expecting another solid result

Today’s Top Pick.

Energy Action Ltd (EAX.ASX; $3.05/sh; Mkt Cap $73m) – Results preview - expecting another solid result . BUY PT $4.55/sh.

•EAX report their FY13 financial result today and we anticipate it to be broadly in-line with our forecasts which include;

­ Revenue: $21.2m

­ EBITDA: $6.8m and

­ NPAT: $5.1m

•The company provides a 50% payout ratio, representing a yield of 2.8% and 3.6% in FY13 and FY14 based on our EPS forecast of 20.4c and 23.6c respectively.

•Management have a history of strong financial performance since inception with revenue growth of ~25% year on year, EBITDA margins of ~20% and ~23% EPS growth over the past 3 years and we see no reason a similar result will not come through in FY13.

•Subject to any major change in the outlook we believe the company is positioned to achieve double digit revenue growth in future years driven by organic acquisition in market share as the awareness of EAX’s reverse auction and monitoring services continues to grow.

•Current market share is just 5% of the addressable market of 80,000 businesses. Organic growth is attainable without the requirement for capital investment in either expansion of operations, staff or technology upgrades. Future growth initiatives may also come from M&A
.
•The register is tightly held with the Board and founding shareholders account for ~50% and institutions building to ~20% over the past 12mths. We expect another strong result will see the stock re-rate.

•Our enterprise valuation is $107m, or $4.24/sh. Based on our conceptual model EAX trades at a PER of 17x and 13x based on FY13 and FY14. While this represents a premium the ASX All Industrials we view the growth profile, zero debt, high cash generation, visibility of forward earnings and operational leverage on the existing cost base warrants a higher PER.

•BUY, PT $4.55/sh.

http://www.fostock.com.au/announcements/energy-action-ltd-eax-asx