I’ll be voting FOR the sale of A2B to ComfortDelGro ( = CDG )
Some considerations:
1. CAPEX $8.8M in FY23 and guidance FY24$10 to $12M = no signs ofslowing.FY23 Deprec + Amort = $9.6M, guidance FY24 $10M.
2. Big VALUE shareholders recent selling prior to CDG offer InvestorsMutual ( 11.9% to 9.3 %) and Spheria ( 18.2% to 15.2% ) at pricesless than $1.80.
3. Rough estimate NTA per share 39c after the sale of properties andthe 60c dividend to shareholders. (see below)
4. Free cash flow in FY23 =10.4 – 5.6 + 4.5 -1.3 = $1.6M .Less than 10% of underlying EBITDA of $20.1M flowing through tofree cash flow.
5. Guidance future dividend policy at least 50% of Underlying NPAT.Underlying NPAT FY23 = $5.1M , equals eps = 4.2cso implies a dividend of around 2.1c given future dividend policy.
Guidance says dividends resume H2 FY24 implies no interim div inFY24.
6. Gross $105M proceeds from sale of 3 properties .Strategic review Announcement dated 14 Jul 2022 estimates propertiesworth $102M to $114M .
After sales costs and tax, estimated NET proceeds of $84M to $92M.
Best guess of sale costs + tax on sales = 18 to 22, say $20M.
7. Current franking credits used up in the 60c dividend.Franking credits 6/2023 = $27.338 equivalent to 22.4c frankingcredits per share which supportsa FF div of 52.2c .
Hmmm more tax paid ( CGT on properties ? ) to get to 25c frankingcredit .
A 60c FF div implies franking credits of 25.7c .
Net cash 6/2023 = $13.9M
Received $19M cash by 30/6/2023 for $105M properties , $86M to come.
Estimate property sale costs + tax on property sales = $20M .
Cost of 60c div = .6 x 122.3 = $73.4M
Rough Estimate Cash after property sales & 60c div paid
= 13.9 + 86 – 73.4 – 20 = $6.5M .
Adjusting CDG offer $1.45 for A2B cash = 1.45 – 6.5 / 122.3 = $1.40
Guidance FY24 EBITDA =$22M
Includes leases $2.3M for O’Riordan + Downing .
Guidance Leases FY25 an increase from $2.3M to $4.5M ie an extra costof $2.2M.
Net deferred tax assets 6/2023 = $22.452M means no income tax paid inmedium term .
FY23 Tax refund $1.2M in P&L, $.2M tax received in cash flows.
FY23 finance costs $3.5M in P&L, $1.7M in cash flows , likelyzero going forward as net cash.
Down the track assume deferred tax assets used up, extra leases kickin and no growth in EBITDA.
Est EBITDA = 22 – 2.2 = 19.8
Est NPAT = ( 19.8 – 10 ) x .7 = $6.86M or eps = 5.6c
CDG price of $1.40 to $1.45, equivalent to P/E of 25 to 26.
NTA 6/23 = $71.93M Property B/S value 6/23 = 10.438 + 4.447 =$14.9M
Rough NTA adjusted for property sales = 71.9 + 86 – 14.9 – 75.3 –20 = $47.7M
ie NTA per share = 47.7 / 122.3 = $.39
Shareholder SANDON with 10.9% of shares, previously quoted in the AFRthey think A2B is worth $2.50 to $3.
I think it is DATED and optimistic.
Jemima Whyte article in AFR dated Dec 23, 2021 quotes **rielRadzyminski as follows:
“If it were to abandon its technology aspirations, and devise astrategy focused on the core taxi service business combined withshareholder-friendly capital allocation, we believe A2B can be worthat least $2.50 and $3 per share. A2B also reports 27¢ per share infranking credits, which could support some form of dividend-basedcapital management. A2B also has significant property holdings, whichwhen combined with its net cash position, underpins the current shareprice. In effect, investors are getting the rest of the company –the taxi service business – for free. This is a business thatgenerated $35 million in annual EBITDA prior to the onset of thepandemic, and should be able to return to similar levels of earningsnow that lockdown measures appear to be in the rear-view mirror.”
FY23 EBITDA of $20.1 and guidance FY24 EBITDA of $22M significantlybelow the $35M level mentioned by Radzyminski.
