Citi has set a SFH target price at 48cents, being a hybrid of several valuations, an EBITDA multiple based valuation at 33 cents, a DCF at 29 cents, a PE relative valuation at 24cents and a takeover valuation at 63 cents.
The EBITDA multiple based valuation uses a multiple of at 50% of peers and uses 2018 guidance EBITDA as the benchmark, despite only 2.5 months of trading until the commencement of the 2019 financial year. That is, without any arbitrary discount, using a EBITDA multiple closer to 5.5, you get on Citi's 2018 numbers (leaving CityChic in at 5 times) an EBITDA multiple valuation of $18.7m x 5.5 0r net of debt etc, over shares issued, at some 53 cents. A $10m uplift in base EBITDA at 5 times adds $50m, or 26 cents a share, making it a total of 80cents a share.
Now this gets interesting:
1. Why has Anchorage, Perlstein etc, been prepared to offer cash $100m/$75m for CityChic and Autograph, privy to confidential information, which are listed as earning an EBITDA in 2018 combined of $4m; that is, 25 times!!!!! Something doesn't fit here?
2. Where is the analysis of the store operating losses saved, including consequential EBITDA uplifts, in FY 19 and beyond?
3. Which scientist has determined SFH is perpetually worthy of an arbitrary discount of 50% to EBITDA multiples? Has anyone noted the Noni B EV/EBITDA multiple recently?
The note discusses one of the risks to the target price being "potential takeover approach from Al Alfia fails" ... errr, what?
SFH Price at posting:
39.5¢ Sentiment: Buy Disclosure: Held
