Stealth Global benefits from resilient revenue stream

By Trevor Hoey. Published at Mar 13, 2019, in Stock of the Week

When economic growth is slowing and revenue growth is difficult to harness, businesses look to trim costs in order to maintain or grow the bottom line.

This can include staff cuts, office equipment being repaired rather than replaced, and technology upgrades put on hold.

In this environment, companies that provide discretionary services, particularly to the small to medium enterprise (SME) market, often struggle.

A useful stock selection strategy to adopt during such a cycle is to focus on businesses that provide essential or non-discretionary services, expenses that management can’t dispense with.

One company that fits this profile is Stealth Global (ASX:SGI), an international supplier and distributor of a wide range of safety, industrial, workplace and healthcare consumable products.

Many of the goods distributed by Stealth have been mandated by industry health and safety bodies as a workplace necessity.

As indicated below, the range of more than 500,000 workplace products distributed by Stealth provides the company with diversification across numerous industries from remote heavy construction worksites to the CBD office kitchen.

Making a swift impression

While Stealth was founded in 2014, the company only listed on the ASX in October 2018.

However, it has been quick to demonstrate its growth potential, delivering first half revenue growth of 13%, in line with management’s forecast.

Pro-forma sales in Australia were up 18%, and there was a doubling in sales in the UK business, which services customers in Africa.

Managing director Mike Arnold also expects a strong performance throughout the remainder of 2019, saying, “All business units have incremental sales projects for delivery in the second half of 2019 and a strong pipeline of prospects, with a focus on winning new large and medium customer types.

“A stronger performance is expected for the second half of FY19 supported by new customer gains.

“Longer term, sentiment across key markets and sectors Stealth operates in remains encouraging and management has increased confidence for growth in 2020 and 2021.”

Growth through acquisition

As flagged in the group’s IPO, Stealth completed its acquisition of Heatleys Safety and Industrial, and it has commenced integrating the businesses to extract the synergies and capitalise on the growth opportunities that the acquisition presents.

The combination of Stealth and Heatleys is highly complementary, delivering a competitive strength that positions Stealth as the only Australian group of its type operating across the five major geographical markets in the country.

It builds upon Stealth’s position as a successful international supply and distribution group providing a wide-range of safety, industrial, healthcare and workplace products to the mining, construction and energy sectors.

Heatleys reported revenue of $43.2 million in FY18, which combined with Stealth, increased group pro-forma reported FY18 revenue to $66.1 million.

Potential for PE based rerating

Heatleys will make its first full six-month contribution in the second half of fiscal 2019, providing earnings momentum which analysts at Argonaut expect will result in a net profit of $2.2 million, representing earnings per share of 2.3 cents.

Stealth’s shares closed at 14 cents on Tuesday, implying a fiscal 2019 PE multiple of six relative to Argonaut’s forecasts.

The broker values Stealth at 25 cents per share, implying upside of approximately 70% relative to yesterday’s closing price.

Potential catalysts are further acquisitions which management has said it may consider, as well as success in securing new contracts.

There could also be a PE based rerating given that the group is expected to generate a profit of $3 million in 2020, representing earnings growth of 40%, suggesting the current PE multiple is heavily discounted.

Acquisitions and/or the securing of new contracts would likely see the focus turn to Stealth’s 2020 financial metrics, increasing the probability of a PE based rerating.

View Our Investment Portfolios

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why is Australia’s leading small cap publication

Founded seven years ago, is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise. provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more. is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!