Reece Limited

REH Details

Acquisition of MORSCO Inc and Equity Raising: Reece Limited (ASX: REH) requested that its securities be placed in a trading halt session state on May 07, 2018; and unless ASX decides, the securities shall remain in trading halt until the earlier of commencement of normal trading on May 09, 2018 or release of an announcement on completion of institutional component of entitlement offer. Meanwhile, the group has recently entered into a binding agreement to acquire MORSCO Inc. for approximately A$1,910 Mn and the acquisition is expected to be completed in July 2018 and is subject to regulatory approvals and other customary conditions. The transaction will be funded by a combination of debt and new equity, wherein the group will raise $560 Mn through a stock offering that comprises of A$421 Mn Entitlement Offer and A$139 Mn Institutional Placement. For that, the group will issue new shares (approximately 60.2 Mn) which is equivalent to approximately 12.1% of existing shares on issue. The main objective of the acquisition is to get market exposure in the Sun Belt region, which includes southern states such as Florida, Louisiana, South Carolina and Texas. Following the acquisition, Reece expects to deliver mid-high single digit EPS accretion in its first full year of ownership on an NPATA basis. No synergies have been assumed in the acquisition metrics.


Equity Raising Timetable (Source: Company Report)

At present, the group has strong foundation footprint in five areas of the top 20 HVAC metropolitan areas in the US.  The group expects sales in the range of A$2,650–2,700 Mn, EBITDA in the range of A$370–380 Mn, and NPAT guidance is in the range of A$223–230 Mn in FY18 and this will be supported by new branch opening, investment across the branch network to improve and deliver great customer service, continued leveraging of its supply chain to deliver market leading products and services, and an enhanced online offering for both trade and retail customers. Meanwhile, the share price was up by 20.62 per cent in the past six months as at May 04, 2018 and the stock currently trades at its high levels considering the last market price of $ 10.750 (trading on a reconstructed basis).
 

REH Daily Chart (Source: Thomson Reuters)
 

Boral Limited

BLD Details

Decent 1HFY18 Performance: Boral Limited’s (ASX: BLD) stock was slightly down on May 07, 2018 while the group has recently revealed its first half year results and reported EBITDA growth of 50% in 1HFY18 as compared to 1HFY17. This was mainly supported by growth in construction materials businesses, particularly New South Wales and Queensland.  Further, NPAT substantially grew by 44% to $214 Mn in 1HFY18. As a result of solid performance in first half, the Board of Directors declared interim dividend of 12.5 cents per share which was paid on March 09, 2018, representing dividend rise of 4.2% as compared to previous corresponding period. Recently, the group announced the completion of a property transaction that will reflect in FY18 financials in the form of contribution from Property being in the order of $55 to $65 Mn.
 

Robust 1HFY18 Performance (Source: Company Reports)
 
Further, the sale of the Prospect property has completed which was ahead of earlier expectation and we expect that it will contribute around $56 million to this year’s earnings. Moreover, the management expects earnings to be in the range of 10-20% higher year on year in FY 2018 wherein EBITDA will increase at the lower end of that range while EBIT should be at the higher end. Meanwhile, the stock price slipped by 17.63% in last three months as on May 04, 2018 and is trading at lower level. The group’s North America business was primarily impacted by adverse weather while Australia has been delivering earnings growth. However, Boral North America will deliver earnings uplift in second half of around 10-25% at the back of favourable June quarter. Hence, we give a “Hold” recommendation on the stock at the current price of $ 6.550, considering high earnings for full financial year at the back synergies from acquisitions.
 

BLD Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.