Anyone would think DNA is a mining stock the way it has been behaving lately. There has been serious amounts of selling over the past 3 trading days (~20m shares) so I would not be surprised to see a change/ceasing to be a substantial holding and hopefully a "becoming substantial shareholder".
DNA looks cheap (IMO) and it seems the share price has suffered recently for three reasons:
1/ We don't have clarity on what the acquisition is, who owns it, how much it is, or when it will be done
2/ Joey Lim transferred shares to his wife, IMO market is wondering what the hell he is up to
3/ Recent issues of taxation, which have been clarified by company on Thursday
1/ and 2/ are very short-term reasons for a sell-off (IMO) and provide(d) a great buying opportunity.
Don't listen to the noise just look at the numbers:
76c per share
$350M market cap
$100M cash
FY15 forecast EBITDA $25-35M (just on Aristo) - Canaccord
EV to EBITDA multiple of 7-10X FY15
Aristo hote/land valuation ~$50-100m
A bit on the acquisition:
6x EBITDA
DNA said existing cash and debt will be used along with equity component to vendor
...........given cash $100M, I envisage the company may use $50-80m of cash and maybe somewhere between $20-40m debt (my own estimate)
If this is the case, acquisition could potentially be between ~$70-120m
...........in this scenario, EBITDA is $10-24m and could therefore double EBITDA instantly
DNA also said further details will be provided to market when 'long form agreements are finalised'
...........the company has possibly been working hard on this deal for 3-5 months now, so we might be able to assume that the long form agreements may only be a matter of weeks away.
Catalysts:
1/ Completion of long form agreements for acquisition
2/ The company said a trading update would come in the near future, presumably once the acquisition is completed and as per Thursday, "Donaco also confirms that recent trading at the Aristo International Hotel has shown good growth".
If that last sentence doesn't make DNA a buy, then I am a monkey's uncle.
DYOR
DNA Price at posting:
76.0¢ Sentiment: None Disclosure: Held
