Investment Matters

Company News

Emeco announced an earnings accretive acquisition – of Queensland based Matilda Equipment.  It was acquired at an attractive price ($80m, or 3.3x Q3 FY-18 annualised operating EBITDA).   Matilda is a national rental equipment business, specialising in individual rentals of high demand, low-hour, late model ancillary mining equipment.

As well as increasing Emeco’s earnings potential, the niche nature of Matilda’s offering complements Emeco’s current operations. It also increases opportunities (e.g. leveraging the maintenance capability obtained under the Force acquisition to achieve profitable use of equipment after the first component life under Matilda contracts).

We are pleased the company is achieving strong organic growth, enhanced by accretive acquisitions.  These acquisitions (recently Force and now Matilda) will further grow the bottom line.

Emeco’s earnings growth is translating to a larger market cap (~$890m post raising; ranking it 187 on the ASX).  It also points to likely inclusion in the ASX200 in coming months, which provides additional institutional buyer interest and mandates to invest in Emeco.

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The AUD fell below 75 US cents this week.  As a general rule, companies with overseas earnings – especially with revenue generated in USD, and depending on their hedging profile – will benefit.  Companies of note that you own in this context include QBE Insurance, South32, MMA Offshore, Cardno, TZ Limited and BHP.

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Threat Protect released its third quarter (ending 31-Mar-18) update.  Operating revenue for the quarter of $3.5m contributed to FYTD growth of 23%.  With the acquisition of SA-based Security Alarm Monitoring Service (SAMS), recurring monthly revenue has risen above $1m from Apr-18.  Additionally, the scale benefits of having increased monitoring clients continue to flow through to operating margin (and thus profitability).

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NSL Consolidated, an Indian based iron ore producer and a comparatively small weight in your portfolio, released an update.  Strong sales were achieved in April, as phase 1 of the production facility ramped up operations.  The plant is now operating well, with 58%-60% Fe concentrate consistently achieved from 30%-33% Fe feed grade input. Further sales' growth is expected over the June quarter.

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Origin Energy released its third-quarter production update (pertaining to the production of oil and gas, including LNG).   Production volume was up 10% vs Q3 FY-17 (reflecting additional APLNG export capacity brought online over that time), but down very slightly (-1%) on the preceding quarter. 

Year-to-date revenue increased 48% compared to the previous financial year at the same time, on the back of higher gas prices (LNG export and domestic).