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Should you buy K&S Corporation Ltd?

The transport and logistics sector is hot right now with investors having already witnessed takeover offers for two giants of the industry. Toll Holdings was first to get snapped up by overseas buyer Japan Post and now Asciano Ltd (ASX: AIO) looks set to be acquired by the giant US-based Brookfield.

At the smaller end of the market there remains a handful of transport companies that could all make tidy bolt-on acquisitions for larger peers or indeed be instigators of smaller scale consolidations themselves. It’s a sector to watch in this low growth and low interest rate economy, as merger and acquisition (M&A) activity is bound to heat up.

One stock that could find itself involved in future M&A activity is the $150 million K&S Corporation Ltd (ASX: KSC).

The group just reported solid full year results, here are the key results:

  • Operating revenue increased 19.3% to $699.2 million
  • Underlying profit before tax of $18.2 million
  • Earnings per share of 11.4 cents
  • Net debt of $98.1 million
  • Net tangible assets at June 30 stood at $1.73 compared with the current share price of $1.26
  • The performance of the New Zealand business was extremely strong with both revenue and underlying profit up. Similarly solid performance is expected in the current year.

Outlook:

Organic revenue growth was impressive during FY 2015 and work won is set to flow into FY 2016 at a rate in excess of $63 million annualised.

A dividend of 3.5 cents per share (cps) has been declared. The stock will trade ex-dividend on October 15 and payment will occur on November 2. Coupled with the interim dividend – also 3.5 cps – and the stock has a yield of 5.5%.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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