Target 20c, page-2

I'm sure holders will get very excited, but objectively I'd be slightly sceptical on this valuation, reason being:

- M&A comp instead of DCF, why, given the company basically gave us revenue trajectory out to 2028 in their latest preso? (see chart below) Also M&A relies on a deal actually happening, there are many companies on the ASX whereby embedded land value is worth more than the business, but market doesn't price them on M&A as it could never eventuate (think Harvey Norman)

- Taking that aside, If you were to drill down to their valuation method:

"We have decided to use the NKT Photonics deal as a precedent for BLG because we think it is the closest comparable of all the companies above.
Although BLG isn’t generating revenues comparable to NKT yet, we think both companies’ products are similar. The US$216.2m deal is worth A$324.9m at the current exchange rate (US$1=A$1.5). With 1,671.1m shares on issue, this equates to a value of $0.20 per share."

"June 2022 acquisition of Danish fibre laser manufacturer NKT Photonics by Hamamatsu Photonics (TSE:6965) for US$216.2m (A$314m). Considering that in the previous year, NKT achieved €80.1m in sales, or US$85.6m, this represented an EV/Sales multiple of ~2.5x. In the last 12 months this was one of only two M&A deals in the laser space of a company that had commercialised its technology."

Referencing BLG's own revenue projections (their caveat was that this assumes everything goes perfectly well), they're not expected to hit anywhere near that for the next 5 years. Now to be fair Pitt St Research did acknowledge this themselves, but if they successfully identified a flaw, I find it odd that they didn't apply any sort of discount to get to the $0.20 per share?





Let's be generous and assume BLG hits the same sales levels by FY30 (chart above is in USD so it's possible), 10% discount rate back to FY24 (6 yrs) should realistically give you $0.11 rather than $0.20...so clearly there is upside not to mention BLG should be able to make good margins (I'm not down ramping haha), but be aware you'll have to forecast pretty far out. Anyways just really wanted to point out that this latest valuation looks rather crude for a professional research service(!)