Austco Healthcare Limited

ASX:AHC

Austco Healthcare Limited

ASX:AHC
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$0.270 (0%)
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#9
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Forum Topics AHC AHC Acquisition

Pinned straw:
LifeCapital
Added 10 months ago

Looks like a good acquisition by Austco to expand their foot print and 3.5x earnings.


Austco Healthcare Limited enters into a Term Sheet for the Acquisition of Healthcare Communications Business, Amentco.


Austco intends to merge Amentco's extensive business with its current operations, spanning hundreds of sites. Key personnel from Amentco will be retained to facilitate a seamless transition for both customers and employees. This acquisition is anticipated to yield substantial revenue synergies by enabling cross-selling of products and services and streamlining operational processes.
lyndonator
Added 10 months ago

AVA Risk Group should check this out to see how an announcement should be done, haha; it is a very detailed announcement.

On the surface 3.5 X EBITDA seems a very responsible price to pay.

Based on their June 2023 report the $5M upfront payment will wipe out all their cash. I wonder if a cap raise is coming (especially considering there will probably be another $3.5M to pay down the road).

Seems like a good acquisition (dear I say, it has very good "synergy" with their business) at a reasonable price. So I'd view it as very positive but reserve the right to change my mind.

Would love to hear @Wini's thoughts on this!!

DISC: Held

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Wini
Added 10 months ago

@lyndonator Acquisition looks tidy to me. In line with the plan to vertically integrate with direct sales and services for customers in Australia to replicate the success in Singapore and Canada. They grew the function organically in those regions but given the collapse of Hills in Australia leaving a big hole in the market I can appreciate why they would take the approach to acquire here and get scale immediately.

As for the capital position, there was only $4.6m at the end of June, but an elevated receivables balance and ~9 months of operations before completion. They also secured a $2m debt facility from a major bank late last year. Assuming no operational issues they can afford the upfront cash payment easily, but it would leave them with not much wriggle room so I wouldn't bet my life that if the share price has a strong run the Board wouldn't raise a small bit of equity just to give that buffer.

But the upcoming report will shed some light on that. They have struggled to maintain working capital through the Covid period, building up inventory in particular so if that trend has continued with weak cash conversion it changes the equation somewhat.

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Seymourbutts
Added 10 months ago

I don't know much about the company having not looked at them closely. But on first impressions and at a glance they appear offering a comparable solution to Alcidion.

It would be interesting to hear from the company, @Strawman thoughts? Unsure if you have reached out to them previously.


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lyndonator
Added 10 months ago

Thanks @Wini - really appreciate your insight, particularly on inventories.

@Seymourbutts - I agree, would be great to hear from them on Strawman

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edgescape
Added 10 months ago

Amentco are system integrators. They take what is existing in market and implement the solution for the customer requirements

@Seymourbutts Alcidion are focused on software implementation so completely different from Amentco

This looks like a good acquisition. Amentco also works with other sectors outside of healthcare so Austco appear to be branching out to other sectors.

Time will tell whether this "horizontal" merger is beneficial or a challenge for Austco.

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