Stealth Global Limited (ASX:SGI) has announced the acquisition of United Tools Limited (UTL) for $24k, which includes $1.25m in cash slated for marketing subsidies to retailers over the next two years. UTL is a co-operative buying group supplying ~33 retailers with tools and industrial-related trade products. The business generated FY21 revenues of $8m, predominantly as income for the management of preferred supplier arrangements, marketing, advertising and shared services for 33 retail stores. FY21 EBITDA was $0.3m, implying a very attractive acquisition multiple! SGI estimates UTL-supplied retailers purchase ~$100m at the wholesale level, offering significant buying and cross-selling opportunities. SGI management estimates $24m in revenue synergies are available at a target EBITDA margin of 10% ($2.4m) over the next three years, which would add 35% to our existing FY23 EBITDA estimates, all else being equal. We recently upgraded medium-term sales by ~5% on the back of new customer contracts and this may still prove conservative given the expected revenue synergies from the recently-acquired Skipper Transport Parts over the same period. 1HFY22 sales have been confirmed at $46.5m, in-line with RaaS estimates and +53% on 1HFY21. We are yet to incorporate numbers and await a detailed business update on February 8 for more clarity, but our numbers into FY24 look well-underpinned given these revenue synergy opportunities.
24 Jan 2022
United Tool acquisition adds further revenue synergies
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United Tool acquisition adds further revenue synergies
Stealth Group holdings Ltd. (SGI:ASX) | 0 0 0.0%
- Published:
24 Jan 2022 -
Author:
Finola Burke | John Burgess -
Pages:
5
Stealth Global Limited (ASX:SGI) has announced the acquisition of United Tools Limited (UTL) for $24k, which includes $1.25m in cash slated for marketing subsidies to retailers over the next two years. UTL is a co-operative buying group supplying ~33 retailers with tools and industrial-related trade products. The business generated FY21 revenues of $8m, predominantly as income for the management of preferred supplier arrangements, marketing, advertising and shared services for 33 retail stores. FY21 EBITDA was $0.3m, implying a very attractive acquisition multiple! SGI estimates UTL-supplied retailers purchase ~$100m at the wholesale level, offering significant buying and cross-selling opportunities. SGI management estimates $24m in revenue synergies are available at a target EBITDA margin of 10% ($2.4m) over the next three years, which would add 35% to our existing FY23 EBITDA estimates, all else being equal. We recently upgraded medium-term sales by ~5% on the back of new customer contracts and this may still prove conservative given the expected revenue synergies from the recently-acquired Skipper Transport Parts over the same period. 1HFY22 sales have been confirmed at $46.5m, in-line with RaaS estimates and +53% on 1HFY21. We are yet to incorporate numbers and await a detailed business update on February 8 for more clarity, but our numbers into FY24 look well-underpinned given these revenue synergy opportunities.