They should be thankful because if MYX is heavily geared the share price would be down 40% not just 15%. And without too much debt it gives them a chance to ride out the cycle (if it is indeed a cycle and not structural). It's the same as saying to someone who just survived a car crash that they are lucky to be alive. No there is nothing lucky about a car crash, but it's all relative.
Alright, looking on the brighter side of things. Fair enough.
Sure. Feel free to define the word "gear" to mean whatever you like.
Shareholders' money
outside of MYX ain't free, right? So when shareholders are given the rights to take from their own pocket, hand it over to MYX management to fund new ventures... it's not exactly the same as money MYX has made and are reinvesting it instead of paying a dividend.
It could also be argued that having just raised cash to be in a fortunate financial position (where the share hasn't crashed further)... if MYX is to face more financial headwind, which is highly likely given the resources that's needed to merge the new acquisition, promote, manufacture, distribute... and being up against the likes of WalMart, pushing MYX to now think of "expanding" its sales into specialty pharmacies and other channels... These stuff costs money.
Now that shareholders had just pony up the cash, if there's a headwind and new cash is needed... who's going to write the cheques? Shareholders are more generous and understanding than bankers, but how much more would they be willing to fork out now?
No. This is wrong. Gross profit and EBITDA are different things. You have calculated a NPAT to gross profit ratio and applied it to EBITDA. If you want to use the NPAT/EBITDA ratio it is 51% (45.2/88.5) for FY16.
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Dude, re-read what I wrote. The idea was to use some "crude" method to gauge an approximate ratio of EBITDA down to NPAT. I didn't say EBITDA was the same as Gross Profit. In fact, I said I was being generous and not do it...
So they paid $880m [or so?] to Teva for the IP. Those are to be written down in 15 years. $880/15 = $58.7m in write-downs per year? That's going to be in one of the D or A right? Each and every year for 15 years? Give or take depending on whatever straight line or acceleration period etc. But around that number over the next 15 years.
Then there's the interest incurred on the new debt to help pay for the acquisition... Say 4% on some $200m [from memory?].
But alright, let's use FY16 as a very rough guide to get the ratio...
btw, your "NPAT/EBITDA ratio it is 51% (45.2/88.5)" uses the "underlying" NPAT... there's a few one-offs in that figure versus the $34.523m Reported figure... and should we really use the $37.31m "comprehensive" figure that add the exchange rate gains?
We're arguing over a couple of millions in earnings for a $1.5b company.
But alright, let's use the FY16 figures as representative of that future ratio, and use its EBITDA and underlying earnings.
So that's $45.2/88.5 = 51%. At the $A120 EBITDA from Teva that's $61.2. $1000/61.2 = 16.3 years.
A 15 year to worthless assets will take 16.3 years to break even?
Don't know man, 16 years is a long time in medicine.
Again this is totally wrong. The return on an investment depends on the cashflow it can generate, not the NPAT.
Imagine there is an investment where you can buy a $9m machine that generates $7m of cashflow a year for 3 years, after which the machine is worthless (so you depreciate the machine over 3 years). The NPAT each year is $2.8m ($7m gross profit less $3m depreciation less 30% tax). So in 3 years total NPAT is only $8.4m hence it's a terrible investment using your method of assessment.
But in reality, the investments yields a total cash of $17.4m over 3 years after paying tax of $3.6m, and it is absolutely worthwhile.
I am not saying MYX made a good investment. I am just pointing out that your method of assessment is wrong, and the calculation within your assessment is also wrong.
Yea, I haven't seen the cash flow on Teva's acquisition so who knows.
Just that if history is any guide for MYX, its acquisitions hasn't returned the kind of cash flow a good company would have.