Bingo Industries Limited

Key Takeaways from Investor Presentation: Bingo Industries Limited (ASX: BIN) provides waste management solutions for domestic and commercial businesses. The market capitalisation of the company stood at A$1.49 Bn as on 1^st July 2019. Recently, the company published its investor presentation wherein it communicated about an update on DADI integration. The company concluded the acquisition of DADI (Dial a Dump Industries) in March 2019. DADI is a fully integrated recycling and waste management services provider in NSW. The acquisition was a catalyst for BIN’s announced network reconfiguration in NSW in order to enhance the operational efficiency of BIN’s network of strategic waste infrastructure assets.
 
The company is expecting that the acquisition of DADI will deliver $15 million of annualised cost synergies from operational efficiencies, internalisation and overheads over 2 years with further potential revenue synergies to be realised. The company’s network capacity expands to 4.7 million tonnes p.a by FY20 on the back of network reconfiguration and acquisition of DADI.

 
Network Capacity (Source: Company Reports)
 
What to Expect: The company is planning to introduce all BINGO P&C policies, processes and procedures by 30^th September 2019. BIN’s goal is Zero Harm and it is committed to protecting people, the environment and communities in which the company operates. The company has continued its focus on embedding ownership of safety to the operational units as well as in individual level. With respect to enhanced vertical integration, 100% internalisation of Victorian non-putrescible volumes is expected in the future.
 
Stock Recommendation: BIN has a strong governance process which is being led by Board Zero Harm Committee and its SEQ team. The gross margin of the company stood at 52.2% in 1H FY19 against the industry median of 39.0%. The current ratio stood at 2.33x in 1H FY19 in comparison to the industry median of 1.31x, which showcases that the company is in a decent position to address its short-term obligations. On the stock’s performance front, BIN’s share had generated returns of 19.26% and 45.34% in the time span of one month and three months, respectively.  Currently, the stock is trading slightly above the average of 52 week high and low prices of around $2.22. Hence, considering the above-stated facts and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of A$2.250 per share (down 0.442% on 1^st July 2019).
 
 

Pact Group Holdings Ltd

 
Debt Refinancing: Pact Group Holdings Ltd (ASX: PGH) is a provider of specialty packaging solutions in Australasia. The market capitalisation of the company stood at ~A$959.74 Mn as on 1^st July 2019. Recently, the company, via a release dated 27^th June 2019, announced that it had successfully extended debt amounting to $380 Mn, maturing in July 2020, to January 2022, at competitive terms and it had received approval from lenders for the establishment of the subordinated debt facility. Furthermore, it had entered six-year subordinated unsecured term loan amounting to $50 Mn. The proceeds from the term loan would be utlised to pay down senior debt and the term loan would provide the group greater funding flexibility.

A Look At Half Yearly Results:In terms of Resin, there was continued upward movement in resin input prices during the half year, exacerbatedby weaker Australian Dollar. The company reported sales revenue of $915 Mn in 1H FY19, reflecting a rise of 13% on pcp. The EBITDA stood at $110 Mn, indicating a fall of 9% on pcp.


Result Summary (Source: Company Reports)

Future Aspects: The company’s priorities include focusing on core and restore margins. The company’s priorities also include restructuring its packaging network in order to deliver its scale advantage and to leverage its market leading platform to deliver growth. The company anticipates the EBITDA in the range of $230 Mn- $245 Mn for the FY ending 30^th June 2019. The range is impacted by uncertainty around the speed with which revenue and efficiency projects can be delivered.

Stock recommendation: The Board of the company would continue to balance the capital requirement of the business with shareholder returns to develop final assessment regarding reinstating dividends at a suitable time. The current ratio of the company stood at 1.00x in 1H FY19 in comparison to 0.50x in 1H FY18. This implies that the company is improving its position to address its short-term obligations. With respect to stock’s past performance, PGH’s share had generated a return of 1.09% in the time span of three months. However, it produced a negative return of 20.51% in the time period of six months. As per ASX, the stock is trading closer towards 52 weeks lower levels. Hence, considering the aforesaid parameters and looking at current trading level, we give “Speculative Buy” recommendation on the stock at the current market price of A$2.690 per share (down 3.584% on 1^st July 2019).  

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