Shekel Brainweigh Limited (ASX:SBW) has announced the sale of its Healthweigh business, an own-brand manufacturer/distributor of a range of healthcare and fitness scales including Physician, Special Needs, Portable and Baby/Neonatal, to its key US distributor Rice Lake Weighing Systems. The sale price of US$3.43m represents 1.1x annual revenue of US$3.1m, which is consistent with RaaS estimates. If we valued the balance of SBW’s revenue (US$28.8m – US$3.1m = US$25.7m) at 1.1x we derive a valuation for SBW ex-Healthweigh of A$0.216/share (US$25.7m by 1.1x = US$28.3m/0.68 (AUDUSD) = A$41.6m/192m shares = A$0.216). We view Healthweigh as the lowest growth and most competitive business within the SBW portfolio, so the 1.1x revenue should be seen as a base case, in our view. SBW intends to reduce debt with the proceeds (A$5m) to strengthen the balance sheet. As a reminder SBW has started the CY22 year strongly with H1 CY22 sales growth of 23%, gross profit growth of 17% and a lower annualised cash burn. The company has also managed working capital exceptionally well relative to its hardware peer group. We expect continue momentum in the seasonally stronger H2 CY22.
23 Nov 2022
Sale of Healthweigh offers further valuation support
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Sale of Healthweigh offers further valuation support
Shekel Brainweigh Limited (ASX:SBW) has announced the sale of its Healthweigh business, an own-brand manufacturer/distributor of a range of healthcare and fitness scales including Physician, Special Needs, Portable and Baby/Neonatal, to its key US distributor Rice Lake Weighing Systems. The sale price of US$3.43m represents 1.1x annual revenue of US$3.1m, which is consistent with RaaS estimates. If we valued the balance of SBW’s revenue (US$28.8m – US$3.1m = US$25.7m) at 1.1x we derive a valuation for SBW ex-Healthweigh of A$0.216/share (US$25.7m by 1.1x = US$28.3m/0.68 (AUDUSD) = A$41.6m/192m shares = A$0.216). We view Healthweigh as the lowest growth and most competitive business within the SBW portfolio, so the 1.1x revenue should be seen as a base case, in our view. SBW intends to reduce debt with the proceeds (A$5m) to strengthen the balance sheet. As a reminder SBW has started the CY22 year strongly with H1 CY22 sales growth of 23%, gross profit growth of 17% and a lower annualised cash burn. The company has also managed working capital exceptionally well relative to its hardware peer group. We expect continue momentum in the seasonally stronger H2 CY22.