Thought I should pull my finger out and do a little analysis on this to see how bad it could get, since I had half an hour free…
Looks like H1 NPAT is $120m, lets assume FY will be $240m (double H1). I know they’re predicting more in their guidance but those predictions are based on COVID going away, which I don’t want to rely on.
Assuming no growth, they might be worth a PE of (at most) 20 (though I think market sentiment could at times demand a lower rate as long as news isn’t good). I won’t speculate at what a lower ranged PE might look like because there’s no way to know where the market’s head is at.
A PE of 20 gives a market capitalization (MC) of $4.8bn (20 x $240m). Adding $775m cash on hand gives a MC of $5.57bn.
Unfortunately the recent milk plant purchase will reduce that number because they’ve said it will be unprofitable/break-even until FY24/25ish. I don’t remember how much they paid for it, but I have a number of $200m in my head for some reason. Let’s use that since I’ve run out of time.
That gives an upper MC of $5,375m at this stage (that’s a share price of $7.23), though this upper limit would go lower on any bad news (or if cash reserves dropped). Implicitly, but for clarity, I expect the ATM share price to fall to at least $7.23, then trade somewhere below and up to that price until there is evidence of a turnaround. I hold in the hope that post COVID, this company can once again be great, but am not investing more money as it’s not running as I would like to see it run (also it no longer fits my strategy).