Yes, it really depends on he mood of the market - ATM, the market is definitely focusing on any potential bad news and dealing with it harshly.... although, if I could point you to Ventia's result yesterday - it similarly got thumped for one of it's divisions not performing to expectations, yet failed to reward the sterling (and dominant) performance of its other divisions which made up for (temporary in my view) weakness in this division, and furthermore illustrated the beauty of its business model which tends to mean earnings are smoothed/less volatile due to its diversity. Of course, the stock rebounded and some today!
I'm not sure ACF is such a quick rebound story, however, for what its worth, on my preliminary numbers based on guidance, what we're looking at is this:
F25
Revenue: c$250m/EBITDA: $75m, which implies 20% revenue growth and about 12% growth in EBITDA (with upside as contracts firmed through the year), for a 30% EBITDA margin and eps of c10cps fully diluted and assuming an 8% increase in weighted ave shares over F24 for the purpose eps calculation. This does not include any assumption of significant items (but they should be significantly less assuming no acquisitions, which we can't forecast.)
This puts the stock at $1.00 sp on a F25 PE of just over 10x. Assuming a c65% payout ratio, F25 eps of 6.4cps, or a div yield of 6.4% fully franked, or a grossed up yield of 9.1%.
Remember, this is a base case! We will be in a better position to firm numbers after the AGM and as the year progresses.
For your information only - this is conservative and I suspect sell-side analysts won't be as conservative, but it gives you an idea of the valuation parameters.
After absorbing the call today, this is a summary of my view of the Opportunities and Risks as F25 and beyond unfolds:
Opportunities
-Strong p/line of growth - strong start with good run rate of contracts committed in first 6 weeks - Formwork to benefit going forward from Olympics in Brisbane/Qlnd Hospital project which are 'multi-year' revenue streams and, given its dominant position in this state, ACF very confident of getting its share of these;
-ACF continues to take mkt share in key markets and pushing hard to grow further in NSW and WA (organically and potential M&A);
-F25 will see full year contributions from MS Scaffolding/Benchmark (only 8mths and 4 mths respectively in F24 result) - both performing better than mgmt expected;
-Increasing quality of earnings (demanding a higher PE?) as a greater % of revenue generated from Industrial Services div (ACF targeting $150mpa revenue from this div in the next few years, albeit lower margin (38% currently) than the high margin Formwork business (c74% margins);
-Leverage effect of increased cross-sell from new businesses and new products;
-Beneficiary of a falling interest rate environment - increased construction activity/lower debt servicing costs;
-Unwinding of delays in major contracts - especially in Qlnd where a combination of CFMEU issues& pending elections have impacted construction activity (although as SB noted on call, ACF still managed to generate $41m of revenue and win market share there);
-Normalisation of step-change in income tax rate in F25 (impact was 2cps to eps in F24);
Ramp-up of revenues from existing contracts e.g. Snowy Hydro currently generating revs of $0.6m/mth, increasing to c$1.2m/mth as of next month - he cited others in a similar vein;
Risks
Further partially share-funded acquisitions that do not enhance eps - a combined 20.6m shrs issued for MS Scaffold/Benchmark in F24; (the balance from DRP and sb payments)
- Further delays to commencement of (very strong) p/line of contracts in Qlnd;
Increased competition/market share loss (I rate this as unlikely, given their entrenched/dominant position/longstanding blue chip client relationships);
- increase in bad debts (they see to be managing these well - they fell in F24);
- change of government leading to a cancellation of key infrastructure projects.
Hope this assists. Again IMHO DYOR.
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93.5¢ |
Change
-0.005(0.53%) |
Mkt cap ! $281.8M |
Open | High | Low | Value | Volume |
95.0¢ | 95.5¢ | 93.0¢ | $588.3K | 625.8K |
Buyers (Bids)
No. | Vol. | Price($) |
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2 | 21389 | 93.5¢ |
Sellers (Offers)
Price($) | Vol. | No. |
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94.5¢ | 5968 | 1 |
View Market Depth
No. | Vol. | Price($) |
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2 | 21389 | 0.935 |
5 | 47574 | 0.930 |
4 | 62678 | 0.925 |
7 | 97547 | 0.920 |
5 | 107064 | 0.915 |
Price($) | Vol. | No. |
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0.945 | 5968 | 1 |
0.950 | 52016 | 2 |
0.970 | 4310 | 1 |
0.975 | 36000 | 1 |
0.980 | 37000 | 1 |
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