sts a young mnd

Just the other day I was admiring the MND chart and realised not even 3 years ago SP was around $2. This got me thinking what could it take for STS to push towards the $10 mark. Well we can assume FY 2007 EPS will be 18c minimum. 3 years of compound growth at 30% and 40% would result in:

2008 EPS - 23.4 2008 EPS - 25.2
2009 EPS - 28.8 2009 EPS - 35.3
2010 EPS - 37.4 2010 EPS - 49.4

We can see there at 30% growth EPS reach 37.4c and so price target would be around $7 and at 40% growth perhaps $10. The PER odf 20 will be supported by the fact it is a reliable company with constant growth and strong dividends ala MND.

Ok it is all well to write down growth projections but how will this be achieved. Firstly STS is expanding rapidly so various risks need ot be identified and monitored. Such as servicing clients, maintaining standards, cost control. These potential weaknesses can be turned into strenghts, economies of scale can be produced. STS has already mentioned it has created a vertically supplied network chain. It is just a matter of ramping up production and keeping equipment up to demand, STS also stated their work increases are easier ot meet than for other labour intensive companies so they should keep up.

STS is in a great position as it is one of the market leaders in the rapidly growing post tensioning area. it has a mini niche market with minimal competitors. it is feeding off bigger players such as LEI and MXG. Overseas operations are growing in Dubai and a JV in India is around the corner. The India JV is interesting as the Comm Games are on in 2010 so work will be abundent in the lead up to that. STS is also taking on biger and bigger contracts so margins can continue to remain healthy and its reputation in the industry grows every day.

Acquisitions have been mentioned by the MD so this will further support growth rate. Work is at record levels and STS is about to ink its two biggest contracts in company history. This bodes well for a stron 2008 and sets it up to launch to higher level. Bauillie have a 12 months price target of $3.20 so brokers are getting on board. Small caps such as STS are in high demand with institutions so once it cracks ASX 300 it will get another boost.

To summarise STS is a stock not too be overlooked and despite a rapidly rising share price growth will continue. Don't think it has made its run, the trend is your friend and remember MND was $1 once upon a time.