Lacklustre half yearly, but the future is bright

A lacklustre half yearly result from Forge Group (ASX:FGE) on Thursday:

Some may say the result is even disappointing. But I feel that they are clearly gearing up for growth over the next few years. A major driver of the growth will come from the recent acquisition of CTEC. Here's a summary of the deal at hand:

With the acquisition, the additional order book is a big factor. It essentially doubles the outstanding work for the company to a massive $1.2 billion. The order book from CTEC will comprise mainly of low-risk low-margin EPCM work especially in the power generation area. The kicker in the deal is that a substantial portion of this will be sub-contracted to Forge's subsidiaries as higher margin EPC work. This will allow Forge to extract more from the acquisition while enhancing the reputation of its subsidiaries in the energy and utilities sectors.

Management will bring out more details in the not too distant future, including likely earnings implications. I'm going to have a bit of fun and come up with some guesstimates, based on the following assumptions:

So with all the assumptions above, my guesstimate for the CTEC acquisition contribution is $19.37m per annum. This will essentially increase FGE's earnings by 50% in the coming years. The company's order book, excluding CTEC, is currently $600m which in itself is double the size for the previous corresponding period of $275m. All this, along with the FGE/CLO JV being in the box seat for the $500m+ Roy Hill Package 3 works, bodes well for a bright future.

FGE last traded at $5.53, down over 5% since the release of the half yearly.