I get the long-term story for this business and think management are excellent. However, if you read between the lines in the "Market Update" slide of the presentation (page 20), I get the feeling that near term performance will disappoint. A big part of this business (despite the recent pivot to more infrastructure and C&I) is still construction exposed.
The issue with the collections side of the business is that when collection volumes drop (due to lower construction activity), greater spare capacity exists in the market, which puts pressure on pricing and you have a drop in both volumes and price. I see collections as a largely commoditised business and Bingo will not be immune from this effect.
"Headwinds in multi-dwelling residential construction have continued in 2H FY19 and are expected to continuethroughout FY20."
"Total construction activity in NSW and VIC indicates a rebalancing with the cycles, resulting in a relatively flatforecast profile for total work to be done over the medium term"
In the face of the above, I don't necessarily love the FY20 growth prospects either. "FY20 growth underpinned by Patons Lane RRC and landfill online, uplift from redevelopment program, benefitfrom price rise, DADI acquisition and associated synergies".
Despite the recent run-up in share price, I am looking for a more attractive entry point, or confirmation that the cycle is turning before buying in.
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I get the long-term story for this business and think management...
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