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Pacific Energy (PEA) - Contract Power Acquisition

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PEA has acquired Contract Power, one of its key competitors in remote power supply. The $90m acquisition ($85m cash and $5m scrip) will be debt funded with the acquisition price implying a 6x EV to FY19f EBITDA multiple which, in our view, is fair for a business with the sort of long term earnings visibility that Contract Power offers. On our numbers we forecast the deal will be ~10% EPS accretive in FY19. We believe PEA is now very well positioned to capitalise on a strong growth pipeline and maintain our BUY recommendation on a revised $0.80 valuation (previously $0.70).

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