Ann: Monadelphous enters agreement to acquire Melchor Contracting, page-5

On it's own this is unlikely to be a very good business (in fact, its probably a lousy business), but as part of the integrated MND group, and the resulting expanded market access, it might go from being lousy, to adequate/reasonable business.

But even if it gets to be only adequate under stewardship of MND management - at a purchase price of $10m for a $100m Revenue business - MND are paying very little for it. Even if it operates at skinny NPAT margins of, say 2% or 3%, MND would be paying around 3.5x to 5.0x P/E for the business.

And once MND channels more internal work through the acquired business, and reduces duplicated fixed overheads (functions of Management, Finance, HR, IT and occupancy expenses etc.), this little business could end up having a payback period of just two or three years.

Viewed another way, if it generates $2.0m or $3.0m NPAT (hardly a tall ask on +$100m of Revenue), then it would be a 4% to 6% uplift to MND's FY2013 earnings.

It might not be a great quality earnings uplift, but still a bargain at an acquisition consideration equivalent to a mere 0.7% of MND's current Market Value.

The folk running MND tend to not do too many dumb things.

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