Looks like STP took the opportunity of the JV acquisition to tell us that it is expanding its business beyond medical waste collection & disposal to encompass the broader area of infection control. Maybe it’s the effect of their new PR firm (Monsoon)?
On the acquisition, it looks expensive, but after having analysed it a bit more closely (no thanks to the lack of baseline numbers in the announcement) it looks quite attractive. Some of the key points are: a) no integration risk; b) EBIT margin of JV acquired almost 90%; and c) even allowing for interest of as high as 10%, EPS +ve.
Impact on STP, is that it increases its enterprise value (EV) from about $40m to about $75m. The presentation accompanying the announcement says EBITDA in FY0708 will increase >20%. It was ~$3.4m in FY0607, so expect >$4m. The acquisition will make it >$8.5m on an annualised basis. Net profit is to increase by 50% in FY0708 (from $1.2m (?) to $1.8m – excluding arbitration costs and writedowns).
My expectation for FY0809 is for an annualised EBITDA of probably $1.5m higher and interest costs about $0.5m lower, with a net profit of $5m, after allowing for DA of $2m with EPS of 1.25cents (dividend?). Choose a PE and estimate the price. Maybe even factor in a net +ve settlement on the court case and more infection control and … Any other thoughts?
STP Price at posting:
0.0¢ Sentiment: None Disclosure: Held
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