Australia | May 21 2007
By Chris Shaw
FNArena last week noted industrial services play Service Stream (SSM) was gaining increased recognition in the market, with Perpetual Trustees (PPT) joining Richard Pratt’s Thorney group, the Lowy family of Westfield (WDC) fame and Gandel as major shareholders on the company’s register.
Citi is one of two larger broking houses to commence coverage in recent weeks, rating it as a Buy, while today long-term supporter Intersuisse has reiterated its Buy rating to reflect a couple of new contracts the company has just won.
One is with Telstra (TLS) and is estimated by management to be worth as much as $175m in revenues over the next five years and follows on from a contract with Queensland energy utility Energex announced the previous week.
The group’s revenues in the communications sector are already at around $300m annually, the broker expecting the Telstra deal will help grow this to $400m next year as management targets a doubling of its business over the next couple of years.
Factoring in such growth, the broker is forecasting net profit to increase from last year’s $4.4m to $16.8m this year and $20m in FY08, while dividend is forecast to increase from 1.9c last year to 8c next year, offering some yield attraction to investors.
Given such an outlook, the broker continues to recommend buying at current levels. Service Stream shares are unchanged today at $1.85, compared to a year’s trading range of 84c to $1.88.