The Stealth Global Holdings Ltd (ASX: SGI) share price is on fire today, having surged 32.53% at the time of writing to 11 cents a share.
Stealth Global shares had closed at just 8.3 cents a share yesterday, but opened at 10 cents a share this morning and rocketed as high as 18 cents a share in early trading (up 80%) before settling to the current share price.
Although today's move is a dramatic one, it actually leaves Stealth Global up just 10% year to date (YTD) – it was down 20% YTD on yesterday's closing price.
So who is this company? And why is Stealth Global exploding in value (and volatility) today?
An intro to Stealth
Stealth Global is a supplier and distributor of industrial and safety workplace products and essentials. The company describes itself as an Australian multinational distribution group headquartered in Perth, Western Australia. It operates across Australia, United Kingdom and Africa as its primary markets, and other select international markets.
The company's network revolves around 3 operating brands in the workplace supplies space: Heatleys Safety and Industrial, Industrial Supply Group, and BSA Brands. Heatleys is a broad range supplier and distributor of safety and industrial products in Australia, whereas BSA Brands performs a similar function for the United Kingdom and African markets
Industrial Supply Group, however, performs a slightly different function. It is a "member-based buying group" or coalition of sorts, that collaborates with major brands in the industrial equipment space in a wholesale network. These include well-known brands like Sutton Tools and WD-40.
Overall, Stealth Global stocks more than 300,000 products from roughly 1,060 suppliers. Over 40,000 line items are stocked in the company's distribution centres and stores.
Stealth Global has been weathering a difficult 2020 well. In its full-year results for FY2020, the group reported revenue growth of 8% to $68.1 million, and earnings (underlying EBITDA) growth of 68% to $3.2 million. The Australian market remains the crown jewel for Stealth Global though — providing 83% of FY20's sales, which were up 36% on last year's numbers.
Why is the Stealth Global share price rocking today?
The stellar performance of the Stealth Global share price has likely been sparked by an ASX announcement the company released to the markets today just before open. The company has reportedly reached "an agreement in principle" to acquire 100% of the shares of the Brisbane-based C&L Tool Centre Pty Ltd (a private company).
The reported price tag is $3.83 million, a figure that Stealth Global claims represent 3x FY20's earnings for C&L.
The $3.83 million figure will be made up of $2.45 million in cash, $480,000 in new Stealth Global shares, and $900,000 in deferred payments over the following 12 months after the acquisition is settled on 1 December.
The company had the following to say on the announcement:
C&L is very complementary to the existing Stealth business with similar customer base, suppliers and services that provide the basis in ease of integration, synergies, and expansion. It has solid long-term stakeholder relationships and high-quality products, services, and solutions. These include product sales, fulfilment, distribution, and a service department to large multi-national corporations, large domestic companies, small-to-medium business enterprises, schools and universities, and government agencies.
At the time of writing, the Stealth Global share price is up by 32.53% to 11 cents a share.
