Wow, what a week for EVS. Sadly I was caught out as a non-holder looking for a re-entry. A single partnership with Mr Zhang and the share price rockets. Highlights the value of establishing ties to a multi billion dollar company with impeccable Chinese government connections right up the management line.
Getting a door to open in China is the greatest challenge – there are many great products out there but tapping into their networks is what will set a company apart – you need to know how China does business, how they want to work and be able to foster the right partnerships. Looks like EVS was thinking the same.
Back to valuations..
Shares on issue after T2/AGM will be 420m. At a current SP of 30c this gives a MC of 126m. A solid 20% growth on Q4 FY19 revenues brings us to $6.7m arr at 30 September 2019.
This gives a psr valuation of c.19x current earnings! To be honest, I never thought EVS would trade on a 19x multiple. My earlier estimates if their FY20 target ($12m arr) was hit was 10x earnings for a SP of 32c (on earlier SOI). Quite remarkable considering where we are at right now..
But if we assume they hit their target of $12m and find an additional $10m (note the ann mentioned this is out to 31 Dec 2021) from their soon to be China subsidiary then a MC of $220m would appear likely, i.e. a SP of c.50c (not factoring in further issue of shares).
There is clearly a substantial amount of success baked in to the current SP but lets see where we go from here! Now, back to waiting for a reasonable re-entry point...
(20min delay)