I think you're right spider5, it's all about current/future earnings.
I was hoping for a cyber acquisition, so that box is ticked.
IMO ST1 is probably a 10c stock post-completion of this acquisition.
Back of an envelope calcs and rationale. InfoTrust + existing cyber business now circa $65m turnover. Assume one-off costs are out then aim for 10-12% rev to earning margin (circa $7m EBIT). Add to this NexGen earnings of say, circa $8m. So, $15m EBIT. Subtract corporate costs of say $4m plus MS loss of say, $1m (currently in a turnaround phase as you said). So, $15m EBIT less $5m corporate costs and MS operating loss, should equate to circa $10m EBIT. Multiple this x 14 (being the current all-ords average EBIT multiple) gives ST1 a notional EV of $140m. Less $14m net debt ($6m cash + $20m loan). Back of an envelope, ST1 fair market value should/could be circa $125m-$130m.
Current MC is circa $50m (735m shares x 6c). Post acquisition there’ll be approximately 1.3B shares outstanding x 10c SP is circa $130 MC.
If they can turn the MS business around, grow the cyber business with healthy margins, keep corp costs under control, and realise a premium valuation as a “sovereign cyber” business, then this has the potential to be north of 20c in 12 months.
In short, ST1 has all the hallmarks of a TNT #2 (including the same management).
Good luck everyone, it’s going to be an interesting (hopefully lucrative) 12 months.
AIMO.
ST1 Price at posting:
6.2¢ Sentiment: Buy Disclosure: Held
