From Bell Potter who are not involved in cap raising:Industrial...

From Bell Potter who are not involved in cap raising:

Industrial scaffolding momentum continues
The momentum in ACF’s industrial scaffolding division continues to outperform
expectations with FY21 revenue now expected to be up +103% YoY to $20.1m (vs
BPe $18.0m). This reflects an expansion into new markets outside of native QLD
punctuated by the announcement of a new contract servicing the Visy Australia’s
Tumut Kraft Paper Mill based in regional NSW. The 3-yr contract with a 2-yr option is
expected to generate $2.5m in annual revenue commencing in 1H22 and builds on the
recent contracts wins with the Liddell Power Station, Olympic Dam and Nystar Zinc
refinery. In our view, the key takeout from this update is the consistency of the
contribution margin across FY20 to FY22e (~48%) which suggests ACF is not winning
business on price but on value proposition and strong sales execution.
Strong growth expected to continue into FY22
Management has reaffirmed FY21 guidance for revenue of ~$106m and underlying
EBITDA b/w $23.5-$24.5m which is in-line with our current forecasts. Management
have also provided a target of +20% YoY EBITDA growth in FY22, higher than our
+13% forecast growth. As a result of these comments, we have updated our FY22
EBITDA to $28.2m (+18% YoY growth) and upgraded our EPS by +5% and +9% in
FY22 and FY23 respectively. Our updated PT is $0.46 (prev. $0.45).
Investment view: Maintain Buy recommendation
Our positive view towards ACF is predicated on the Company’s leverage to Australian
civil infrastructure markets which continue to benefit from fiscal stimulus and improved
operational execution. Despite the cyclical nature of ACF’s business, we believe the
transition away from the highly commoditised residential scaffolding market to the
formwork and industrial scaffolding markets has significantly improved the quality of
ACF’s earnings profile. Further to this, we see a FY22 PE ratio of ~6x as undemanding
for a stock with upside bias to consensus earnings in both FY21 & FY22.