking credit or assign any value to NIMA, you get 84c

At ~95c or above it may be marginal (i.e some may prefer a return of their investment rather than a taxable dividend and a capital loss), but at this price or below, it seems to be mispriced.

Perhaps they are implying a negative value to NIMA given prior losses and the remaining NIMA business having to carry the overheads and mgmt costs, but the fall is starting to look overdone

VTG Price at posting: 80.0¢ Sentiment: None Disclosure: Held
3 Upvote

0 Great analysis

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