$HYH – Halyard Health – a look back at the spin-off

$HYH represents my first foray into spin-offs. It seems very much a case of beginners luck. I bought in earlier this month at $38.92, and I have been more than pleasantly surprised that its recent price is $44.30.

I did some back-of-the-envelope calculations – so be warned, they have a likelihood of being wrong. Google Finance doesn’t have a proper listing for them, and Yahoo Finance has a PE of 29.74. That seems a bit of a nosebleed valuation, but I think the valuation is more reasonable than that.

It has a market cap of $2061m, and net debt of $45m. So, an EV (Enterprise Value) of $2106m. Call it $2100. I reckon that its recurring EBIT will be around $260m, and depreciation and amortisation of about $69m. So that gives an EBITDA of around $330m.

That gives me an EV/EBITDA of 6.4 (2100/330). If anyone can spot any mistakes in my calcs then please provide a correction, kindly. That was the sort of multiple that Smith & Nephew was trading at a couple of years ago. It’s multiple is now around 13. HYH’s former parent company, KMB (Kimberley Clark) is trading at a TTM EV/EBITDA of 10.8. Similar’ish companies seem to be trading on that kind of mulitple.

So it’s probably not all that surprising that the spin-off is doing so well. I’d hazard a guess that it’s still got a way to go.

Anyway, we shall see. As I say, I’m a complete newcomer to spin-offs, so I’m sure to be making a lot of schoolboy errors.

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About mcturra2000

Computer programmer living in Scotland.
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2 Responses to $HYH – Halyard Health – a look back at the spin-off

  1. Lewis says:

    Mark,

    Have you accounted for new corporate costs? I haven’t done any work here so I might be way off mark, but I think the pro-forma figures they put out showing profitability didn’t include any of the corporate overheads. Since they’re now a separate entity, they have to pay listing fees, auditors, head office, corporate costs etc. etc. etc.

    Again, might be completely wrong about this, though.

    Lewis

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