If there are any institutional investors out there who might be talking to the CEO/CFO I would like the following questions answered.
1. Why is this business so capital intensive? Yet another year of high Capex. $5.1m when they only generated $6.4m EBITDA. DWS, SMX and RXP don't have Capex anywhere near these levels.
2. Net Debt decreased, yet interest jumped by $0.5m. Interest cost of $1.2m implies debt of $40m at 6%, but debt levels substantially lower than this. How does this work?
3. Deferred Vendor payments decreased on the balance sheet by $2.2m, however payments out were only $1.2m. Where did the credit of $1m go to? To the P&L to bump up EBITDA fictitiously? It must have gone somewhere.
4. What is the EPS forecast for FY17 & FY18? We know EBITDA is pitched at $16m, but with depreciation rising to $8m, interest probably pushing to $2.5m as $7m deferred vendor payments due soon pushing debt up, then it looks like low 2 cents EPS.
I am really struggling to value this company. 15x p/e puts it at low 40 cents, but with $30m debt, p/e probably needs to be at 10x.
Any astute investor or IT market knowledge very welcome.
EPD Price at posting:
45.0¢ Sentiment: Hold Disclosure: Not Held
