One Building Materials Company to Invest On - WGN
Wagners Holding Company Limited
WGN Details
Wagners Holding Company Limited (ASX: WGN) is a diversified Australian construction materials and services provider, producing New Generation Building Materials, including heavy construction materials on the environment.
Result Performance for H1FY22 (For the Half-Year Ended 31 December 2021)
- Total revenue increased to $172.2 million in H1FY22, up 10.6% YoY due to sales growth in cement, concrete, steel and precast.
- Improved operating EBIT to $12.6 million from $11.6 million in H1FY21 due to continued growth in cement, concrete and steel.
- Resultantly, net profit after tax grew significantly to $4.73 million from $1.39 million in the pcp.
- Reported sustained rise in volumes from Concrete, however, continued market pressure on concrete margins resulted in disappointing earnings contribution from fixed concrete plants.
Source: Analysis by Kalkine Group
Outlook
The company plans to commence manufacturing of CFT at its Texas facility as well as start manufacturing EFC through a facility in outer London in H2FY22. Further, the company intends to increase activity in the Australian domestic pedestrian infrastructure and bridge division of CFT and further invest significantly in its low carbon technology in H2FY22.
In the CFT business, WGN expects strong orders for H2FY22, particularly for pedestrian and marine projects- both ANZ and USA and focus on margins and grow revenue without corresponding rise in cost. In the EFC segment, the company expects the new international partnering arrangements are likely to deliver revenue in FY23. WGN is also increasing investment in global expansion and technology development in the EFC segment.
Key Risks
Reduced demand for the company’s products and services due to delays in current capital investments and construction activity could materially and adversely impact revenue, profitability, and growth. Failure to continuously comply with regulatory requirements could result in enforcement actions. Disruption in local and international supply contracts could cause product delays and potential loss of profitability.
Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)
Technical Overview:
Source: REFINITIV
Note: Purple Color Line Reflects RSI (14-Period)
Stock Recommendation
The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). In addition, a slight discount has been applied to peer average EV/Sales multiple (NTM basis), considering Covid-19 led disruption, as well as challenging and volatile business conditions.
However, the company has significant growth aspiration for its low carbon concrete business, EFC and its strategy to augment its presence into global markets will progress during FY22.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Considering the factors above, we give a “Buy” recommendation on the stock at the closing market price of $1.400 per share, up 1.449% as of 22nd March 2022.
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
Technical Indicators Defined:-
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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