The Orcoda Ltd (ASX: ODA) share price has rocketed up 24% to 21 cents on news the company will acquire transport services business Betta Group of Companies (BGC). The $5 million acquisition will be completed as a combination of securities and cash.
Why is Orcoda buying BGC
BGC is a private transport services business specialising in contracting rail, road, air infrastructure power services, as well as mining projects. The company’s strong client base includes Aurizon, Ergon Energy, Queensland Rail, PowerLink, Q-Build, Australian Defence Force, and the Bowen Basin mining industry.
Orcoda said that BGC was a “good complementary fit” that would help to significantly bolster its bottom line.
In addition, BGC was likely to grow further, especially in Central Queensland, given the significant government stimulus it was expected to receive due to its ‘essential services’ status in major infrastructure projects. BGC’s key transport services business would also be a major revenue earner when the companies consolidated.
Orcoda advised that BGC achieved $9 million revenue, and earnings before interest, tax, depreciation, and ammortisation (EBITDA) of $2.1 million in FY 2020. In comparison, Orcoda’s full year revenue for FY20 was $1.2 million.
A brief look at Orcoda
Orcoda (formerly SmartTrans Holdings Limited) is a transport and logistics company. It focuses in business efficiency and optimisation through the use of software technology.
The company announced a significant customer win in July, signing a nine-year contract with the Mt Buller Ski Resort in Victoria. That contract comprised a five-year term, plus two additional two-year options. Under the arrangement, Orcoda will provide guest transit services and ride-share services to Mt Buller Ski Resort customers during the annual ski seasons.
The contract is expected to generate around $2–$3 million revenue per annum. And if it runs the full 9-year term, contract revenue value is estimated to be between $20 million and $30 million.
About the Orcoda share price
The Orcoda share price has experienced volatility in 2020. It started the year at a price of 22 cents, before slumping to 9 cents in March. The share price has since recovered along with the general improvement in the economy. Orcoda’s share price was trading as high as $4.60 back in 2015. At the current price of 21 cents, the company holds a market value of $20 million.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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