NRW Holdings Limited

NWH Details

Record Revenue and Strong Earnings: NRW Holdings Limited (ASX: NWH) provides services, including civil contracting, mining services, and equipment to the resources sector. As on 21 May 2020, the market capitalization of the company stood at $704.03 million. The company has recently provided an update for the ten months ended April 2020, wherein it reported record revenue of $1.6 billion and EBITDA of $177 million. The company continued to generate strong earnings with normalized EBITA of $107 million. Given the continued strong performance of the business, the Board resolved to pay the interim dividend of 2.5 cents per share on the 9 June 2020. 

Debt Profile: During 1H20, the company made a continued repayment of corporate debt. However, the debt was increased due to the acquisition of BGC Contracting. During the half-year, Bankwest facility extended to provide incremental working capital and contract guarantee facilities and the new agreement with Bank of China up to $40 million of debt. During the 10 months ended April 2020, the company made a significant improvement in net debt to $115 million. 


Debt Profile (Source: Company Reports)

Future Expectations: The company has a strong pipeline of opportunities and has built capability across several areas and improved its revenue visibility. It has expanded its geographic reach and has built a sustainable revenue base with strong growth in capital. NWH will strongly grow its business over the coming years and is well positioned to capitalize on the positive market conditions in public infrastructure.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of NWH is trading on average levels of 52-weeks band and thus hold further potential for growth. Following the outbreak of COVID-19, the company has not seen any material change to planned activities in any of its business divisions. During 1H20, gross margin of the company stood at 57%, higher than the industry median of 13.3%. In the same time span, ROE of the company was 9.3% as compared to the industry median of 4.7%. Considering the continued generation of earnings, resilient business model and significant improvement in debt profile, we have valued the stock using an EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target upside of mid-single-digit (in percentage terms). For the said purposes, we have considered Perenti Global Ltd (ASX: PRN), Monadelphous Group Ltd (ASX: MND) and Emeco Holdings Ltd (ASX: EHL) as peers. Hence, we recommend a ‘Hold’ rating on the stock at the current market price of $2.19, up by 32.727% on 21 May 2020, owing to its recent trading and dividend update. 

 
NWH Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Unibail-Rodamco-Westfield

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URW Details

Decent Increase in Total Turnover and GRI: Unibail-Rodamco-Westfield (ASX: URW) is an owner and operator of the commercial property portfolio, predominately shopping centres and offices and convention & exhibition centres in Europe, United Kingdom, and the United States. As on 21 May 2020, the market capitalization of the company stood at $10.85 billion. During the quarter ended March 2020, the company has reported a total turnover of €956.6 million, an increase of over 1.8% on the pcp. This was mainly due to the property development and project management revenues, partially offset by the mandated cancellation of major events. In the same time span, the proportionate Gross Rental Income of the shopping centre division stood at €679.1 million, reflecting an increase of over 0.8% on pcp.


Quarterly Operational Highlights (Source: Company Reports)

Successful Placement of €1.4 Billion of Bonds: URW has strengthened its liquidity position by issuing €1.4 billion two-tranche senior bond offering of €600 million and €800 million with maturities of 5 and 10 years, at a fixed coupon of 2.125% and 2.625%, respectively. The net proceeds will be used for general corporate purposes, including the refinancing of debt maturing in 2020.

Impact of COVID-19: The company faced a limited effect on the group’s Q1 turnover from the outbreak of the global pandemic. This is because rents are billed and paid quarterly in advance in most of Europe and monthly in the US. However, the company expects to reflect the impacts in Q2 as the shopping centres were closed in the last week of March. Following the outbreak of COVID-19, the group reviewed its pipeline and is planning to remove €1.6 Bn of controlled projects, including Westfield Milano. The company has deferred approximately €500 Mn of discretionary capital expenditures budgeted for 2020.

Stock Recommendation: As per ASX, the stock of URW is trading at attractive levels, close to its 52-weeks’ low level of $3.650 but gave a negative return of 65.12% on the YTD basis and a negative return of 18.67% in the past one month. Following the widespread of COVID-19, the markets have been softer, and the shopping centres of the company have been closed. Considering the volatility in returns, current trading levels, and impact of COVID-19 on the business, we suggest investors to keep an eye on the business activities. Hence, we have a watch stance on the stock at the current market price of $3.75, down by 4.337% on 21 May 2020.

 
URW Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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