aged care is mature and stagnant.won't say any more, except that...

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yanzifeisheng

196 Posts.

81

11/06/21

12:54

Post #: 53792687
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Originally posted by romans: ↑

You should NPAT Pumice on the back for schooling you in valuations! While I understand what you are trying to say it's incorrect in this industry and it would require a fairly stagnant and mature business to be true which is rare these days. The core of Japara's business involves greenfield or brownfield development and acquisition of aged care and retirement facilities. To perform these activities they use debt which incurs interest expense and they receive a fairly healthy depreciation tax benefit against the buildings and equipment both of which materially change the NPAT position. The later is a non cash item thus NPAT is not a true reflection of the cash flow generated by the business and the former is hopefully used as a tool to improve ROE against a feasibility which in theory provides a positive IRR. Looking at NPAT to value Japara does to accurately analyse the cash flow generated or the impact of reinvestment in improving current facilities to sustain or improve earnings and acquiring or developing new facilities which impact NPAT today to in theory increase free cash flow in the future. Material changes to revenues and occupancy are the main top line drivers. The current RAD system helps the business with the refurbishing costs of rooms taken into consideration through this mechanism which is different to other real estate classes.

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aged care is mature and stagnant.

won't say any more, except that when buying a business, tax, capex and financing costs are as important as any other cash flows.
happy that npat is the best reference point and that calvary's 1.20 bid values JHC on 20x post synergies npat (adjusting for covid impact)... my point is this offer is not unreasonable and that's why JHC and its advisors Macquarie have granted calvary access to the company to perform due diligence...

in context of the bid, in my view, it means there's about a 1.40 ceiling

JHC Price at posting: $1.19 Sentiment: Buy Disclosure: Held
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0 Great analysis

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