GSIG – I would advise caution, not only because of the restatement issue, but even without any restatements, there does not appear to be much upside here for the equity holders. I was intrigued by the postings related to GSIG and did a little research. Based on my calculations, if we assume that they can perform as they originally reported 2007 (would be considered an upside scenario given situation and economy), the performance would approximate annual EPS of about $0.06 for a P/E multiple of 15.5x and EBITDA of $45.5 million for a current EV/EBITDA multiple of 4.73x. Calculations are as follows:
EPS: 2007 numbers display Operating Income of approximately $29.3 million (excluding restructuring charges). The revised Term Sheet with the banks indicates $95 million of debt at 12.5%, so annual interest expense will be $11.6 million and I’m throwing in $1.2 million of interest income to reach a pre-tax income of $18.9 million. Subtracting 1/3rd for taxes results in $12.6 million of Net Income. The Term Sheet with the lenders gives them 80% of the Company (fully diluted) as part of a debt-for-equity swap from a loan taken out in 3Q08 to acquire Excel Technology ($210 million financed through Unsecured Notes and warrants). With approximately 42 million shares (rounding) outstanding prior to the Term Sheet, this would represent a revised share count of 210 million. $12.6M Net Income/210M shares = $.06 EPS and a 15.5x multiple vs. current share price of $.93.
EBITDA Multiple: EBITDA of $45.5 million was calculated as 2007 Operating Income of $22.65M + $6.65M Restructuring + $16.2 D&A. Enterprise Value calculated as 210 million shares x $.93 = $195.3 million + $95 million restructured debt less $75 million cash/Auction Rate Securities for a total of $215.3 million. This is a 4.73x multiple assuming that GSIG could achieve 2007 operating performance.
AI
