YELL – why it’s overpriced

An observation on Yell: according to Sharelock Holmes, and ignoring the recent announcement, it has net debt of £2200m and a market cap of £25.7m based on a share price of 1.08p. Let’s take the market cap as negligible for the purposes of calculating Enterprise Value. Current EV/EBITDA is 13.61 – well above market averages. Analysts expect a whopping 58% decline in EPS for 2014, too.

So basically, the company is worth nothing at current levels. If memory serves, the debt is due for refinancing in 2014. Let’s consider a rights issue, although I’m not sure who’d be enticed into it. I think that net debt would have to halve to even begin to make the slightest sense as an investment. In the 3 m/e to 20-Jun-2012, net debt decreased by £19m. That rate is far too slow to make an appreciable dent in the debt.

I think current equity holders have to face the fact that they are highly likely to be wiped out, even if the company does manage to recapitalise itself, in whichever form that may take.

About mcturra2000

Computer programmer living in Scotland.
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