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Why I think Bingo Industries Ltd shares could be a good bet

Bingo Industries Ltd (ASX: BIN) today announced its half-year results, with strong revenue and earnings growth driven by ongoing business momentum and increased market share. Key items for the period include:

  • Revenue from ordinary activities up 43.2% to $141.7 million
  • Statutory net profit after tax (NPAT) up 30.1% to $17.8 million
  • Pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) up 40.1% to $43.8 million
  • Pro forma NPAT up 37.1% to $21.3 million
  • Inaugural, fully-franked interim dividend of 1.72 cents per share

Bingo recorded higher revenue and earnings across all three of its operating segments, though Post-Collections was the standout and largest contributor to group performance.

Post-collections revenue rose 53.4% to $81.8 million for the period, while the segment’s pro forma EBITDA was up 53.2% to $24.0 million on flat margins.

Through Post-Collections, Bingo Recycling separates and recycles waste from its Collections operations and other customers, diverting waste from landfill so that it can be processed and eventually reused.

Bingo has invested heavily in its recycling infrastructure in recent years, which I believe will allow it to capitalise on increasing demand due to tighter laws and regulation, reduced availability of landfill and export options, and greater environmental awareness.

While statutory NPAT rose 30.1% for the period, earnings growth on a per share basis was more modest due to Bingo’s $120 million capital raising in December. This meant earnings was 5.0 cents per share, up from 4.5 cents per share for the previous corresponding period.

The capital raising was used to fund two business acquisitions with waste management and recycling operations that are expected to double Bingo’s current network capacity by 2020. The purchases comes not long after Bingo’s initial entry into the Victorian market in October 2017, and the company has previously flagged potential expansion into Queensland, should the state government re-establish the landfill levy.

Looking forward, Bingo has an immediate focus on integrating its recent acquisitions, though the company is planning on further expansion across the east coast of Australia, with the goal of national presence by 2022.

Outlook

Bingo has reiterated full-year pro forma EBITDA guidance of $93 million, stating “positive business momentum has continued” since the end of the first half and that recent acquisitions are “expected to contribute more materially” in the second half of FY2018.

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Motley Fool contributor Ian Crane has no position in any of the 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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