Service Stream share price lower after utilities firm acquisition complete

Melbourne network services company Service Stream Limited’s (ASX: SSM) share price has dropped 2.29% to $1.70 in Thursday afternoon trade.

This comes after the company announced on Wednesday that it has completed its acquisition of Melbourne utility infrastructure services firm, Comdain Infrastructure, for $161.7 million.

Service Stream announced on December 3 it was buying Comdain Infrastructure, which provides engineering and asset management services to the water and gas sector in eastern Australia.

The acquisition is now settled, Service Stream said on Wednesday. The buyout was financed with $68 million in new shares and the rest in cash, with Service Stream borrowing $60 million to fund the acquisition. The company said it was suspending its share buy-back program.

“The acquisition is strategically significant to Service Stream, providing the Group with enhanced revenue diversity across well-known gas and water markets and through a familiar client base,” Service Stream said.

Comdain “will progress as a business unchanged,” the company said on its website.

It expects to generate $320 million in revenue and earn $22 million before tax, depreciation and amortisation this financial year.

Founded in 1962, Comdain’s projects include working on Sydney Water’s sewer network, building water mains in Queensland and maintaining gas mains in Victoria for Multinet Gas.

Service Stream installs and maintains mobile phone towers, as well as reads millions of gas and electricity meters each year, the company says on its website.

It has 1800 employees and more than 3500 active contractors, and a market capitalisation of $615.8 million.

Over the past year, the Service Stream share price has gained almost 35%, compared to a loss of 7.01% for the S&P/ASX 200 Index. The stock trades towards the top-end of its 52-week range.

Service Stream shares currently trade on a price to earnings (P/E) ratio of 15.36 times earnings and a dividend yield of 4.3%.

with AAP

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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