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Viva Leisure share price storms higher on acquisition news

James Mickleboro

The Viva Leisure Ltd (ASX: VVA) share price is on course for a solid day of trade.

At the time of writing the technology-focused Australian health club owner’s shares are up 3% to $2.69. This leaves them trading a single cent away from their all-time high.

Why is the Viva Leisure share price on the rise?

Investors have been buying the company’s shares after it announced more acquisitions.

Viva Leisure has announced a binding sale and purchase agreement for two Healthworks Fitness Centres in Cleveland and Victoria Point, Queensland.

This follows the announcement of a binding sale and purchase agreement for eight Healthworks Fitness Centres in the state last month.

According to today’s release, the acquisition price represents a headline multiple of 2.5 times FY 2019 normalised EBITDA, before synergies.

These health clubs are expected to contribute approximately $250,000 in EBITDA on a full-year run-rate pre-synergies.

Once again, due to the benefit of Viva Leisure’s historical acquisition expertise, management expects to realise all post-acquisition synergies.

As a result, it estimates the effective purchase price to represent a multiple of less than 1.8 times FY 2019 EBITDA on a full-year run-rate. The acquisition is expected to be immediately earnings per share accretive.

The acquisition is expected to complete within the next 30 days and will add approximately 2,500 new members to its growing portfolio.

Viva Leisure’s CEO and Managing Director, Harry Konstantinou, was pleased with the progress the company is making in Queensland.

He said: “Expanding on our previously announced Queensland acquisition means Viva will be one of the largest club owners in the Queensland market with 10 owned locations at the completion of the acquisition. We continue to be excited about the Queensland market and the opportunities available for further acquisitions and greenfield locations. We confirm our previous guidance that we expect to be operating over 15 locations in Queensland within the next 12 months.”

At the end of the first half the company expects to have a network of 60 health clubs, which will be an increase of 50% on the end of FY 2019. This is the equivalent of a new location opening on average every 1.3 weeks.

Also on the rise on Tuesday are the shares of InvoCare Limited (ASX: IVC) and Jumbo Interactive Ltd (ASX: JIN). Like Viva Leisure, both companies have announced bolt-on acquisitions this morning.

The post Viva Leisure share price storms higher on acquisition news appeared first on Motley Fool Australia.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia has recommended InvoCare Limited, Jumbo Interactive Limited, and Viva Leisure Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019