Bingo Industries Limited

DADI Acquisition to Offer Significant Synergies: BINGO Industries Limited (ASX: BIN) is engaged in providing waste management solutions for domestic and commercial businesses. The company recently updated on the change in shareholding of The Capital Group Companies, Inc, wherein the voting power of the shareholder increased from 5.2195% to 6.2474%.

In another recent announcement, the company notified on the appointment of Stephen Schmidhofer as Joint Company Secretary with Rozanna Lee.

Updates from Macquarie Australia Conference Presentation, May 2019: The company highlighted on the key aspects of DADI (Dial a Dump Industries) acquisition. The acquisition of DADI shifts Bingo’s post-collections and recycled revenue contribution from 47% to approximately 70% of group revenue. The management updated that it will take up to two years to fully integrate the two businesses which are anticipated to bring in cost synergies of about $15 million per annum.

The company also talked about its 5-year strategy. The company has made an investment of $140 million in its initial network upgrade program for waste infrastructure assets, earnings from which are expected to flow from FY20.

As a result of network reconfiguration and acquisition of DADI, Bingo’s network capacity expands to 4.7 million tonnes by FY20.

Financial Highlights: During 1HFY19, the company reported net revenue amounting to $142.4 million, up 25.4% in comparison to pcp. Underlying EBITDA for the period stood at $43.8 million, up 4.1% on pcp.


Key Financial Metrics (Source: Company Reports)

FY19 Outlook: The company expects full year underlying EBITDA split to be approximately 50%:50%, which was earlier expected to be 45%:55%. There is strong forward revenue visibility for the future owing to solid collections work in hand and pipeline. Growth in FY20 is expected to be underpinned by a combination of factors including the potential acquisition of DADI, uplift from redevelopment program and benefit expected from 1 July 2019 from the price rise.

Stock Recommendation: The stock of the company generated returns of 16.42% over a period of 6 months and has a market capitalisation of ~$1.55 billion as of 12 July 2019. Considering the expected growth in business owing to the acquisition of DADI, expected increase in network capacity due to network reconfiguration and the guidance provided for FY19 and looking at current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of $2.340 per share.
 

Oil Search Limited

A Quick Look on 1QFY19 Update: Oil Search Limited (ASX: OSH) is engaged in the exploration and development of oil and gas fields. It was stated that Oil Search Limited had exercised its option to acquire Armstrong Energy LLC and GMT Exploration Company LLC’s remaining 25.5% and 37.5% interests, respectively, in the Pikka Unit and Horseshoe area, as well as a further 37.5% interest in the Hue Shale leases and a 25.5% interest in other exploration areas, for US$450 million.

Production during Q1FY19 witnessed a decline in the previous quarter from 7.44 mmboe to 7.25 mmboe. Total sales declined by 15% from 7.82 mmboe to 6.65 mmboe.Total revenue for the quarter stood at US$398.1 million.


Highlights of 1Q 2019 (Source: Company Reports)

The first quarter represented a continued strong performance by the PNG LNG Project, offset by lower oil field production. Revenues during the period were impacted by the timing of LNG shipments and lower realised prices.

Stock Recommendation: The stock of the company generated negative returns of 7.38% and 1.99% over a period of 3 months and 6 months, respectively. The first quarter of 2019 was marked by a decent performance by the PNG LNG project. In addition, the company is expected to derive good outcomes from the recent agreement signed, including the Landmark Papua LNG Gas Agreement and the mid-term LNG sales and purchase agreement with Unipec. Hence, considering the aforesaid factors, we give a “Buy” recommendation on the stock at the current market price of $7.400 per share (up 3.497% on 12 July 2019).

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