No-Moat Seven Group Cashes in on China, FVE Upgraded 13% to AUD 8.50
We increase our fair value estimate for no-moat Seven Group to AUD 8.50 from AUD 7.50 due chiefly to the announced sale of WesTrac China to Lei Shing Hong Machinery for AUD 540 million or AUD 1.90 per share. Despite this, at AUD 12.85, Seven Group shares remain materially overvalued, in our opinion. As per our June 2 note, WesTrac China had comprised 7% or AUD 0.53 of our fair value estimate, equivalent to a fiscal 2016 EBITDA multiple of 4.2. Assuming Seven Group nets 85% after completion adjus...Seven Group Holdings has six segments: WesTrac Australia, which provides heavy equipment sales and support to customers in Australia; WesTrac China, also providing heavy equipment sales and support in Hebei, Liaoning, Heilongjiang, Jilin, Shanxi, Inner Mongolia and the municipalities of Beijing and Tianjin; AllightSykes, engaged in the manufacture, assembly, sales and support of lighting, FG Wilson power generation and dewatering equipment as well as distribution of Perkins engines; Coates Hire, which is an equipment hire company; Media Investments, which relates to investments in listed and unlisted media organizations; Energy; and Other investments.
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