Investor's Champion comment27 Nov 2021 14:25
Investor's Champion comment (subscriber access) on last results :-
HTtps://www.investorschampion.com/channel/blog/plenty-of-promise-in-these-results-and-updates
"Despite the attractive cash generation, we aren’t sure the market likes the debt load carried by this business. Net senior debt at the period end was still a hefty £31.2m, and £38.1m if one includes the dilutive convertible debt.
The outlook statement confirmed that AdEPT is on track to achieve management expectations for the year ending 31 Mach 2022.
Full year March 2022 adjusted forecasts are for earnings of 28.8p. At the current 216p share price this represents a very modest earnings rating of only 7.5x, although forecasts allow for plenty of adjustments.
The c£54m market capitalisation and Enterprise Value of £92.1m (including the convertible) equates to 8.9x forecast adjusted EBITDA of £11.7m for March 2022.
The shares look cheap on many levels and may remain so until the debt can be brought down, and there is also the issue of the convertible.
In August 2017 the Group raised £7,293,726 in the form of a convertible loan instrument from BGF to part fund the acquisition of Atomwide. BGF has the right to convert the loan to 1,855,910 shares at a share price of £3.93 per share at any time. The loan instrument can be redeemed by the Company from the third anniversary and bears an interest rate of 7%. 1.8m shares is equivalent to 7.5% of the current issued share count, although the conversion price is over 80% higher than the current share price.
We are of the view that management should focus on organic growth for now to generate cash and reduce debt. The shares should then start to perk up."
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