Viva Leisure share price rockets higher on Queensland expansion

The Viva Leisure Ltd (ASX:VVA) share price has rocketed higher after announcing its expansion into Queensland…

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Credit: Cabe Jefferies

The Viva Leisure Ltd (ASX: VVA) share price has been on fire again on Wednesday.

The technology-focused Australian health club owner’s shares raced 12% higher to $2.27 this morning.

This means the Viva Leisure share price is now up 127% since its IPO in May.

Why did the Viva Leisure share price jump 12% today?

Investors have been buying the company’s shares today after it announced its expansion into the Queensland market.

According to the release, Viva Leisure has signed a binding sale and purchase agreement for eight Healthworks Fitness Centres in Queensland.

The eight centres are located in Aspley, Deagon, Ipswich, Mooloolaba, Newstead Gasworks, Redcliffe, Teneriffe, and West End. This will add approximately 10,000 new members to Viva Leisure’s growing portfolio.

Viva Leisure has agreed an acquisition price of $2.7 million. Which represents a headline multiple of 3.25x FY 2019 normalised EBITDA, before synergies.

However, given the benefit of Viva Leisure’s historical acquisition expertise, management expects to realise all post acquisition synergies.

Based on this, it expects the effective purchase price to represent a multiple closer to 2x FY 2019 normalised EBITDA. The acquisition is expected to be immediately earnings per share accretive, will be funded from its existing cash reserves, and is expected to close within 30 days.

Viva Leisure’s CEO and Managing Director, Harry Konstantinou, appears to be very pleased with this expansion.

He said: “Entering the Queensland market for the first time with such a high-quality acquisition of the eight Healthworks clubs is an exciting milestone for the Company. The opportunities that it provides to extend our hub and spoke model into these new territories is significant. We expect to be operating over 15 locations in Queensland within the next 12 months.”

Also climbing strongly on Wednesday are the shares of Freedom Foods Group Ltd (ASX: FNP) and Challenger Ltd (ASX: CGF). A bullish broker note out of Goldman Sachs has helped lifted the Freedom Foods share price by 11%. Whereas Challenger’s first quarter update has sent its shares charging 7% higher.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia has recommended Freedom Foods Group Limited and Viva Leisure Ltd. 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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