Further diversification via acquisition ? Acquires G&S Engineering Calibre has announced the acquisition of G&S Engineering, a provider of operations, maintenance and asset management services to the Australian east coast coal sector. Consideration for G&S is a minimum of $91m, with management expecting to pay $98m, representing an EBITDA multiple of 5.3-5.7x. ? Immediately EPS accretive G&S is expected to make a seven month contribution to Calibre’s FY13 earnings. Management expects G&S to contribute $160m of revenues and $10m of EBITDA in addition to current Prospectus forecasts. On a full 12-month basis this equates to $274m in revenues and $17m in EBITDA. Incorporating G&S into our model results in our FY13-15 EPS estimates increasing 3.3-7.2%. ? Reiterate Buy rating In our opinion, the acquisition of G&S is a smart strategic decision by Calibre as it not only diversifies Calibre’s revenue streams, but also provides a higher degree of sustainability due the increased exposure to maintenance activities. With the stock continuing to trade on an EV/EBITDA of 3.5x, a P/E of 5.5x and a fully franked yield of 9.8%, we reiterate our view that Calibre represents an excellent valuation opportunity at these levels. ? Valuation: PT raised to $2.05 Based on our revised estimates, our DCF derived valuation and price target increase to $2.05 from $1.95. We continue to assume a WACC of 11% and a TGR of 2%.
UBS Small Cap Team
CGH Price at posting:
$1.15 Sentiment: None Disclosure: Not Held
