CY 17 profit was $3.42M with 31 million shares on issue now. If...

CY 17 profit was $3.42M with 31 million shares on issue now. If they deploy the $10M of the debt funding at 4.5x they can buy $2.2K of EBIT. Translates to $1.2M NPAT after interest at 5%. Assuming 10% organic growth in current centers with the increase in rebates and occupancy levels this translates to 3.42M + 10% + $1.2M = $4.96M NPAT

With 31M shares on issue post dividend reinvestment issue this equates to eps of 16 cents. Main risks are increases in interest rates, staffing costs and oversupply of centers. In the the presentation organic growth will come from - An improved operating market with increases in government rebates will provide a strong stimulus to further occupancy growth  Realisation of our 2017 acquisitions, which are trading inline with expectation  Continuation of our cost efficiency programs and investment in technology  Continued focus on our Quality Improvement program  Interest rates on our existing loan facilities has been fixed at 4.65%  Childcare fee increases greater than CPI and labour costs  Centre improvement works for 2018 are well underway, gaining traction with existing and new parents  Continuing and extending our marketing initiatives and community programs.
Valuation on deployment of $10M funding at 4.5 EBIT and 10% organic growth is $1.44 at 9 times. Franked up dividend yield would be 14.85 cents ...15% yield on the current price. Management have guided at 20% profit increase for CY 18 that translates to $4.104M. Assuming 10% organic growth that leaves a balance of $342,000 profit to come from acquisitions to meet guidance. They only have to deploy 28% of the $10M on acquisitions on 4.5 x EBIT to meet the guidance. If they only meet guidance in 2018 valuation is 13.2 eps x 9 = $1.19.