Disappointing but not unexpected result today given the headwinds
But where to from here? ABC has been a no growth stock for quite some time.
ABC has not executed it's strategy well in the past. $260m of acquisitions prior to 2018 may have fired the share price but only marginally impacted EPS for a short time.
New CEO appointed October last year so maybe things will change
Looking at the strategy pillar of building out quarry and concrete footprint for SE Qld, the big concern is paying too much for acquisitions.
$58m was paid for Zanows on 8.5 X EBITDA, therefore EBITDA is $6.8m
The total value of ABC = Market Cap + Debt = $1.440B + $651m = $2,091m HY2022 EBITDA = $135m Expected FY2022EBITDA = $270m
Total value of ABC is 7.7 X EBITDA
So why pay a higher multiple for an acquisition (and could be even higher still if there is debt involved) than the multiple the parent company is on. I understand why you might pay up for quarries but you would pay a lot less for a commodity like ready mix concrete.
Anybody have a better understanding of what is a fair price for these types of assets?
ABC Price at posting:
$2.21 Sentiment: None Disclosure: Held
