Is Bingo A Great Growth Story?

Bingo Industries Limited (ASX: BIN) has established itself as a fully integrated recycling and waste management company by providing solutions across the entire waste management supply chain.

In the recent corporate presentation, the company provided an update about the acquisition of Dial a Dump Industries, which is a fully integrated recycling and waste management services provider in NSW, with operations across the waste value chain from collections, to recycling, landfill and recycled product sales. However, the integration of the business is under progress and likely to take approximately two years to integrate fully.

The strategic rationale underpinning the acquisition included complementary post-collections assets, opportunities to transform the future of recycling and resource recovery in Greater Sydney, diversifying the product offerings of the company, Eastern Creek facility providing a platform for the ongoing diversification into Commercial & Industrial waste processing and the acquisition is expected to deliver $15 million of annualised cost synergies.

The company has made substantial capital expenditure investment on its initial network upgrade program of $140 million. The program is currently complete to a large extent, and the earnings are expected to flow from FY20. The capital program will likely be reduced by approximately $25 million on the back of the network reconfiguration and will deliver enhanced operational efficiencies along with the network capacity of Bingo (RRC and landfill) increasing to 4.7 million tonnes per annum by FY20.

Bingo’s strategic network of waste infrastructure assets in key locations across Melbourne and Sydney is core to the 5-year strategy of the business. The network reconfiguration is placing the company for long-term growth.

The company has a 5-year growth strategy, with the key factors driving the growth includes protecting and optimizing the core ensuring that the company preserves and grow its key competitive edge – customer and technology-centric business model with recycling led solution, geographic expansion and enhanced vertical integration.

The company expanded its operating footprint along the east coast of Australia, concentrating on markets with favourable growth drivers, and targeting greater internalization of the collection volumes and increasing diversion from landfill for both putrescible and nonputrescible waste.

On the financial performance front, the company reported year-on-year net revenue growth of 25.4% in H1FY19 supported by solid growth in organic revenue, to $178.7 million. The underlying EBITDA was broadly in line with 1H budget, up 4.1% to $45.6 million. The company maintained strong cash conversion of 103% with the business continuing to generate strong free cash flow to support growth.

The CAGR growth in revenue of the company was 34.0% from 1HFY17 to 1HFY19, along with a 20.7% CAGR growth in EBITDA for the same period. The underlying NPAT and the free operating cash flow exhibited a CAGR of 17.7% and 30.4% respectively during the period. The underlying organic revenue growth, however, stood at 16.0% from 1HFY18 to 1HFY19.

Going forward, the company prioritizes on delivery and optimization of waste infrastructure network in both NSW and Victoria, diversify end-markets to continue to reduce exposure to cyclical markets, margin expansion etc. Further, the revised FY19 Underlying EBITDA guidance is broadly in-line with the previous year, and Bingo is well placed for growth in FY20 and beyond.

On the price-performance front, the stock of Bingo Industries Limited last traded at $1.910 with a market capitalization of ~$1.25 billion as on 10 May 2019. The stock has yielded a YTD return of 3.56% with returns of -17.83%, -11.68% and 19.62% over the past six months, three months and one-month period respectively. Its 52-week high price stands at $3.270 with a 52-week low price of $1.170, and with an average trading volume of ~7.58 million. The stock traded at a PE multiple of 25.070x.

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