Grew? I thought you were a Value guy
And we want growth
we just don’t want to pay too much for it
What’s with the EBITDA reference, I thought you don’t like that metric?
I don’t really
Because companies with a huge & unaffordable interest bill can look great with Earnings BEFORE Interest…
They just look shoddy afterwards
But I look at EBITDA because it shows me a different angle
Like looking at yourself in the mirror at various angles
although I do that less these days..
I just don’t STOP at EBITDA
Because it’s like stopping at a good looking Cash Flow number
but not noticing it’s due to lower inventory – you can’t cut inventory forever
Or stopping at the Cash on the Balance Sheet
but not spotting the huge accounts payable balance that needs payment the day after the quarter-end
Now convention says to use Enterprise Value when using EBITDA
Mkt cap + debt and – the cash
The theorists think it’s harsh to penalise the valuation with the debt AND the interest bill
which is why you add the debt but ignore the interest – EBITDA
But I think high debt deserves harsh treatment
Because I don’t want to lose my shirt on any stock
especially if I’m not looking good at various angles
Now you deduct cash in the EV calc
while remembering my point about inflated cash & high payables
Net current assets is R4.5bn and cash is R3bn so I’m safe in this case
Now for the debt, you normally use long term, interest-bearing debt but let’s be conservative and use all non-current liabilities of R7bn (deferred tax, environmental provisions) because if you acquired the entire company, they’d be yours
So EV = mkt cap of R8bn + R7bn – R3bn = R 12bn
A conservative number
They made R2bn in H1 so shall we go with R4bn for the year?
= 3x EV/EBITDA
Except H2 should be FAR more profitable because the Rand Coal price is currently 50% higher than H1’s average
And operating leverage doesn’t get better than with coal companies
Sorry, did I not tell you this was Thungela Coal (TGA LN, TGA SJ)
Oh, you want Green energy?
Like Siemens Gamesa the massive wind turbine guys?
that made R11bn of EBITDA in H1
only 5.7x TGA’s (lower if I use my H2 guess)
but has an EV of R400bn
nearly 50x TGA’s
oh and they dropped R8.3bn of negative cash flow in H1
and in Q3 complained of:
“a very difficult environment…the impact on backlog profitability of rising commodity prices … higher-than-expected ramp-up costs …resulted in a provision for onerous contracts”
with a share down 35% since Jan
You’d rather own that?
Be my guest
I just think if you really want to make a difference & help the planet, buy solar panels, energy-efficient appliances/cars, bikes, drink oat milk lattes, eat plants & watch #seaspiracy
Buying a “green” stock / ETF might make you feel good
But it won’t help your returns
Nor your angles