Reliance Worldwide Corporation Limited
RWC Details
This report is an updated version of the report published on 10th May 2022 at 03.55 PM GMT.
A Quick Look at Financial Highlights: Reliance Worldwide Corporation Limited (ASX: RWC) is involved in designing, manufacturing and supply of high quality, reliable and premium branded water flow, control and monitoring products and solutions for the plumbing and heating industry. The company experienced strong repair and remodelling activity during the period. In the Americas, the Asia Pacific and Continental Europe, the company’s revenue grew from a significantly higher base recorded in FY21.
Financial Summary (Source: Analysis by Kalkine Group)
Key Risks: The company is exposed to risks arising from the global supply chain issues relating to shipping and freight delays, materials shortages, and construction sector delays. In addition, the business could also be impacted by the rising market share of peers in the industry.
Outlook: Looking forward, the company is focused on the launch of new products, which would help RWC to continue its long-standing record of delivering above-market growth with quality margins. In addition, RWC anticipates operating margins to improve as the full benefit of further price increases in Q3 and plans for an increase in Q4 are realized.
Valuation Methodology: P/E 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 RWC is trading below its 52-week low-high average of $3.760 - $6.610, respectively. The stock has been corrected by ~21.16% in the past three months. The stock has been valued using a P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers multiple, considering the declining margins and supply chain issues, etc. For the purpose of valuation, a few peers like James Hardie Industries PLC (ASX: JHX), Boral Ltd (ASX: BLD), and GWA Group Ltd (ASX: GWA) have been considered. Considering the expected upside in valuation, growing sales, strong repair and remodeling activity, decent long-term outlook, current trading levels and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $4.000, as on 10 May 2022, 11:30 AM (GMT+10), Sydney, Eastern Australia.
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.
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RWC Daily Technical Chart, Data Source: REFINITIV
Decmil Group Limited
DCG Details
Resignation of Director: Decmil Group Limited (ASX: DCG) provides designing, engineering, construction and maintenance services to the infrastructure, resources, energy and construction sectors in Australia. Recently, the company announced that Mr Dickie Dique has resigned from the position of Director.
1HFY22 Highlights: The below picture gives a broader overview of the company’s financial performance in 1HFY22:
Financial Summary (Source: Analysis by Kalkine Group)
Key Risk: The company’s operational and financial performance could be affected by supply chain issues, cost escalation, and difficulties in accessing labour.
Outlook: Due to award delays and project commencement delays, the company has revised revenue guidance to $425 - $450 million against the previous guidance of ~470 million. In addition, EBITDA for FY22 is likely to be in the ambit of ($15 million) to ($10 million).
Stock Recommendation: The stock of DCG is trading near its 52-week low level of $0.096, offering a decent opportunity for accumulation. The stock has been corrected by ~18.51% in the past month. On a TTM basis, DCG has an EV/Sales multiple of 0.1x as compared to the industry median (Construction & Engineering) of 0.5x. Thus, it seems that the stock is undervalued at the current trading levels. Considering valuation on a TTM basis, rising revenue, growing order book, current trading level and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.110, as on 10 May 2022, 11:30 AM (GMT+10), Sydney, Eastern Australia.
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.
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DCG Daily Technical Chart, Data Source: REFINITIV
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 price
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