One Specialist Chemicals Company With Decent Growth Prospects

As the market players know, the outbreak of COVID-19 pandemic has impacted several businesses as well as industries. The lockdowns which were imposed to restrict the spread of this deadly virus have impacted numerous companies. However, some companies are now well-positioned to navigate the challenging environment. This company is possessing robust balance sheet which could help it in tackling tough operating environment. This company has released decent FY 2021 results. This company’s stock price witnessed an increase of ~80% in 3 months. However, in the time frame of past 1 month, the stock rose by ~47.3%.

DGL Group Limited

Summary

  • The company is having a unique competitive position along with a strategic network of Trans-Tasman infrastructure, a better-trained workforce, the required licenses as well as approvals to carry out operations throughout the chemicals lifecycle. Further, it has substantial industry know-how including proprietary processes as well as IP.
  • DGC will utilise proceeds from the IPO along with the strong cash generation of its business to pursue the growth opportunities.
  • The business of the company is well-supported by the robust balance sheet as well as an experienced and highly motivated management team with the commitment to growth.

DGC Details

DGL Group Limited (NZX: DGC) is a specialist chemicals business company and is engaged in manufacturing, transporting, storing and processing chemicals, and hazardous waste. The company has been serving more than 1,300 customers throughout ANZ as well as internationally from different industries. The company integrates deeply into the customers’ processes as well as workflows at the multiple levels. Notably, this results in the loyal as well as long-tenured customer relationships.

FY21 Results Performance (For the Year Ended 30 June 2021)

  • DGC delivered a Pro-forma net profit after tax of $11.3 million, an increase of 134.6% YoY. Also, the statutory net profit after tax stood at $47.2 million.
  • It has recorded a Pro-forma sales revenue of $196 million, up by 9% over the pcp and 3% higher than the prospectus forecast. It witnessed robust revenue growth across all three divisions.
  • It also logged strong growth in Pro-forma EBITDA, up by 47% YoY to $28.1 Mn. It was 8% greater than the prospectus forecast.
  • Total assets of the company rose to $277 million from $150 million driven by the benefit of IPO and the acquisition of Chem Pack Pty Ltd, including $23.9 million in goodwill.

Key Data (Source: Company Reports)

Acquired Contract Formulator and Packaging Business

The company undertook a strategic acquisition of Opal Australasia for the consideration amounting to $8.6 Mn. The acquisition price comprises property valued at around $4.3 Mn and signifies a valuation of 5.1x LTM earnings. The company will finance the acquisition through both cash and shares, with the share component being valued at $1.9 Mn.

The company, in the release dated 1st September 2021, announced that it has completed the acquisition of Opal Australasia. The company has issued 1,366,906 fully paid ordinary shares to former shareholders of Opal as part consideration and these are subject to the 12 months escrow.

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Acquired a Multi-Purpose Chemical Facility in Townsville

The company, in the release dated 15th July 2021, announced that it has acquired a multi-purpose chemical facility in Townsville, Queensland, for a total consideration of $2.45 million.

It was mentioned that, with the purchase of the facility, the company would be having formulation capability in all the key industrial hubs throughout NZ as well as Australia.

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Stock Information

The company’s balance sheet remains strong, with the net cash position of $43.8 million.

The company has fruitfully integrated the Chem Pack manufacturing business which was acquired in the month of January 2021. This helps the company to expand the manufacturing capabilities of its chemical manufacturing division.

It was mentioned that the company has delivered on the strategic initiatives which were outlined in the prospectus including integration, expansion of services as well as cross selling between the divisions. The company has announced numerous successful business as well as property acquisitions since its listing.

DGC has guided of exceeding the forecast provided in prospectus for FY 2022 of Pro-forma NPAT of $10.4 Mn as well as Pro-forma EBITDA of $29 Mn. The guidance does not take into consideration the revenue and profit contribution from recently acquired businesses, Label’s Connect and Opal Australasia, and the favourable trading conditions experienced.

The stock of the company ended the session at NZ$2.520 per share, reflecting a rise of 6.33% on 3rd September 2021.

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