At the time of writing, shares of Energy Action Ltd [ASX:EAX] are up by 26.47% for the day, to 86 cents per share.
Why did Energy Action Ltd shares do this?
The company announced its financial results for the year ended 30 June, 2018. It delivered a net profit after tax (NPAT) of $2.59 million. That’s a 46% jump on last year’s NPAT, which was $1.77 million.
What now for Energy Action Ltd?
Energy Action’s CEO, Ivan Slavich, told the market:
‘The Company’s continued focus on improving margins and lowering the operational cost base has supported a higher NPAT result for FY18 and allowed the business to declare a healthy dividend to shareholders and pay down $3.1m in debt. While revenues declined during the period, a significant uplift in operating cash flow illustrated the strong underlying cash generative nature of the business.’
Energy Action’s business is starting to turn around. Operating cash flow jumped $3.3 million over the year and net-debt (debt less cash) stands at $4.3 million. That’s a pretty good position. Remember, the company repaid $3.1 million in debt over the year. So, considering the operational efficiency improvements, the company could repay this debt during the current financial year.
Furthermore, as announced on 6 August, Energy Action appointed PriceWaterHouse Coppers (PwC) ― a top-tier accounting firm ― to help conduct a strategic review. The company is looking at various options to maximise shareholder value in the future. The review will consider the potential sale, joint-venture or merger of the company with or to another organisation.
The bottom line: Energy Action boasts an enterprise valuation of $22.3 million at current share prices. That reflects an EV/EBITDA of 3.91 times. That’s pretty cheap, considering the turnaround story in play. No doubt, if the company was to proceed with a merger or acquisition, it would be value accretive. In other words, if the company keeps ticking boxes, shareholders could be rewarded nicely.
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