RE: Director Buy9 Jul 2024 12:14
A good post copied from the other BB regards the value here worth reading
"I digest these things quite slowly and it helps my thought processes to post. ADVT appeared in SCSW (published early this month...) but nothing new. It did however remind me that ADVT has just bought Celation for 4.2x EBITDA (pre-dev costs).
If I take VM's multiple for an instant sale to private equity of 15x and her rough average buy at c. 5x EBITDA and a guessed at current run rate today of £8m EBITDA (Inc Celation) then the businesses in ADVT could be sold now for about £120m. And there is about £100m of cash/near cash.
I would be gobsmacked if the EBITDA run rate this time next year from the businesses presently in ADVT was not £12-15m. At 15x that is £180-225m. BTW, reading between the lines I would not be surprised to see EBITDA at >£20m 12 months from now - like for like.
There is no clue as to how fast VM will spend the cash she has in the bank, but when she does, she will surely try to carry on buying at about 5x EBITDA. As she does so, her instant out at 15x will be increasingly valid as ADVT gets bigger. So I think the £100m of cash will equate to about 300m of private equity sale valuation. £180-225m + £300m = £480-525m.
There is no allowance in that for improvements in new acquisition performance nor for synergies with existing apps.
Anyone who is familiar with VM's performance at Advanced Comp Software will remember that most of the EBITDA growth came organically from a combination of efficiencies, new business wins and very purposeful cross-selling of solutions. It was a while ago, but my sketchy notes from then suggest about 75% of EBITDA growth was generated internally. So I get to £480-525m x 3(ish) = target exit of £1.4-1.5bn. That equates (rough rough) to an SP of over £10. Timescale? My guess is 3-4 years - VM is 62 and may want to slow down a bit as she nears 65.
Seems silly not to hang around for something that has an outstanding chance of 7x from here.
So - no profit-taking from me yet. That may change when this thing nears 300p and I look forward to the day.
GLA
GS"
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