Investment Matters

Company news: Emeco

Emeco released a third quarter operational update.  There are continued signs of market recovery, with operating utilisation at 56% (from 42% this time last year), and operating EBITDA (earnings before interest, tax, depreciation and amortization) up 56%. 

On an annualised basis this level of underlying EBITDA is equivalent to $81.5m.  This is some 35% above the earnings rate assumed in the merger and recapitalisation documents.  On this basis, Emeco is on track to smash the earnings guidance implied in these documents - as the industry continues to come off its lows. The first chance to judge this will be next quarter when the combined businesses (Emeco, Orionstone and Andy’s) are reported as one.  We see little downside in the restructured Emeco, and significant upside as the cycle improves and the combined, better business delivers.