After shedding about a half of its share price earlier in the month, Bingo Industries Ltd [ASX:BIN] has made up some of its lost ground.
The waste management and recycling company has seen 16.21% of its share price return today, to currently trade at $1.685 per share.
The company saw its share price take a dive on Monday last week after slashing its final year revenue and profit guidance, citing delayed price rises and timing of development programs.
What caused Bingo’s share price to rise?
Bingo announced this morning it had been given the green light by the ACCC to acquire waste removal and management company, Dial A Dump Industries (DADI).
The ACCC gave Bingo the nod for the $578 million acquisition of the DADI on the provision it sells its Banksmeadow processing facility in Sydney to forego concerns by the regulator about competition in the collection of building and demolition waste.
Managing director and CEO Daniel Tartek said the result was important in realising Bingo’s vision and five-year strategy to be a fully vertically integrated business and diversify into new markets in NSW.
‘Our acquisition of DADI will not only be transformational for BINGO, but also for recycling in the greater Sydney region.
‘Our development of a Recycling Ecology Park at Eastern Creek will allow us to process and recycle every type of waste, accelerate our vertical integration and compete more effectively with the larger local and international players.’
Mr Tartak also said Bingo expects to achieve cost synergies of around $15 million per annum over a two-year period from the DADI acquisition. Bingo also said it would begin a $75 million on-market share buy-back.
What’s ahead for Bingo?
The acquisition of DADI will certainly allay some concerns investors may have about its revenue generating capabilities.
Despite its cut in full-year earnings guidance, Bingo improved across the board in H1 FY19.
The company laid out results on Tuesday, announcing revenue, underlying EBITDA and underlying net profits had all increased from the prior corresponding period.
Revenue grew by 25.4% to $178.7 million, earnings went up by 4.1% to $45.6 million and net profit rose by 3.8% to $23 million.
Once the acquisition is complete, Bingo expects the deal to increase their competitive power as they look to take on international heavyweights Veolia, Suez, and Cleanaway Waste Management Ltd [ASX:CWY].
The waste management sector has become increasingly competitive, where operation scale has become an important factor.
For Money Morning
PS: Take a look at what our three in-house small-cap experts’ top picks for 2019. Download the free guide today.