In response to Mediagrif’s (Mediagrif Stock Quote, Chart TSX:MDF) recent statements, Laurentian Bank Securities analyst Nick Agostino suggests a buyout may be in the cards and approximates MDF’s minimum takeout value at $15 per share.
Last week, Montreal-based e-commerce company Mediagrif issued a news release announcing a transition process which will include the retirement of its largest shareholder, stating that president and CEO Claude Roy intends “to pass the torch in the context of a smooth transition.”
Shares of MDF are up about 25 per cent since the announcement which, together with the company’s statements at its September 12 AGM, points in the direction of an in-part or in-whole sale of Mediagrif, says Agostino, who in an action note on Monday maintained his “Hold” recommendation and $11.50 target price, representing a negative one per cent return at the time of publication.
Breaking down the value of Mediagrif stock
“In our view the shares adequately reflect the current state of MDF’s operating affairs highlighted by stagnant top line growth as non-core assets mask some gains in growth areas such as e-Procurement (MERX/BidNet, ASC) and Supply Chain (InterTrade, Orckestra), increased investment dollars to drive future top line growth, and depressed EBITDA margins,” says Agostino. “However, with the strategic review underway the question on shareholder’s minds is ‘what are the shares worth should a buyer step
To estimate the company’s takeout value, Agostino takes a number of approaches. First, by looking at comparable company multiples to value Mediafrif’s operating segments (Supply Chain, eProcurement and Consumer) he arrived at a sum-of-the-parts valuation of $15.00 per share.
Secondly, his estimated a free cash flow yield potential valuation from a Sales-based valuation of $12.50 per share and an EBITDA-based valuation of $16.95 per share, also resulting in $15.00 per share.
Third, Agostino arrived at a hypothetical leveraged buyout scenario generated a $16.25 per share valuation and, fourth, an analysis of comparable recent transactions produced a range of between $15.50 and $16.30 according to gross profit multiples and $18.10 according to sales multiples.