ASX:SSM

Stock Analysis Report

Executive Summary

Service Stream Limited accesses, designs, builds, installs, and maintains networks in Australia.

Rewards

Trading at 49.3% below its fair value

Earnings are forecast to grow 5.65% per year

Earnings have grown 32% per year over the past 5 years

Risk Analysis

Unstable dividend track record

Shareholders have been diluted in the past year



Snowflake Analysis

Excellent balance sheet average dividend payer.


Similar Companies

Share Price & News

How has Service Stream's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: SSM has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

2.2%

SSM

-2.2%

AU Construction

0.8%

AU Market


1 Year Return

8.4%

SSM

-32.0%

AU Construction

15.3%

AU Market

Return vs Industry: SSM exceeded the Australian Construction industry which returned -32% over the past year.

Return vs Market: SSM underperformed the Australian Market which returned 15.3% over the past year.


Shareholder returns

SSMIndustryMarket
7 Day2.2%-2.2%0.8%
30 Day-15.6%-17.2%0.3%
90 Day-7.2%-10.4%5.3%
1 Year12.6%8.4%-29.3%-32.0%20.5%15.3%
3 Year117.2%93.3%-4.0%-13.4%37.4%18.8%
5 Year1242.8%929.6%71.6%41.5%50.7%16.8%

Price Volatility Vs. Market

How volatile is Service Stream's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Service Stream undervalued compared to its fair value and its price relative to the market?

49.3%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: SSM (A$2.32) is trading below our estimate of fair value (A$4.57)

Significantly Below Fair Value: SSM is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: SSM is poor value based on its PE Ratio (17.6x) compared to the Construction industry average (15.4x).

PE vs Market: SSM is good value based on its PE Ratio (17.6x) compared to the Australian market (18.8x).


Price to Earnings Growth Ratio

PEG Ratio: SSM is poor value based on its PEG Ratio (3.1x)


Price to Book Ratio

PB vs Industry: SSM is overvalued based on its PB Ratio (3x) compared to the AU Construction industry average (1.7x).


Next Steps

Future Growth

How is Service Stream forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

5.6%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: SSM's forecast earnings growth (5.6% per year) is above the savings rate (1.1%).

Earnings vs Market: SSM's earnings (5.6% per year) are forecast to grow slower than the Australian market (9.4% per year).

High Growth Earnings: SSM's earnings are forecast to grow, but not significantly.

Revenue vs Market: SSM's revenue (3.6% per year) is forecast to grow slower than the Australian market (4.2% per year).

High Growth Revenue: SSM's revenue (3.6% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: SSM's Return on Equity is forecast to be low in 3 years time (18.6%).


Next Steps

Past Performance

How has Service Stream performed over the past 5 years?

32.0%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: SSM has high quality earnings.

Growing Profit Margin: SSM's current net profit margins (5.3%) are lower than last year (6.6%).


Past Earnings Growth Analysis

Earnings Trend: SSM's earnings have grown significantly by 32% per year over the past 5 years.

Accelerating Growth: SSM's earnings growth over the past year (17.1%) is below its 5-year average (32% per year).

Earnings vs Industry: SSM earnings growth over the past year (17.1%) underperformed the Construction industry 17.1%.


Return on Equity

High ROE: SSM's Return on Equity (16.9%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Service Stream's financial position?


Financial Position Analysis

Short Term Liabilities: SSM's short term assets (A$239.9M) exceed its short term liabilities (A$177.1M).

Long Term Liabilities: SSM's short term assets (A$239.9M) exceed its long term liabilities (A$113.3M).


Debt to Equity History and Analysis

Debt Level: SSM's debt to equity ratio (19.1%) is considered satisfactory.

Reducing Debt: SSM's debt to equity ratio has increased from 10.9% to 19.1% over the past 5 years.

Debt Coverage: SSM's debt is well covered by operating cash flow (86.4%).

Interest Coverage: SSM's interest payments on its debt are well covered by EBIT (34x coverage).


Balance Sheet

Inventory Level: SSM has a low level of unsold assets or inventory.

Debt Coverage by Assets: SSM's debt is covered by short term assets (assets are 4x debt).


Next Steps

Dividend

What is Service Stream's current dividend yield, its reliability and sustainability?

4.09%

Current Dividend Yield


Upcoming Dividend Payment

Purchase Service Stream before the 'Buy Limit' to receive their next dividend payment.


Dividend Yield vs Market

company4.1%marketbottom25%2.3%markettop25%5.5%industryaverage2.9%forecastin3Years4.5%

Current dividend yield vs market & industry

Notable Dividend: SSM's dividend (4.09%) is higher than the bottom 25% of dividend payers in the Australian market (2.29%).

High Dividend: SSM's dividend (4.09%) is low compared to the top 25% of dividend payers in the Australian market (5.49%).


Stability and Growth of Payments

Stable Dividend: SSM's dividend payments have been volatile in the past 10 years.

Growing Dividend: SSM's dividend payments have increased over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: With its reasonable payout ratio (72.2%), SSM's dividend payments are covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: SSM's dividends in 3 years are forecast to be covered by earnings (62.2% payout ratio).


Next Steps

Management

How experienced are the management team and are they aligned to shareholders interests?

5.8yrs

Average management tenure


CEO

Leigh MacKender 0

5.8yrs

Tenure

AU$2,105,328

Compensation

Mr. Leigh Mackender, BEng (Civil) (Syd) has been Managing Director of Service Stream Limited since May 26, 2014 and served as its Executive General Manager of AMRS from March 21, 2011 to May 2014. Mr. Mack ...


CEO Compensation Analysis

Compensation vs Market: Leigh's total compensation ($USD1.41M) is above average for companies of similar size in the Australian market ($USD948.27K).

Compensation vs Earnings: Leigh's compensation has been consistent with company performance over the past year.


Leadership Team

NamePositionTenureCompensationOwnership
Leigh MacKender
MD & Director5.8yrsAU$2.11m0.26% A$2.4m
Robert Grant
Chief Financial Officer9.7yrsAU$1.59m0.25% A$2.3m
Samantha Grant
Founder of Total Communications Infrastructure Ltd0yrsno datano data
Douglas Young
Chief Information Officer1.7yrsno datano data
Chris Chapman
Company Secretary & General Counsel4.5yrsno datano data
Vicki Letcher
Company Secretary7.5yrsno datano data

5.8yrs

Average Tenure

Experienced Management: SSM's management team is seasoned and experienced (5.8 years average tenure).


Board Members

NamePositionTenureCompensationOwnership
Leigh MacKender
MD & Director5.8yrsAU$2.11m0.26% A$2.4m
Deborah Page
Non Executive Independent Director9.4yrsAU$125.00k0.11% A$999.2k
Peter Dempsey
Lead Independent Director0yrsAU$118.00k0.26% A$2.4m
Brett Gallagher
Chairman of the Board4.9yrsAU$160.00k0.81% A$7.7m
Gregory Adcock
Non-Executive Director3.7yrsAU$118.00k0.012% A$116.0k
Thomas Coen
Non-Executive Director1yrsAU$49.17kno data

4.3yrs

Average Tenure

60yo

Average Age

Experienced Board: SSM's board of directors are considered experienced (4.3 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: SSM insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 11.5%.


Top Shareholders

Company Information

Service Stream Limited's company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Service Stream Limited
  • Ticker: SSM
  • Exchange: ASX
  • Founded: 1996
  • Industry: Construction and Engineering
  • Sector: Capital Goods
  • Market Cap: AU$945.360m
  • Shares outstanding: 407.48m
  • Website: https://www.servicestream.com.au

Number of Employees


Location

  • Service Stream Limited
  • 357 Collins Street
  • Level 4
  • Melbourne
  • Victoria
  • 3000
  • Australia

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
SSMASX (Australian Securities Exchange)YesOrdinary SharesAUAUDDec 2004
SSMCHIA (Chi-X Australia)YesOrdinary SharesAUAUDDec 2004

Biography

Service Stream Limited accesses, designs, builds, installs, and maintains networks in Australia. It operates through four segments: Fixed Communications, Network Construction, Energy & Water, and Comdain Infrastructure segments. The Fixed Communications segment engages in the provision of a range of operations, maintenance, installation, design, and construction services, including customer connections for owners of fixed-line telecommunication; service and network assurance; design, construction, and installation of broadband services, as well as projects for asset remediation, augmentation, and relocation. The Network Construction segment offers a range of design, construction, and related services to the owners of fixed-line and wireless telecommunications networks. Its services include site acquisition, engineering, design, and construction of wireless and fixed-line projects. The Energy & Water segment offers a range of specialist metering, new energy, and inspection services to gas, water, and electricity network owners and other customers. Its services meter reading and asset replacement services; engineering, design, and construction services for energy-related products; and specialist inspection, auditing, and compliance services. The Comdain Infrastructure segment offers a range of operations, maintenance, design, and construction services to gas and water network owners and operators. Its services comprise network assurance; asset upgrades and replacement; engineering, design, and construction of network assets, as well as specialist electrical and mechanical instrumentation services. The company was incorporated in 1996 and is headquartered in Melbourne, Australia. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/02/19 10:32
End of Day Share Price2020/02/19 00:00
Earnings2019/12/31
Annual Earnings2019/06/30


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.