Australia | May 18 2007
By Rudi Filapek-Vandyck
Ever since Service Stream (STR) and Total Communications Infrastructure (TCI) decided to team up the combination seemed destined for a greater future.
Until recently, however, the merged Service Stream (SSM) was only on the radar of mid-sized stock broker Intersuisse, though that didn’t stop the broker from issuing repeatedly positive research notes on the Melbourne based service provider whose clients are predominantly situated in the telecommunications and utilities sectors.
It hasn’t held back the share price either, coming into the new calendar year a tick above $1.40 only to steadfastly move towards the $2.00 level. Today, and in an overall weaker market, Service Stream shares added another 2c, 1%, to $1.85.
After the merger, Citi commenced coverage on the stock –the first major stock market expert to do so- and the analysts certainly liked what they saw judging by the fact that they slapped a Buy, High Risk recommendation on the stock. Exactly one week ago Citi raised its twelve month price target to $2.05 on the announcement of a major contract from industry mogul Telstra (TLS).
On current Citi estimates Service Stream should achieve EPS growth of 23% in FY08 followed by 16% in FY09.
It would appear that one of the better known value investors in the Australian share market had already come to a similar conclusion. Perpetual Trustees (PPT) declared today it has been buying up shares in Service Stream since early January culminating into a substantial stake of 6.54% in the company (9m shares).
Both Intersuisse as Citi expect management to remain on the lookout for acquisitions.