DGL - DGL Group

[Ferg]

A quick summary of the prospectus:

• The issue is for new shares to fund expansion (acquisition of Chem Pack + capex) and repay debt
• Founder will own 57% post-float
• Forecast Dividends = nil in the short term (cash used for acquisitions yet to be identified?)
• Droughts in Australia will impact negatively on revenues
• Top 10 customers are 57% of revenues
• Strong Balance Sheet with debt/equity at 26-28% before retirement of debts from surplus cash not used for acquisitions
• At a forward PE of 24.6 this is a slow burn unless they can come up with some meaty acquisitions
• Challenge for 2022 will be restoring environmental solutions revenues which have been in decline since at least 2019 (~32% of total revenues)

Financials below:

DGL/DGC	2020	2021	2022
Revenues	$180,050	$189,916	$209,657
Growth	10%	5%	10%
Gross Margin	31.0%	35.0%	34.5%
NPAT	$4,833	$9,497	$10,447
EPS	$0.019	$0.037	$0.041
PE Ratio	53.2	27.1	24.6
NTA	$153,750	$162,395	$172,046
NTA/Share*	$0.60	$0.63	$0.67
FCF	-$15,822	$1,296	$8,480
FCF/Share	-$0.062	$0.005	$0.033

Note: 2020 and 2021 assume inclusion of Chem Pack over the full periods.

*The NTA for 2021 and 2022 is my projection of the the tangible assets based on forecast profitability, although the actual values may drop by 4c per share depending on the treatment of pre-acquisition payments.

EDIT: all values quoted are $A per the prospectus and the PE ratio and other metrics are based on the issue price of A$1 per share.