Seven Group Overvalued; No Change to AUD 8.75 Fair Value Estimate
We still think Seven Group is overvalued. We require 6.5% five-year revenue growth at a midcycle 20% plus EBITDA margin to justify the current share price--unrealistic in our assessment. Our base case AUD 8.75 per share fair value estimate assumes 6.0% annual average group revenue growth to AUD 3.9 billion by fiscal 2022, still well below fiscal 2013’s AUD 4.8 billion peak. We also assume a midcycle 18.0% EBITDA margin, increased in September due to Coates’ consolidation and well ahead of the 12...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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