Outsourced facilities service provider Spotless Group Holdings Ltd (ASX: SPO) was one of the most hotly anticipated initial public offerings (IPOs) of 2014.
The company certainly hasn't disappointed investors who jumped aboard the IPO with the stock up 27% from its float price of $1.60 a share.
How is Spotless travelling?
This week's interim profit result has given investors an important opportunity to assess how the business is performing…
- Revenue was up 4.5% to $1.35 billion
- Adjusted pro forma net profit after tax (NPAT) is up 21% to $64 million
- An unfranked dividend of 4.5 cents per share has been declared
- Net debt increased 7.5% to $566 million
- The group has won numerous significant new contracts including facilities maintenance for SA State Government, new contracts with the Australian Department of Defence, facilities maintenance with WA Department of Housing and cleaning services for the lounges of Virgin Australia Holdings Ltd (ASX: VAH).
What should investors expect now?
The company took the opportunity to reaffirm the prospectus forecast for the full year with revenue of $2.69 billion and adjusted NPAT of $141.8 million expected.
The longer-term outlook for the group is also positive with Spotless well positioned to grow via an expanded services offering and further bolt-on acquisitions. It should also benefit from margin expansion as a number of public-private partnerships ramp-up to full operation over the next few years.
Based on the prospectus forecast for financial year 2015, the group will achieve adjusted earnings per share of 13 cents per share. With the shares closing Tuesday's trading session down 1.5% at $2.02, the stock is trading on a forward price-to-earnings ratio of 15.5x. That's below the market average of the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), which arguably suggests the stock is undervalued on a relative basis.
