Originally Posted by
Beagle
I'm surprised everyone seems pleased with that EDITDA result which is a massive reduction ($6.7m EBITDA falling to just $2.3M is a massive fall), on the previous year, (challenges notwithstanding).
I know everyone is holding for future growth but...I can't help observe that some people appear to be making the mistake of misinterpreting EBITDA for profit. Earnings before interest tax and depreciation of $2.3m is not net profit and last year net profit was $1.5m lower than EBITDA. I would expect more than $1.5m in expenses and depreciation below the EBITDA line this year with more plant and equipment (capital raise costs are another sperate thing entirely), but sticking with $1.5m in expenses and depreciation below the EBITDA line as per last year my back of the envelope calculations suggest about $800K profit before tax or just on $600K after tax which equates with the higher number of shares on issue to just 0.24 cents per share. (PE 250)
Annualizing the second half EBITDA result of ~ $1.5m which was about double the first half, would suggest annual after tax earnings of about 0.43 cps, much better than above but still trading at 140 times the most recent half financial performance. This suggests to me that several years, perhaps even 5 years, of expected future growth is already baked into the current share price. (When I originally invested at 20 cents when they were growing earnings they were on a forward PE of only 20 times earnings so the metrics are certainly very, very different today). One could of course argue that their growth prospects are better now than they were in the past but I think their growth prospects were pretty good a few years ago so maybe the current metrics are far too stretched...it seems that way to me.
Actual earnings, (if any after capital raise costs), will be revealed with their annual report shortly.
What's abundantly clear is they face a human resource crisis in this labour intensive industry and 20% staff vacancy rate with current modest staff needs is an extremely serious situation. Its all very well to be building significantly more processing capacity in the years ahead but where on earth are they going to find the staff from if they can't even staff their current processing machinery's needs ? To me I see no solution other than to dramatically lift pay rates to attract the necessary staff and this surely begs the question of how serious is the impact on future profitability ?
For my money, I think the private equity guys paid about the right price (40 cents) at that time but the challenges the business has faced and continues to face with labour shortages, shipping and installation challenges and delay's are probably a lot worse than they or anyone else were expecting at the time so fair value now is probably below the 40 cents they paid. That's how I see it and I am sure others see it differently and that's fine.