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Company Overview: Wagners Holding Company Limited (ASX: WGN) is an Australian construction materials and services provider, operating in the domestic and international markets. The company was formed in 1989 in Toowoomba, Queensland, and was listed on ASX in 2017. The company is engaged in producing cement, aggregates, concrete, new generation composite products and develops the latest technology to curb the effect of heavy construction materials on the environment.
WGN Details
WGN Rides on Decent Fundamentals & Strategic Alliances: WGN remains on track to expand into international markets like Europe, the USA, UAE, and the UK, with its Composite Fibre Technologies (CFT) products and its low carbon concrete, EFC. In addition, the company has made numerous strategic alliances to augment the growth prospects for EFC, thus aiding WGN to manufacture and distribute its technology from its local UK manufacturing facility.
Key Findings from FY21 Results:
Key Operational & Financial Trends; Analysis by Kalkine Group
Key Metrics: For FY21, the company reported an EBITDA margin of 12.2%, higher than the year-ago figure of 10.7%. In FY21, the company recorded ROE of 11.6% compared to the year-ago figure of 0.2%
Profitability & Liquidity Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders together form around 69.88% of the total shareholdings, while the top 4 constitutes the maximum holding. Wagner (John) held the maximum number of shares with a percentage holding of 11.97%, followed by Wagner (Denis) holding 11.82%, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis:
Outlook: The company expects robust growth in bulk haulage business from the resources sector in the CMS segment. Further, higher demand for concrete is expected to drive increased sales in the cement, flyash and aggregates businesses. The company expects ongoing investment in international expansion, with establishing a UK manufacturing and distribution facility (anticipated to complete in FY22). The company remains on track to commercialise its new product lines and strengthen its global foothold with revenue generation from new geographic locations. The prospect for the construction industry in south-east Queensland is promising, and WGN anticipates robust cement volumes in FY22.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of the company went down by ~28.75% in the past six months. The stock has made a 52-week high and low levels of $2.56 and $1.52, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount as compared to its peers, considering COVID-19 pandemic, logistics delays, lack of availability of raw materials, pricing pressure, etc. For valuation purposes, peers like Adbri Ltd (ASX: ABC), CSR Ltd (ASX: CSR), Boral Ltd. (ASX: BLD), and others have been considered. Considering rise in cash flow from operations, higher revenue base, positive outlook, projects pipeline, decent liquidity position, geographical expansion, indicative upside in valuation, we recommend a ‘Buy’ rating on the stock at the closing price of $1.66, as on 16 November 2021.
WGN Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.
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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