Why the Emeco Holdings Limited share price surged 7% higher today

The Emeco Holdings Limited (ASX: EHL) share price was one of the biggest movers on the local market on Wednesday, following the release of the company’s quarterly update. The stock climbed 7% higher to $0.30 – more than three times its value this time last year.

Emeco rents earthmoving vehicles to the mining sector. Throughout 2017, the company grew with a number of acquisitions, and the last trading update proves that the business remained strong in 2018.

Revenue increased to $101 million, up 22% over the previous quarter, with operating EBITDA up 15% to $41 million – yielding an EBITDA margin of 41%. Major drivers of the improved results were the first full-quarter contribution of equipment rental business Force, acquired for $70 million at the end of 2017, and the increase in operating utilisation of the company’s fleet from 57% in the first half of FY2018 to 61% in the March quarter.

The company expects new project wins and existing project scope expansions to further increase earnings in the last quarter of FY2018 and in FY2019.

In March, media speculation mounted that Emeco was considering moving under private ownership, but the company denied having solicited or received takeover proposals.

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Motley Fool contributor Tommaso Autorino 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 Scott Phillips.

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