Small Cap Value Report (Fri 25 June 2021) - UPGS
Good morning, it's Paul here with Friday's SCVR.Timing - I've got the whole day free, so we'll see how things progress.DisclaimerAgenda -Paul's Section:Up Global Sourcing Holdings (LON:UPGS) - acquisition of Salter brand. Looks a good deal, on a EV/EBITDA ratio of 7.4.Paul’s SectionUp Global Sourcing Holdings (LON:UPGS)214p - mk cap £183mAcquisition of SalterThe well-known homewares brand Salter is being bought by UPGS. UPGS already licences the brand (expiry: 2024) for use in kitchen products, so buying it will not only eliminate royalties, but also add Salter’s other, lucrative product ranges (especially kitchen amp; bathroom scales, where it is market leader).The purchase price is £32m cash, plus £2m deferred.Forecasts for Salter show: £16.7m revenues, £4.6m EBITDA, and £4.0m underlying profit before tax.Taking £34m consideration (which should be the same as EV, because it says the price is on a nil cash/debt basis), and dividing by £4.6m EBITDA gives a multiple of 7.4, which looks reasonable. Whatever we think of EBITDA, acquisitions seem to generally be calculated on a targeted EV/EBITDA multiple. John McArthur of Tracsis used to say he targets a multiple of 7 times, and since then private equity bidders have chased up...