Hi mate, thanks for responding.
The 2.5 multiple was definitely nothing more than an assumption on my part. I actually first took the theory from one of your posts after the AGM where you had said:
"
Having done some work on peer comp multiples of water treatment companies, they vary significantly and it depends on the mix construction and recurring earnings, and whether the stock is profitable.
I suspect RWL is mostly construction, though the intention is to move to recurring, however it is much more difficult to win recurring style projects, as most customers prefer to own their projects.
Imo, a fair multiple is around 2.5x revenue"
https://hotcopper.com.au/threads/emc-agm-summary.3408258/page-16?post_id=24521004#.Wf-3HcIUmVc
If we are being valued on revenue, your fair multiple suggestion of 2.5x in May seemed to be a very astute one, as that is (roughly) where the MC has been going since the merger, including a slide when noises started to appear about revenue slipping into 2018.
If I have picked this up wrong, my apologies. I took from your earlier post on this thread that you had attributed Friday's drop to the revenue 'downgrade' for CY17 due to San Quintin and potentially other revenue slipping as cited in the 4Cs accompanying update.
If our valuation is at all tied to CY revenues, the slipping of revenue from 17 to 18 could be profound, and the basis for my theory that it could "snap upwards". Put more simply, if revenue is not disappearing, but simply moving from 2017 to 2018 - it dramatically affects our revenue growth expectations.
Initially it was presumed $90m in 2017, to $112.5m in 2018 - a
25% increase.
However, take $20m from '17 and transplant it into '18....
Now it is $70m in 2017, and $132.5m in 2018 - an
89.3% increase.
Therefore, if CY revenue is a cause of valuation - this could mean a significant snap when the CY18 forecasts come at the end of January. As previously, this is all theory and could have no foundation. DYOR etc.
