SSM - Service Stream Limited

[The P.O.D.]

http://www.servicestream.com.au/

Market cap 26m, current price .22, forecasting to exceed 3.5m+ NPAT fy06.

With p/e sitting on 7.5 it seems that there is a bit of upside here.

It sort of seems to me that alot of small cap companies are getting slightly overlooked in favour of mining related stocks. The main difference being that STR for example, has proven revenue, cashflow, and strong growth.

[Sunshine007]

I have just had a look. Almost 150m options exercisable at 25c or 26c. 124m ordinary shares with 7.5m of these escrowed. At 25c, assume that all options are exercised, giving STR cash injection of $3.8m, and market cap of $68.5m. Net debt would be $14.5m-$1.5m-$3.8m=$9.2m so EV=$77.7. Say they make EBITDA of $10m for 06/2006 year then EV/EBITDA for STR is roughly 7.8 time. Not expensive but hardly a bargain.

[The P.O.D.]

strong growth, some major contracts, and maiden dividend.

sp now at 38 having touched 40.

Obviously, and with hindsight, they were a bargain at 22c.

I think sometimes analysing every number available does not really help in assessing potential. High growth is what matters most.

[Lizard]

Service Stream (now SSM) going strong today and yesterday, with a run from the low 90's up to $1.10 on reasonable volume.

I used to follow both STR and TCI before they merged to form SSM, but never actually bought any until yesterday. Reconfirmed EBITDA guidance in early July of $37m (FY Jun08) and $48m (FY09), so I estimate that at $1.10, that equates to P/E of about 9.5 or EV/EBIT about 6.4, with forecast growth of 30%. Yield currently 8.4% plus franking.

Not recommending anyone jumps on the rally right now though - it looks about ready to re-trace back to $1.00.

(For comparison with older posts, previous STR shares were consolidated 2 for 5 on merger with TCI)

[Lizard]

FY result was on target for EBITDA but disappointing at NPAT and cashflow level. Still, market has rallied on hints of "interested parties" in a recent release and now at $1.18.

[Lizard]

Back to visit SSM and now at 37cps after struggling during the past year.

It looks interesting at this price, but, despite the recent cap raising, it still might be risky on cashflow/debt. Hopes seemed pinned on NBN work flowing their way, but the stresses of one-off projects aren't always for the best either.

I've put it on watch for now - chart says there's no hurry to buy this anyway. Comments appreciated.

[Lizard]

Another one that posted a good result last night and should be in for some share price growth this year. Currently 42.5cps and balance sheet a lot stronger with cashflow positive and debt reduced. Lots of NBN work in 2013 to give some growth and current PE only 6.4 with yield of 4.7% (plus franking).

Market will price in bumpy nature of contract work to some degree, but would still expect a trajectory to land it near 60cps.

Just too many of these cheap small-caps around to have them all though. And, as we saw before, a market downturn can still make "cheap" cheaper.

[ozzie]

Intelligent Investor Funds recently bought in to SSM for 16 million shares. Apparently they're a very selective value investor whose
other holdings (bought some time back) include EGG, GBT, INA, RNC and VEI.