Hi guys,
I have started buying APM since it was 1.5 per share, and I see it undervalued as some referece below. Please share me your thoughts.
1. Please look into a company called "Option Care Health Inc" listed on NASDAQ:OPCH.
The 2022 annaul
EBITDA is USD 300M
Cash 294M
Net Debt (Debt + Lease - Cash) is about USD 835M
Goodwill+intangibles ~USD 1.5 billion
Net assets mimus Goodwill+intangibles ~ minus USD 169M
The stock price is currently USD 32 per share with a Market Cap USD 5.6 billion.
**The reason I mention about this company is because they are in the same industry operating in the USA and two of APM's director Timothy P. Sullivan and Elizabeth Q. Betten also sits on OPCH's board. Timothy is a co-CEO and Elizabeth is the managing director of Madison Dearborn Partners (the US private equity company which holds 30% of APM shares and 27% of OPCH shares)
https://investors.optioncarehealth.com/static-files/ec2e0b4e-d64c-40c3-a98e-45f3fbdbc8acAPM has
2024 EBITDA AUD 350M (my own estimate 1st half 148M + 2nd half skewed 202M)
Cash 106M (2023 figure) and expected remains the same in 2024 if paying full dividends.
Net Debt 2023 as 920M (with lease) and expected to climb to AUD 1,000M if paying full dividends.
Goodwill+Intangibles AUD 2.2 billion (2023 figure)
Net assets mimus Goodwill+intangibles ~ minus AUD 702M (2023 figure)
The sotck price is current USD 0.765 per share with a Market Cap AUD 700M
In this comparion, I see APM is holding relatively lower cash than OPCH, so APM could be advised by the board to pause or cut dividends and improve its liquidity. Since APM's health care is growing, they will need more working capital to grow with.
For valuation comparison, I see APM is undervalued given OPCH's Price to EBITDA is x18.6 and APM is only x2. These two companies exposed to very simialr macroeconomic risks.
For credit risk and capital raising, I don't see it urgent as OPHC has very similar Leverage Ratio to APM (Net Debt divided by EBITDA). Even if it is urgent, APM can raise 15% of capital without shareholder approval and sell to who, so I don't expect APM will sell at this market price. Also they don't need more than 200M to be debt comfortable (that is AUD 1.47 per share).
**OPHS is just a pick from APM's annual report. If anyone has better company for comparison, please share with us.
2. Regaridng macroeconomics,
- Unemplyment rate will go high with current monetory policy. ABS's December 2023 Job Data already showed a lost of 100k Full time job.
- Interest rate will go down with weaker job markets.
- Goverments' policy changes support big companies which they trust to run employment and NDIS service. They want to remove scams from smaller firms.
- Human welfare is always the top priority for domecratic nations. Budgets will only go up.
- Baby boomers are aging.
Overall, APM should sail along with policy changes as they have many of board members are goverment related. They will have earilier information and clearer goverment expectations than smaller firms. This is what they called government relationship.
I am looking for some decent discussion and I hope to hear some of your thoughts. Thank you for reading.
(20min delay)