Apex Technology Acquisition Corp (NASDAQ:APXT), a SPAC (special purpose acquisition company) announced a reverse merger with AvePoint on Nov. 23, 2020, but still has not closed the deal as of March 19. Nevertheless, once the SPAC deal closes, APXT stock, which will change its symbol to AVPT, should get a good boost.
This is because the deal looks to be undervalued as it stands right now.
Using my calculations APXT sock (AVPT post-close) will be worth over 28% more, or $15.34 per share, compared to its current price around $11.88. This article will show how I came up with that calculation.
What APEX Stock (AVPT) Is Worth
AvePoint just released its 2020 earnings results. The software company, which claims to be “the largest data management solutions provider for the Microsoft cloud,” produced better revenue than it had originally forecast. Revenue for 2020 came in at $151.5 million, whereas its slide presentation in Novovember originally estimated $148 million (page 27).
We can then adjust the company’s 2022 revenue numbers by this higher revenue for 2020. For example, in the slide presentation, the company estimated 30% growth in 2021 and 33% growth in 2022 revenue.
Without using these numbers the stated growth rate for 2021 falls to 27.4% and by 2022, the growth is lower by $5 million in sales.
As you can see from the table on the right, the proforma market cap for APXT, as of Friday, March 19 when this was calculated, is $2.47 billion.
In addition, the pro forma Enterprise Value (EV) is $2.2 billion. This is calculated by taking the sources and uses of cash figures from page 27 of the slide presentation.
Next, we can use these numbers to estimate the EV-to-sales metrics and valuation for APXT stock (AvePoint). This uses the forecast sales numbers, both adjusted (see above) and unadjusted.
The table at the right shows that the unadjusted EV-to-sales multiple for 2022 is 8.5 times, whereas the adjusted metric for 2022 is 8.5 times.
Given that the comp numbers from AvePoint’s peers, as seen on page 29 average about 10.8 times EV-to-sales, you can see that APXT stock (AVPT) is undervalued as it is at 8.5x and 8.6x.
In fact, the higher valuation metrics of some of its other peers is 14 times revenue. But for now, I am now using this.
Lastly, the table at the right shows that the adjusted market capitalization value for APXT stock is $3.079 billion, or $15.47 per share. The unadjusted value is slightly lower at $3.025 billion, or $15.20 per share.
The average of these two is $15.34 per share or 28% up from here.
What To Do With APXT Stock
This analysis shows that there is still upside left in APXT stock (later AVPT stock). This is based mainly on the ratios of the three peer stocks shown on page 29 of the slide presentation.
In fact, if we used the higher EV-to-sales ratio of a broader set of its peers, AvePoint will earn an even higher valuation. Using the same sales numbers and plugging in a higher metric of 14.1 times EV-to-sale, results in an adjusted market cap of $3.95 billion ($19.86 per share) and unadjusted market cap of $3.88 billion (19.50 per share).
The average of these higher metrics is $19.68 per share, or 65% more than today’s price. Based on this we can say that APXT stock (AVPT stock) is worth somewhere between 28% and 65% more than today’s value.
Therefore, this looks like a good investment. That, of course, assumes that Apex Technology gets working to close the deal. The deal came out in Nov. 2020 and to the best of my knowledge, they still have not set a closing date for the merger.
Nevertheless, value investors will take advantage of this lull to get in on a pretty good deal with APXT stock.
On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article.