Hi GoSouth
Those strike me as very conservative numbers. Eg, :
1. 4-traders had broker expectations of FY19 EBITDA at $30.2m, so an EV/EBITDA multiple of ~10x; and fy19 eps of 31cps, so a PE of circa 10x; see
http://www.4-traders.com/MOTORCYCLE-HOLDINGS-LTD-27377762/financials/
2. Morgans had them on circa 10x adjusted EPS too - and Morgans are close to the company:
https://www.morgans.com.au/Blog/2018/May/Motorcycle-Holdings-cycling-out-of-a-tough-FY18
I know those numbers were before this downgrade, but it was "only" a ~10% miss; so doesn't reconcile to your 16x PE.
In terms of my own numbers, I'm (again) struggling to really understand the guidance. For example, yesterdays update refers to "EBITDA of between $19-21 million". But the presentation from the 2018 interims refers to "underlying EBITDA excluding $1.6 million in non-recurring costs in Dec half 2017 associated with acquisitions including Cassons". Is the guidance for FY18 referring to the underlying result (consistent with the Feb 18 results presentation) or headline EBITDA (which is what yesterday seems to imply). If the latter, then there is a presumably non-repeating hit of $1.6m in acquisition costs in the guidance.
Consider two scenarios for FY19 EBITDA. In the low case, FY19 EBITDA improves to $25m from ~$20m in FY18. (Ie, it grows to about half the level stated on 4-traders for FY19.). In the high case, assume we get a strong rebound in motorbike sales in FY19, and a full year impact from Cassons, so achieve the full $30m EBITDA stated on 4-traders for FY19. Under both scenarios, depreciation might be circa $2.5m (it was $900k in H1), assume interest of 4.5% (vs 4% in 1H) on $46m of debt (as reported in 1H), and assume 30% corporate tax. That implies net profit of $14.3m in the low scenario, and $17.7m in the high scenario. On 61.7m shares, that's a PE of 13.8x to 11x. not really cheap, but if one believes the story/strategy, the potential to add more dealerships at low incremental cost, achieve more share growth and more synergies, that might be reasonable buying. This thing should spit out cash too, esp. when trading conditions are good as the balance sheet needs are minimal.
the other information which really helps me build my case for investing in MTO is the "Same store profit statement" reported in the feb 2018 interims (page 12 of the presentation). it shows H1FY17 EBITDA 33% behind that of H1FY16 - highlighting the significant operating leverage of the business excluding Cassons. Clearly, the negative/downside impact of the MTO's operating leverage which was evident in H1 continued into H2. But at some point, motorcycle sales bounce back, and positive operating leverage will again be evident. When it does, MTO should report stellar profit growth particularly coming off the low base level of performance in all of FY18. Even if you decide you don't want to hold MTO long-term, you might consider waiting for the benefit of positive operating leverage before you sell, rather than sell at a cyclical down point. Just my opinion, not financial advice! And note David Ahmet's comments that MTO is "perfectly positioned" to benefit from an upturn. The question is - when is the upturn? How significant? How patient are you?
In the meantime, MTO continues to develop their business (eg the finance JV), and build scale and market share (now 30 dealership locations). As the largest player by far in the market, I think they enjoy significant economies of scale and scope, and shareholders will at some point benefit. I'm happy to be patient, and intend to buy more.
my final point is that I think MTO could improve disclosure, even in this trading update. Personally, I can live with the cyclical nature of the motorbike retailing, but I would like more disclosure. Why didn't we get a little commentary on how Cassons had performed, and whether integration was on track. We'll get it in August, but I thought they could have done more now. GLAH
