Australia | Jan 22 2007
By Greg Peel
An opportunity exists in crane hire company Boom Logistics (BOL), Intersuisse analysts believe, for the investor who doesn’t dither. Boom boomed up to May last year, driven by its industrial and resource sector-led hire business expansion, but it faltered along with the resources sector thereafter and has failed to recover.
Boom hit $4.89 last May before slipping back under $4.00. Trading at $4.12 today, Intersuisse feels the stock will shortly be re-rated by the market, having been largely overlooked for a few months. The broker put an Accumulate rating on Boom at $4.16 last October, but since then little news has come out of the company and it has slipped off the radar.
Yet Boom’s EPS growth in FY06 was an impressive 46%, with 13% organic and the remainder fuelled by acquisitions. Its main business is “wet hire” where not only does Boom hire out the crane, it provides the driver and participates in the customer’s maintenance operations. 70% of Boom’s business comes from maintenance – 31% in the resource sector – and customers are typically long-term. Intersuisse estimates Boom’s EPS will grow by another 25% this year, with around 13% remaining organic.
Boom will continue to acquire, notes Intersuisse, and the full effect of the Camilleri Industries integration has not yet been felt. Camilleri was acquired last April and required a capital raising. It was this raising that put the boot into Boom just at the time of the commodity price correction.
Intersuisse notes: “Key sectors for Boom – resources, industrial and engineering construction – have a strong and positive outlook expected to continue for the next two to three years. Increased production and investment in resources, activity from energy producers in the petro-chemical and electricity sectors and in the development of roads, ports, rail and infrastructure projects are all drivers for Boom’s growth.”
Intersuisse suggests Boom’s FY07 P/E is now a low 15x and is set to fall below 12x in FY09. The FNArena database shows Boom with a 5/1/0 B/H/S ratio and an average target of $4.94, although most recent broker reports date back to August, which just goes to highlight Boom’s lack of attention of late.
Intersuisse now rates Boom as Buy with strong upside.