Looking at the pipeline that the company was forced to disclose in the cleansing notice, I've applied a probability score to each opportunity and then calculated the share of revenue attributable to Macro. I then applied a range of EBIT/Revenue ratios based on small-medium mining services providers (between 8-12% EBIT).
I have also plucked out only three opportunities that I ranked as higher probability (combined attributable revenue of $160M). Applying the lowest 8% EBIT assumption to those opportunities, I get a risked $12.8M EBIT.
What would Macro be worth if it produced $12.8M EBIT and had a number of other good opportunities in the pipeline (and had a history of converting the opps into contracts)?
I would start with a low EV/EBIT multiple of say 5. That would provide a rough valuation of $64M. If we use a higher EBIT conversion of 10% then we get $80M.
I've used really conservative assumptions and without any insights into the pipeline, I only used what sound like the three more mature opps. If they land more, then obviously that's upside.
Based on this, do I feel Macro is undervalued at $20M? Yeah I do. Do we have enough in the pipeline to warrant a MC of $20M - yeah I do but we need to convert deals.
If we pull off these deals and execute on the strategy of deploying free cash into our own mining projects,
we're onto a winner. High risk for sure but the reward is also very high.
M4M Price at posting:
0.6¢ Sentiment: Buy Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)