Ord Minnett delivers an upbeat assessment of Millennium Services

Sydney-based integrated services company Millennium Services Group is scoring a stockbroker's 'buy' recommendation for many reasons.
Millennium Services Group's CEO Mark Baldwin
Millennium Services Group’s CEO Mark Baldwin

Geographic expansion, acquisitions, new business and solid organic growth are the primary reasons for recently publicly listed Sydney-based integrated services company Millennium Services Group scoring a stockbroker’s ‘buy’ recommendation.

An upbeat assessment of Millennium was delivered in stockbroker Ord Minnett’s Ords Monthly December/January 2016 edition. That stockbroker conducted the Millennium Group Service’s (ASX MIL) IPO.

Millennium Services Group’s IPO

‘The (MIL) business has around 2.5 years of work in hand, endowing the stock with high earnings visibility,’ stated Ord Minnett.

‘The stock listed at $2.25 in mid-November, but slipped below that levels (sic) without any news. To our mind, with a 12-month target price of $2.67, the stock looks attractive for investors with a penchant for emerging companies.’

Ord Minnett believes Millennium is worth owning for a number of reasons including ‘the potential to acquire similar businesses at prices that will make them accretive to earnings’; being a scalable business it’s estimated half the overheads of acquired operations could be removed; and the organisation has delivered solid organic growth in the years leading up to listing, which has boosted operating margins.

The broker observes that ‘new business opportunities are evident with around $50 million of new tenders submitted’ and historically the contractor wins about one-third of tenders. Apparently Millennium has retained more than 95 percent of existing contracts while ‘organic growth rates should therefore remain compelling and is a primary reason why the stock will be re-rated positively over time.’

Millennium’s board comprises independent non-executive chairman Peter Anderson, executive director and CEO Mark Baldwin, non-executive director Greg McCormack, non-executive director Stephen Williams and executive director and director of security Stephen Lidbury. Not on the board but director of operations is Royce Galea.

Millennium’s ‘replacement’ prospectus

A more recent ‘replacement’ prospectus, which can be downloaded from Millennium’s website, sheds more light on the company’s financials.

Of the $49.6 million raised in the IPO some $32.1 million went to the selling shareholders with $17.5 million going into the company. Prior to listing the major Millennium shareholders were Stephen Lidbury (Stephen Lidbury Pty Ltd), Royce Galea (Royce Galea Pty Ltd) and Wayne Crewes (Tomi-Sasha Holdings, trustee for Natural Property Trust).

Millennium’s pro forma historical FY15 total revenue is stated at $120 million with a pro forma forecast of $168 million and a statutory forecast of $116.9 million for FY16. FY15 gross profit of $18.2 million is forecast to increase to a FY16 $28.7 million pro forma or $20.2 million statutory.

Pro forma FY16 EBITDA is forecast at $13.3 million while statutory FY16 EBITDA is forecast at $6 million. In turn, the FY16 net profit after tax is forecast at $7.77 million pro forma or $2.6 million statutory.

Millennium’s first dividend is expected to be paid October 2016.

MIL was trading at $2.18 on 4 January giving a market capitalisation of some $100 million.


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