This has been a pretty topsy-turvy year for investors in waste management company Bingo Industries Limited (ASX: BIN). The company's share price performance over the backend of 2018 had been poor, but it looked to have broken its losing streak in January as it surged 30% higher over a matter of weeks. However, just when it seemed like things were getting back on track, Bingo was forced to downgrade its full-year earnings guidance, and the share price promptly fell off a cliff.
So, what's been going on with the Bingo share price so far this year, and should ASX investors have the company on their watchlist for FY20?
A closer look at Bingo's FY19 performance
After originally forecasting growth in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) in the range of 15–20% for FY19, Bingo was forced to concede that in fact growth would be flat. There were a number of reasons for this: growth in its buildings demolitions collections business was below forecast due to subdued residential property construction activity, price increases were delayed, and the company decided to rejig some of its development projects.
Regardless of the legitimacy of the reasons for the downgrade, the Bingo shares were hammered by the market. On 18 February, the day of the announcement, the company's share price plummeted almost 50% lower. For those few shareholders who decided not to sell, it would have been a white-knuckled ride to the bottom.
What's the outlook for FY20?
A few months on from this turbulence and things are looking much better again for Bingo. The share price is back above where it was prior to the earnings downgrade, and Bingo is starting to look like it might be a decent investment once again. It may even be that, in retrospect, a tough FY19 has actually set it up for a bumper FY20.
There are a number of reasons I think investors who have stuck with Bingo might end up getting the last laugh next year.
Bingo recently completed its acquisition of fully integrated NSW recycling and waste management services provider Dial a Dump Industries, which will deliver a number of key benefits to Bingo including boosting its network and collections fleet, increasing its competitive advantage, and providing increased waste processing capacity. Bingo anticipates that it will take up to two years to fully integrate the two businesses, but it should already have started to deliver some accretive benefit to top-line growth.
Additionally, the price rise that was delayed in FY19 will come into effect in FY20, and should also provide an additional welcome boost in revenues.
And on top of all this, the development projects that provided such a drag on FY19 earnings should start to deliver benefits in FY20 and beyond. Bingo has now completed a $140 million upgrade to its network, which is expected to increase FY20 earnings. Plus, a number of new recycling facilities have either come online already or are expected to begin operations in early FY20.
Foolish takeaway
After a rocky start to 2019, Bingo seems to have recovered to be now in a reasonably strong position looking ahead to FY20. If the company can start to realise returns from the investments in its development projects, FY20 could turn out to be its best year yet.
