DGL (ASX:DGL) share price soars 16% in last 2 days

The company is eyeing strong growth in the near-term.

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The DGL Group Ltd (ASX: DGL) share price is again flying higher today. This comes after the chemical company announced the acquisition of Opal Australasia late yesterday afternoon.

At the time of writing, DGL shares are up 10.03% to $1.81. Over the previous 2 days, the company’s share price is hovering above 16%, reflecting an upbeat sentiment from investors.

DGL expands market access

According to its release, DGL advised it has strategically acquired contract formulator and packaging business, Opal Australasia for $8.6 million.

Based in the Kwinana Industrial Area, Opal is one of two independent agricultural chemical toll manufacturing companies in Western Australia. The group provides specialised product and formulation development services to a majority of chemical suppliers within the industry.

The agreed purchase price represents a valuation of 5.1 times the last twelve months of Opal’s earnings. The deal is expected to be funded by both cash and shares, with the latter valued at $1.9 million.

DGL stated that the takeover will provide it access to a number of agricultural customers on Australia’s west coast. In addition, the company’s manufacturing capacity is also expected to increase in excess of 150,000 tonnes per annum.

DGL founder and CEO, Simon Henry commented:

Opal brings to our business a substantial foothold in the Western Australian market. It means we can now adequately service Western Australia’s grain industry, the largest agricultural sector in the state, which also represents around 40 percent of Australia’s grain exports.

Through this acquisition, we will have Australia’s agriculture market covered, and with a presence on both the east and west coast of Australia, it will provide a natural hedge on varying drought cycles.

About the DGL share price

It’s been an impressive start since DGL entered the ASX in late May with a share price of $1. The company has made quick progress which has been reflected in its share price.

Based on valuation metrics, DGL presides a market capitalisation of roughly $429.1 million, with 257 million shares outstanding.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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