In this briefing:
- Procurri: Exit DeClout, Enter Novo Tellus. Company Remains Highly Undervalued at 4.4x 2018 EV/EBITDA
1. Procurri: Exit DeClout, Enter Novo Tellus. Company Remains Highly Undervalued at 4.4x 2018 EV/EBITDA
Procurri Corporation (PROC SP) released FY18 results which showed the company growing revenues to 220M SGD (+21% vs FY17), EBITDA to 19.7M SGD (+185% vs FY17), PBT to 10.1M SGD (vs 2.3M loss in 2017) and a small net profit of 5.3M SGD which was artificially low because of an astronomical 47% tax rate. The high tax rate should reverse in 2H19 which would show the reported profitability of Procurri improve substantially.
Procurri remains deep value trading at just 4.4x 2018 EV/EBITDA and 0.4x 2018 EV/Sales. If we adjust the FY18 net profit figure(assume 30% tax rate vs 47%) the shares trade at a P/E multiple of just 13x.
The shareholder register of Procurri has seen a dramatic change YTD with multiple announcements on SGX. The most significant development is the entry of Singapore PE fund Novo Tellus acquiring a 29.6% stake on 19/2/19. Consequently this means that the biggest corporate overhang on Procurri (read: the control by Declout Ltd (DLL SP) ) is now almost over with their stake reduced to 17% from 47% previously.
Novo Tellus paid 0.33 SGD for the 29.6% stake which should now be a floor valuation for Procurri going forward.
Given the well-publicized track record of Novo Tellus at SGX listed Aem Holdings (AEM SP) the question is if Novo Tellus sees another multi-bagger in the making?
While a “10-bagger” type return like AEM is unlikely at Procurri, doubling the market cap from 90M to 180M SGD would not be impossible as Procurri continues to grow in FY19 and the depressed multiple expands modestly.
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