I wrote on Friday that Speedcast International Ltd (ASX: SDA) looked to be the only winner from the Newsat Limited story, with the former having acquired the latter's assets for approximately AU$12.7 million.
Investors may have been a little distracted by turmoil elsewhere in the market, as Speedcast shares only rose 3% in Friday's trade. I opined at the time that the company looked pricey, but instead it appears that investors were simply slow in making a decision to bid the stock higher.
Speedcast has soared 10% in trade so far this morning as investors buy into the positives of the acquisition:
- Newsat's business provides services to UK, US and Australian governments
- Financial year 2015 forecasts are for $22 million revenue and $3.8 million in Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
- Acquisition to cost $12.7 million including stamp duty, for a Price/EBITDA multiple of 3.3
- Expected to deliver further cost savings of $1-2 million annually from 2016
- Room for expansion via adding new antennae at existing sites
Additionally, management confirmed that the: "Organic growth profile of underlying business (is) expected to be in line with the existing Speedcast group."
Debt will rise, but management indicates that it will be back inside their target range within 12-18 months of the acquisition.
It all looks very promising and as I wrote on Friday, Speedcast International is only confirming investor suspicions that it is a growth story well worth watching.