Spotless Group (SPO) - Peter Quinton's single best idea for this week

Bell Potter


Spotless Group (SPO) - Peter Quinton's single best idea for this week. Spotless has two divisions - Facility Services (71% of group EBITDA) & Laundry/Linen Services (29% of group EBITDA). The group is currently experiencing underlying growth across most of its services together with the ongoing impact of cost saving and efficiency programs. The balance sheet is sound for a services company with net debt/shareholders' funds of 73% and an interest cover (EBIT) of 5.5x. The shares were priced at $1.60 in the recent IPO and then climbed to $1.97 on August before falling 8% to the current $1.81 At the current price of $1.81, the forecast of FY15 PER is 13.9x (EPS growth of 29%) and the nil or very low franked dividend yield is 4.7%. Dividends will be fully franked in FY16 and thereafter. The stock was one of our standouts in our 'growth at a reasonable price' analysis and our recommendation is a Buy.

Bell Potter Securities is a leading Australian stockbroking, investment and financial advisory firm that provides a comprehensive offering of financial services to a diversified client base that includes individuals, institutions and corporations.

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