I have spent the long weekend looking over the valuation of A2M...

I have spent the long weekend looking over the valuation of A2M in great detail and consulted with people familiar with valuations to get to a realistic number.

Simple Val (no fluff)
Current net assets: $1.1 Billion
NPAT (lower estimate for second half): Confirmed $56m first half + estimate $64m second half (or total $120m for FY22)

Valuation (on current numbers using no growth to NPAT for FY22): $2.3 Billion. (A2M currently has a $3.3 Billion market cap).

Unless we have some type of miracle development, it stings me to say this, I am afraid we need to come off another $1 Billion in market cap to be fairly valued using the current numbers.

This translates to a share price of about $3.00 a share (I’m hoping $3.50 a share is the bottom though).

The smart money knows this which explains why A2M has continued to slide down further (The 12 month sideway consolidation ($5.00 to $7.50 a share) was a wait and see for recovery, as this has not happened 2 years on, the market has pushed A2M below the said consolidation level.

In my honest opinion, the only time A2M may have a ‘real’ recovery is when the business can demonstrate that NPAT and free cash flow are on the way back up or at least higher than the current numbers.

For disclosure: I have exited all my A2M position today and keen to see if I can pickup the same consideration value between $3.00 and $3.50 a share (benefiting from more shares or and saving on a lower cost base).

I love the business/ product but have to follow the smart money. If that suddenly changes then happy to also get back in again but genuinely feel we need to go lower after going through the valuation.