Polynovo Limited

ASX:PNV

Polynovo Limited

ASX:PNV
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$1.980 (-0.5%)
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#15
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Reports (12) My Report Forum Investors
Forum Topics PNV PNV Scenario Modelling - Acquisiti

Pinned straw:
Parko5
Added 3 months ago

@mikebrisy

Your analysis of what you have not included in you PNV 10 year DCF Model....has got me thinking.

If you were say Johnson & Johnson (and I know if a former life you have experience in this).....and sizing up PNV for a takeover offer.....how would you model that?

My take would be:

  • Look at the exisiting business (lets say valued at $2.60 a share)
  • add growth of about 20% a year for another 5 years...and then taper off for antoher 5 years. (Not sure what equates to additional SP....at a guess lets say another $2.00
  • Value the new products coming.....say another $1.00 (total guess. We could look at the timing...and ball park TAM/Revenue and get it more precise).


So that would make a take over offer price of about $5-6 per share (or about 3.5-4 billion offer based on 690 million shares).

For someone like J&J....this is bread a butter takeovers/acquistion. And they will take a 10-20 year view....so all those products in R&D....they will actually get higher returns.


I wonder if there have been any discussions?
Parko5
Added 3 months ago

Do people add some of this potential take over upside into their SP valuations?

12
nerdag
Added 3 months ago

Only if acquisition is part of the thesis.

11
mikebrisy
Added 3 months ago

I would test the valuation using comparable M&A multiples. For a company like $PNV, EV/EBITDA is a common multiple used by investment bankers (heaven knows I've digested enough pitch packs during my corporate life!), but given it is only just becoming EBITDA positive, we're probably looking at a revenue multiple.

This is when you realise that at 13x FY25 revenues, $PNV is not a cheap acquisition.

So, in practice, an acquirer would wait for a stumble, and then wade in with a 30-40% premium.

Therefore, in practice, I don't need to consider M&A, because the SP is baking in many years of successful execution.

$PNV is somewhat of a special case in medical devices. There are few if any (i.e. none I'm aware of) medical device businesses that have a %GM of 95% - so some of the bankers rules of thumb go out the window.

That's at least how I think about it.

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