TGA valuation Note in my reply to @Pioupiou I provided a...

TGA valuation

Note in my reply to @Pioupiou I provided a valuation of approx. $2.  This is a very rough guide of how I arrived at that figure:

Consumer Leasing division:  For the last two years this division has had EBIT in excess of 40m (after adding back ASIC fine provisions for this year).  7*EBIT seems reasonable for this division – as mentioned it has a competitive advantage in its comparative purchasing power and an extensive distribution network in its shopfronts.  Not to mention a customer network of over 100,000 customers.

Equipment Finance division:  This division is likely to earn an EBIT of in excess of 20m for the next FY reporting based on current run rates.  4*conservative EBIT seems reasonable for this division as the quality in much lower than CL.

Valuation = 7*40 + 4*20 = 360m for whole business VS current MC of 184m

This gives a valuation of $2.28.  Note this company has traded with a much higher SP on similar underlying earnings#.  Due to risks around ASIC, centrepay and MB class action a lower share price valuation of $2 seems prudent.

Although the NTA (supposed liquidation valuation) of $1.17 provides some comfort, actually realising that NTA in the event of a liquidation could be problematic.  Certainly not all of the assets would be recoverable as a result of bad debts.

# I don’t like using ‘underlying earnings’, but hopefully the ASIC fine provisions and possible expenses due to class action are not a long term change to earnings.