ASX industrials stock Tasmea Ltd (ASX: TEA) has risen 60% in the last 12 months.
Tasmea is a skilled services company.
The company provides essential maintenance, engineering, and specialised project services and solutions across the following four service streams to the mining and resources; oil and gas; waste and water; power and renewable energy; and defence and infrastructure industries.
In the last week it has shed almost 15% which may have created a buy the dip opportunity.
Following the recent share price drop, the team at Morgans has upgraded its view on this ASX industrials stock.
Here is the latest from the broker.
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WorkPac Acquisition reason for optimism
Earlier this week, Tasmea acquired 100% of the issued capital in WorkPac Group Pty Ltd.
WorkPac is a workforce solutions business. It specialises in tailored, end-to-end solutions in workforce management, recruitment, skills and career development across diverse sectors including Mining, Industrial, Construction, Engineering, Healthcare, Social Care and more.
Commenting on the acquisition, Tasmea's Managing Director, Stephen Young said:
This transaction reflects our disciplined approach to growth and our commitment to building a diversified, scalable platform across Australia.
It seems the team at Morgans saw this as a positive move for the ASX industrials stock.
In a note out of the broker on Thursday, it said WorkPac gives Tasmea a deeper labour pool which will be helpful in a tight market as it endeavours to self-perform all its services. This has the capacity to positively impact margins.
The WorkPac acquisition is +10% EPS accretive or +5-6% including the dilution from the recent equity raise. This transaction is a step-out from the company's strategy to acquire more specialised services businesses, though it sends a clear signal about TEA's visibility over demand in its key end-markets.
The broker also believes Tasmea should benefit from improved speed of mobilisation, which is critical given the fast-paced nature of some of its responsive services.
Target price increase from Morgans
The team at Morgans has maintained its buy recommendation on this ASX industrials stock.
The broker also increased its price target to $5.40 (previously $5.00).
Based on this new price target, Morgans sees an upside of 20% for Tasmea shares.
