Bingo Industries Ltd

Raised Fund for the acquisition of Dial A Dump Industries: Bingo Industries Ltd (ASX: BIN), is a provider of waste management solutions for domestic and commercial businesses in Australia. The company operates through three segments, comprising of Collections, Post Collections, and Other. This small cap company, with the market capitalization of $1.80 billion, is trading at the price of $3.12. The company’s stock has a support at $2.69 and resistance at $3.2 level.
 
BIN has raised $425 million through an Entitlement Offer, comprising of both the institutional and the retail component at an offer price at $2.54 per ordinary share. The funds raised will be used for the acquisition of Dial A Dump Industries (DADI) for the cash consideration of $377.5 million. Though the company is acquiring DADI for the total consideration of $577.5 million. Further, the funds will be used for the acquisition of two additional freehold properties located in Melbourne and Sydney of $20.5 million, to borne the transaction costs of $15.0 million and to get the Stamp duty of $12.0 million. The new BIN shares issued under the Entitlement Offer are not eligible for the final dividend of 2.0 cents per share. Moreover, for FY 19, BIN expects to post year-on-year pro forma EBITDA growth of the underlying business in the range of 15% to 20%, which is prior to any impact of the acquisition of DADI. BIN expects the acquisition and Entitlement Offer to post mid-single digit EPS accretion on a FY19 pro forma basis pre synergies, more than 15% EPS accretion including run-rate synergies of $15 million per annum and is expected to post Return on Capital Employed of approximately 15% within 2 years of completion.
 
However, the acquisition is subject to customary closing conditions, that includes ACCC informal merger clearance. Additionally, the company for FY 18 has reported 44.5% increase in revenue, 46% rise in Pro forma EBITDA and 91.6% rise in statutory NPAT.As a result, BIN stock has risen 21.48% in three months as on September 24, 2018  but is trading at a high P/E of 31.60x compared to the industry P/E of about 16x.
 
BIN stock is added in S&P/ASX 200 Index, effective from September 24, 2018 as per September 2018 Quarterly Rebalance of the S&P/ASX Indices. Further, the company is founded on 3 March 2017, therefore not much history of performance. Based on the foregoing, we give an “Expensive” recommendation on the stock at the current price of $ 3.100.


Outperformance against FY18 guidance (Source: Company Reports)
 
 

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