This communications conglomerate has recently got religion. And that religion is ‘growth’. In issue 208/Sep 06 (Long Term Buy – $2.65), we suggested that ‘$40–$50m of debt-funded acquisitions are possible’. And it seems we were out by a million bucks.

A recently announced flurry of deals will see STW Communications spend $39m initially, with some scope for further performance-based payments. The acquisitions include 100% of Moon Design, a ‘brand and design agency’, and 90% of Ikon Communications, a ‘consumer focused media agency’. STW is also buying 49% of a company associated with Ikon called New Dialogue. Elsewhere in the action-packed announcement, management spoke glowingly about The Brand Agency and revealed that it had increased its stake in the company from 49% to 75%.

We’ve documented our concerns about the company in recent reviews, but we’ve maintained our positive view thanks to the undemanding share price. With the stock shooting up 25% since issue 208/Sep 06, the value is becoming less obvious, but we’re still happy with our LONG TERM BUY recommendation.