UPDATE: Service Stream Ltd (ASX: SSM) has just received a significant price target upgrade from broker Ord Minnett, signaling a major opportunity for investors. The upgrade follows the announcement of new contracts with the Australia Department of Defence, which could drive the stock even higher.
In a strategic move, Service Stream has secured two Base Services Contracts to provide essential Property and Asset Services across 113 Defence sites in South Australia and the Northern Territory. These contracts are set to last for an initial 6 years, with potential extensions of up to an additional 3 years, accumulating a combined value of approximately $1.6 billion.
This latest contract is a game-changer for Service Stream, diversifying its earnings away from traditional telecommunications. According to Ord Minnett, the new contracts will enhance the company’s earnings profile, with expected 8% upgrades to FY27 EBITDA forecasts and a 11% increase in EPS forecasts. The firm emphasized that a strong balance sheet positions Service Stream well to mobilize these new contracts using internal cash flows.
The stock has already had a remarkable year, surging over 47% year-to-date. Following this announcement, Ord Minnett raised its price target from $2.35 to $2.57 per share, indicating a potential upside of 10.3% based on Friday’s closing price of $2.33. This upgrade reflects growing confidence in the company’s future performance.
Additionally, Macquarie has also revised its outlook, increasing its price target from $2.42 to $2.70, suggesting an impressive 16% upside from current levels.
Investors are keenly watching Service Stream as it embarks on this new venture. The impact of these contracts not only underscores the company’s operational strength but also highlights the growing significance of defence contracts in the Australian market.
As developments unfold, it’s crucial for potential investors to consider the implications of these contracts on Service Stream’s future. The excitement surrounding this upgrade has sparked discussions about the broader implications for the ASX industrials sector.
With a spotlight now on Service Stream, market observers are eager to see how the company capitalizes on this opportunity and what it means for its standing in the competitive landscape. Keep an eye on this stock as it navigates its exciting new chapter in the defence sector.
