The Bingo Industries Ltd (ASX: BIN) is among the best performing stocks on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index after the waste management company posted its half-year results this morning.
The BIN share price jumped 5.2% to $1.35 in morning trade – making it the third best performer on the top 200 index after the Speedcast International Ltd (ASX: SDA) share price and Orocobre Limited (ASX: ORE) share price.
The rally in Bingo's shares marks a sharp turn in sentiment towards the stock following its shock profit warning just last week.
The stock hasn't made back all the near 50% plunge in value from the bleak update but at least management is breaking the "downgrades come in threes" curse.
Profit results not rubbish
The bounce in Bingo's share price reflects relief that there aren't more skeletons falling out of its closet (at least not yet) and its upbeat outlook for FY20.
But before we get into that, here's a snapshot of its results for the six months ended December 2018:
- Net revenue growth up 25.4% to $178.7 million.
- Earnings before interest, tax, depreciation and amortisation (EBITDA) increased 4.1% to $45.6 million.
- Operating free cash flow improved by 33% and cash conversion ratio came in at 103%.
- Margin squeeze from some site being offline for redevelopment, lower margins from Victorian business, rising corporate costs and increase in lower margin material at its post-collections business.
- Interim dividend held steady at 1.72 cents per share.
Quick return to growth?
While management reiterated its expectations that FY19 full year EBITDA guidance will be flat compared to last year, it stressed that FY20 will be transformational for the group.
"We have a solid forward order book, and we have good visibility of future revenue through our opportunities pipeline. Our aim is to use this runway to continue to diversify our earnings, by securing long-term C&I [commercial and industrial] contracts to provide more annuity-style defensive earnings," said BINGO's chief executive Daniel Tartak.
"We expect to see the benefits from the significant capital outlay over the last 12 months on our redevelopment program as our key assets come back online, most notably our recycling and landfill asset at Paton's Lane and our advanced recycling facility in West Melbourne."
The company also believes that the introduction of the Queensland levy over the coming months is a positive for BINGO as it plans to increase its prices to offset rising costs.
It appears that BINGO's profit warning was only a blimp and that it would be quickly returning to growth. Let's hope for shareholders' sake we can take management at face value.
