Fantastic announcement, and I suspect the share price has a lot...

Fantastic announcement, and I suspect the share price has a lot more upside over the next week as this is digested. I've run some quick numbers on the acquisition (they are buying 80%, so I've only modeled in 80% even thought the accounting will be different - see table below):

- Acquisition looks well priced at <3.5x EBITDA,
- No shares issued for the acquisition (so no dilution), but good to see they have kept mgt engaged with a 20% stake and deferred part of the consideration over 2 years;
- Debt post the acquisition should remain minimal given the cash on balance sheet at year end, so the $20m facility should give them additional capacity for further growth
- Even if we assume no growth from the entire business next year, we should still see a 30%+ increase in the dividend (and a 13% grossed up yield at 35c share price);
- The acquisition appears focused on the high growth infrastructure sector, although it will be good to get further detail on their exposure to non infrastructure work. Also, there is some noise that many east coast infra projects are delayed, so the full benefits may be beyond 12 months;
- Growth from the existing business looks robust with 13% EBITDA growth, despite the loss of the major contract during the year. I'm keen to see the detail later this week, particularly the training/LH split and H2 cash-flow generation.
- If the share price increases to 50c, the P/E will still be <10x, and the grossed up dividend yield >9%;
- All in all, a great announcement and a deployment of surplus cash that is about as good as we could hope for.