I'd like to start this thread to discuss earnings, and the likely sequence of events going forward. Any feedback or alternate methods are welcome.
All we have to anticipate what will be released on Tuesday, ie. the notice of meeting and the Independent Expert's Report, is the short document released on the 28th of October. We can assume that the report will be positive however the exact content and how positive is key.
As they have only supplied us with EBITDA figures, we have do some quick/rough calcs to get to an approx FY13 NPAT figure with which we can then forecast what FY14 could look like.
FY13
EBITDA - $2.21m
DA - Not supplied, however with $5,484,452 in PPE, and assuming they are using a 10 year depreciation rate (10%) we can approximate it at $548,445/year.
EBIT - $1.662m
Interest - Again, not supplied, however if we look at the balance sheet provided, we see that Bulletproof had approx ~$4m in borrowings. If we assume a 8% interest rate, this would imply $320,000 in interest costs/year. For the sake of the exercise, (and to err on the side of caution) i'm assuming all of their cash is needed for working capital purposes and does not earn interest.
So interest = $0.32m
Profit before tax = $1.342m
Hopefully they won't have to pay too much tax, due to Spencer having tax losses they will be able to use. Nevertheless if we assume they will pay full company tax at the corporate 30% tax rate,
1.342 * (1-.3) = $0.9394m
NPAT = $0.9394m
Now the fully diluted Market Cap (pre performance shares as these vest on decent hurdles down the road) = 20m shares currently + 41.7m issued as part of the acquisition= 61.7m shares @ $0.315 = $19.4m market cap
8m extra issued in prospectus = 69.7m shares @ .315 = $21.96m fully diluted
Note that this doesn't take into account options which will provide some more dilution, however I don't have time to do the math right now.
If we say $21.96m/$0.9394 we get a P/E ratio of 23.37.
I see this as a decent punt as if we factor some growth, remember 80% of their revenue is recurring annuity based (the bread and butter of any good IT company), remember the Bulletproof management seem confident achieving much higher EBITDA figures for FY14 + FY15, some cash back from exploration tenements etc. there could be a nice little story unfolding here.
Thoughts?
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