It is reasonable to expect an NPAT at some stage.In the end, the...

It is reasonable to expect an NPAT at some stage.

In the end, the EBITDA needs to be large enough to:

• pay for the interest incurred from the debt facility (looks feasible to me now)
• pay the taxes (non existant - currently)
• pay for the deprecitation of the equipment (otherwise the business gets "hollowed out", when there is no money to replace - say an aging bar manufacturing machine.
• pay for the amortisation of the intangibles (intellectual property, brand names - my hunch is that is not a big item)

Eg. if the EBITDA to revenue is large like in THM, then one is laughing; if the EBITDA to revenue is small (HLF), the one is weeping. This is why this acquisition is so good. If the EBITDA stays large then NPAT must follow.

I guess, there is un-easyness among some posters here about issues that are unexpected (remember that EBITDA last was normalised) items, share-based payments (because investors don't scrutinise fine print), inventory write-offs, non-renewal of production lines, subscriber churn, change of direction like 'milk play' to 'wellness play with milk play' etc.

The depressed SP can only be explained with the fact the Mr. Market doesn't buy the rosy story. Also, now HLF is morphing from a low margin business towards a high margin business with an annex of Instagram, facebook and 'subscribers'. One could say a new world for them, but for me it is positive that the BOD has a new director for that, Ms Susan Klose. I quote below a short form lifted from Commsec (I am to lazy to write something of my own):

"Ms Klose has executive background and experience in senior leadership positions across SaaS businesses focussing on digital strategy, corporate development, partnerships and business growth in Australia and the USA. Sue also has relevant experience in digital health and wellnesses subscriptionbased businesses. Ms Klose last previous executive role was Chief Operating Officer at Michelle Bridges' online business, 12WBT (12 Week Body Transformation). Ms Klose currently holds nonexecutive director roles at Nearmap, Envirosuite, Honan Insurance Pty Ltd and Pureprofile."

It has to be noted, that is current SH driving this SP down, it is not the management selling. That's why TEP persistently points out comparative values and multiples and EBITDA, whilst the sellers don't buy the 'future story', they just think all these figures and sales won't come to fruition.