Daily ShareChat: Opus International

By Jenny Ruth

Tuesday 16th November 2010

Opus International Consulting has recommenced its acquisition strategy with the CAD$15 million (NZ$19.2 million) purchase of Canadian firm Dayton & Knight but its experience in Britain "makes us a little wary," says Andrew Harvey-Green, an analyst at Forsyth Barr.

The British Colombia-based business has 90 engineering consulting staff in four offices and specialises in water and wastewater.

"Opus expects the D&K business to contribute $2 million to full-year 2011 net profit, implying a PE (price-to-earnings) multiple (of) 9.5 times and an EBIT (earnings before interest and tax) multiple of less than six times," Harvey-Green says.

"Assuming D&K performs as expected, we are comfortable with the price that Opus has paid."

D&K has a strong name in British Colombia with its main clients being local and regional councils and there should be opportunities for Opus to leverage off D&K's knowledge base, he says.

"Our main area for concern is the fact that D&K is earning very good margins, some of the best within the Opus group. The acquisition will be adding about 4% to Opus' staff base but a massive 9% to net profit,"Harvey-Green says.

"There appears to be little scope for margin growth, meaning there is only downside risk on margins and puts added pressure on growing the revenue base."

Recommendation: Hold.

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