JCS is best value play around - why - Spectrum proves it In a...

JCS is best value play around - why - Spectrum proves it

In a previous post I gave my valuation of JCS at 5 cents.

Cash: Sitting on around $3.3 million as at 31/12/2018 (based on conservative current run rate of cash accumulation over the previous 12 months to 31/12/2018). Accounting for previous 3-4 months =
$3.5 million
Revenue: $10.4 million fy (5.2 mill hy) with an inferred multiple of 1.25 times (industry average is typically over 1.5 times) =
$13 million

Total Valuation = $16.5 .....or around 5.1 cps based 327 million outstanding shares.
This valuation is very conservative if we look at the Spectrum Acquisition more closely….

What we know from the Spectrum deal?

• Initial Revenue is flagged at SD$400,000 for the year ending 31^st March 2018….For those who don’t know the exchange rate that is SD$1.05 to AUD$1.00AUD.
• JCS have paid initial payment SD$300,000.
• JCS have are forecast to pay another SD$300,000 in a deferral payment.
• JCS will pay approximately SD $600,000 for SD $400,000 annualized revenue giving Spectrum a purchase price multiple of 1.5 TIMES revenue.

What else do we know about Spectrum?

• Spectrum is a NET-SUITE TWO – STAR SOLUTION PROVIDER
• JCS is a NET-SUITE FIVE -STAR SOLUTION PROVIDER
• JCS will receive an uplift in on the commissions that Spectrum receives…instead of receiving a 2 Star provider commission rate JCS will receive 5 Stars commission rates.

Conclusion

• In my valuation I applied a 1.25 times multiple to recurring revenue.
• JCS paid 1.5 times for 1.5 times for a TWO-STAR provider that receives lower commission rates.
• If JCS pays 1.5 times for a two star provider JCS must be north of 1.5 and probably closer to 1.75 – 2 times

REVISED VALUATION
Based on 1.75 times recurring revenue = $06.6cps
Cash: Sitting on around $3.3 million as at 31/12/2018 (based on conservative current run rate of cash accumulation over the previous 12 months to 31/12/2018). Accounting for previous 3-4 months =
$3.5 million
Revenue: $10.4 million fy (5.2 mill hy) with an inferred multiple of 1.75 times = $18.2 million

Total Valuation = $21,700,000 .....or around 6.6 cps based 327 million outstanding shares.
Based on 2 times recurring revenue = $0.074cps
Cash: Sitting on around $3.3 million as at 31/12/2018 (based on conservative current run rate of cash accumulation over the previous 12 months to 31/12/2018). Accounting for previous 3-4 months =
$3.5 million
Revenue: $10.4 million fy (5.2 mill hy) with an inferred multiple of 2 times = $20.8 million

Total Valuation = $24,300,000 .....or around 7.4 cps based 327 million outstanding shares.






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