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#theroadto10000 have we reached 100 yet?, page-173

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KingEddie

96 Posts.

29

12/03/19

12:08

Post #: 37731527
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Originally posted by Holdtight: ↑

I have to agree with you DPR. If I may I would like to add a few points to your rebuttal.
This purchase was NOT just dreamt up overnight. They guys have known and respected each other for 5-6 years and have always thought that a collaboration between the two companies would occur at some point. The fact that this is occurring right now is a significant stroke of good fortune with regards to timing.
(1) The Chinese manufacturer (owning 51%) needed to be willing to sell. Their upcoming IPO in China forced this situation to occur.
(2) The LIFX founders and team, needed to be happy to work for who ever the buyer was for many years.
(3) The buyer ( BUD) had to add value to the LIFX business. BUD does that by (a) allowing LIFX to access significantly more working capital to expand operations and production (b) providing direct access to the commercial and industrial market places. (c) provide a direct ability to process and organise the data the light sensor collect.
(4) The price of the LIFX purchase has to be right for all involved. The Chinese get to make a profit on their initial $3m USD investment and maintain the manufacturing contract for 3 years which they anticipate a 100% growth rate yoy ( probably higher given the access to working capital). Also the Chinese have been funding the -ve EBITDA for the last 5 years. So they needed that back for their IPO. The LIFX team didn't want to go to the likes of a google and be stuck not being in control of their own destiny. Look at what happened to nest and ring founders!! Also they didn't want to join a company that was totally relying on their growth. They see great potential at BUD from many aspects. The BUD journey has just begun in earnest. And then there is BUD--- needed to pay a good price. IMHO they have got a steal. With $38.5m net revenue or $44m gross revenue in 2018 the purchase price of $70m is 1.6 times gross revenue. We are now in March, and Jan and Feb numbers appear to be right on track for a 100% growth. So forecasting $88m gross revenue seems reasonable. That places the deal at 0.8 times 2019 gross revenue.My own expectations are higher revenue numbers, given the new working capital. ( Kogan still remains sold out of all 22 lines they have on offer. ) ( Livetile paid 8 times gross revenue for an acquisition recently). If not for the Trump tariffs in September last year ( LIFX best quarter) they company would have had a positive EBITDA. Despite the tariffs, LIFX is expected to have a positive NPAT. If the tarriffs are removed that leads to millions on the bottom line.

No matter how the trolls try to portray this deal, it very cheap and very mutually beneficial.

IHMO HOLDTIGHT. Its blast off time.

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Hey there @Holdtight . Thank you for your commentary, always find it very interesting. Apologies if this has been covered already:

You wrote that the acquisition - "allows LIFX to access significantly more working capital to expand operations and production"

Can you please clarify how exactly the acquisition frees up working capital for LIFX?

Thank you in advance.

BUD Price at posting: 5.8¢ Sentiment: Buy Disclosure: Held
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