Ann: Service Stream COVID-19 Business Update, page-55

This is a write up from NAB Trade by James Dunn. All opinion not advice.

Service Stream (SSM:ASX)
Analysts’ consensus target price: $2.765
(FN Arena, based on May updates)

Any investor wanting a stable, high-yielding stock that offers services that are essential in the Coronavirus-affected economy, Service Stream would be one of the first that popped up. Service Stream builds, operates and maintains the country’s essential telecommunications and utilities infrastructure, including water and gas distribution networks. As would be expected with many people working from home, demand for the company’s services has remained strong throughout the pandemic. However, Service Stream has not been totally unaffected itself. It has had the issues that most companies have had in terms of making sure its employees can work safely, and it has had clients delaying projects because of the need to make sure the system copes – both in the telecommunications networks and utility fields. These delays did see Service Stream reduce its EBITDA (earnings before interest, tax, depreciation and amortisation) guidance for FY20, in May, to about $108 million. The company was going extremely well before Covid-19, with first-half EBITDA up 50%, net profit up 28% to $32.2 million, and earnings per share (EPS) up 14% to 7.96 cents. The company is close to a net cash position and knows that its workload will grow once Australia emerges further from the pandemic. At current prices, you’re buying an estimated fully franked dividend yield of about 5% in FY21, or 7.1% grossed-up, and you’re buying that on about 13.9 times earnings. That’s pretty good for a high-yielding essential services provider.