Valuation, page-34

Thought better to bring an existing thread that's on topic to life rather than make a new one. You're welcome.

Lets look at the low end of today's guidance.
1.4bn revenue
26% EBITDA
NPAT (based on historical data) is around 0.69 x EBITDA.
Therefore low end NPAT of the guidance is $250m. Apply a PE of 30 to this (for a company growing at 10% for the foreseeable future) gives a market cap of $750m. This equates to around $10.10 NZD per share. ($9.48 AUD)

That is basically the absolute worst case for a number of reasons
1. It is unlikely that full year revenue will be below the forecast considering it is an achievable number and the revenue range has already been guided down once.
2. EBITDA will likely be higher based on historic figures and even if it is not higher this year its likely to be higher next
3. The company is most likely going to grow much faster than 10% for the next few years so a higher PE is justified. Bear in mind that the growth rate is being taken from a very low base of $1400m revenue.

It's unclear what it will trade at in the but from a fundamental point of view the stock should have very solid support in the $9s.

The major risks to the company haven't changed for the last few years.
1. China ban on milk products
2. Chinese consumer behaviour shift to local products or dislike for A2m products (guilty by association to Australia).
Although both the above are possible, they are very low probability. Especially point 1. Point 2 could happen to some extent but media has been drumming on about that for years but A2 milk sales keep increasing.

I always find it easier to find a price where I feel like the SP can't go lower compared to find the price it will trade it. For me mid $9 AUD is excellent buying. I added to my position at $10.10 today. If shorters or panic selling sends this to $8.14 for a double bottom that would be one of the best risk reward buying opportunities I would have seen on the ASX.