The Bingo Industries Ltd (ASX: BIN) share price is down 45% in early trading after the company gave a market update.
Bingo Industries is a waste management business, it provides residential and commercial waste services, recycling services and bin manufacturing. It started in 2005 when the Tartak family purchased a small skip bin business.
Here’s why the Bingo Industries share price is down 45%
Bingo said that it now expects underlying EBITDA for FY19 to be broadly in-line with the previous year’s result (click here to learn what EBITDA means).
The company said that Bingo’s post-collections and Toro businesses have performed to expectations, but there are a number of factors that will impact the full year result.
Bingo said multi-dwelling residential construction activity in the key markets of NSW and Victoria had softened quicker than expected.
Another negative was that there will be no Bingo price rise in FY19. Bingo’s previous forecasted price rise was going to coincide with the introduction of the Queensland waste levy, but the delay of the QLD introduction as well as a softening residential market, there will be no price increase until FY20. Therefore the company will be absorbing increased costs like tipping and transport.
The third and final point was a reconfiguration of developmental projects. The reconfiguration will deliver “enhanced operational efficiencies” and lower the overall capital program by $25 million to $30 million. To do this the company is reopening its Mortdale facility, which will occur in the first half of FY20.
All of the above combined to change the company’s prior guidance of underlying EBITDA growth of 15% to 20%, instead the underlying EBITDA is likely to be flat.
Bingo CEO Daniel Tartak said: “We remain committed to our five-year strategy and our focus for the coming year will continue to be on optimising our network of waste assets in both NSW and Victoria, with the aim of delivering greater efficiencies and improvements in operations in preparation for future growth.”
The ACCC has advised that a final decision is expected about the Dial A Dump acquisition on 26 February 2018.
Is Bingo a buy?
Clearly the update was disappointing. Was a 20% reduction of EBITDA worth a 45% cut of the share price? It does seem harsh. Perhaps in two years from now, today’s Bingo share price may have recovered when profit growth returns.
I wouldn’t make the investment myself, but I can imagine a number of long term investors will be sniffing around, however the share price could drift lower in the next few weeks as more shareholders respond to the news.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).