Interesting catalysts on the horizon for SGN

We believe STW Communications (SGN) has a few interesting catalysts on the horizon. The business is due to be merged with the local operations of the world’s largest advertising and marketing business, WPP, after an EGM on April 4th. WPP is a global behemoth and the merger gives SGN shareholders $15m of cost synergies, incremental revenue synergies as well as a better balance sheet. The merger will also double revenue and EBIT.
Glennon Capital


Debt has been an issue for SGN previously; though after the merger net debt/EBITDA will fall from 2.6x to 2.1x. A new bank facility is already in place pending deal completion, with the next debt maturity in 2019, easier covenants, and lower borrowing costs. Once the businesses are merged we believe the market is less likely to be concerned about debt and will begin to focus on the prospects of the combined group. When SGN’s half year results are released in August we should begin to see healthier organic growth, year on year margin expansion, and more confidence from management on synergies; all at a very undemanding valuation.

Glennon Capital
Glennon Capital
Fund Manager

Glennon Capital was founded in 2008 by Michael Glennon. Previously, Michael worked with some of the best institutional small company fund managers in Australia. In 2007, he received the IMCA Money Management Fund Manager of the Year (Small Cap)...


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