Seven Group Holdings Limited
SVW Details
Seven Group Holdings Limited (ASX: SVW) holds investments in industrial services, media, and the energy sectors in Australia. Its portfolio includes WesTrac, Coates, Boral, AllightSykes, SGH Energy, Beach Energy, and Seven West Media.
Recent Developments and H1FY22 Highlights:
- In the investor presentation dated May 3, 2022, SVW mentioned its portfolio company, Boral, had repaid its $2.97 billion bridge loan.
- The group has All-in costs of debt of 3.9%, with 55% being fixed with the average maturity profile of 4.5 years.
- H1FY22 revenues surged 68% YoY to $3.96 billion due to an 11% jump in revenues from Beach Energy,a aided by increasing energy prices and strengthening US dollar exchange rates.
- NPAT went up 22% YoY to $302 million. SVW benefited from a surge in EBIT at Coates, Media, and Energy business. This was despite major weather events in NSW and headwinds like supply chain disruptions.
EBIT Performance by Business Divisions (Analysis by Kalkine Group)
Key Risks: Lockdown restrictions impacted the construction market in NSW and Victoria. The company was exposed to extreme weather events in NSW, which had dented its profitability. Ageing fleet and global supply chain concern weighted on the performance of mining companies.
Outlook: The company is expecting the outlook for commodities to remain positive. Its Energy business to benefit from growing LNG demand and rising spot prices. Despite supply chain concerns, SVW is expected to deliver FY22 EBIT growth of 8-10% on FY21 Pro-forma EBIT.
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 SVW has been corrected by ~15.36% in the past three months. The stock of SVW is approaching its 52-week low price of $18.620. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers, considering the ongoing supply chain disruptions to affect project completion. For the purpose of valuation, peers such as Monadelphous Group Ltd (ASX: MND), Downer EDI Ltd (ASX: DOW), NRW Holdings Ltd (ASX: NWH), others have been considered. Considering the diversified portfolio, an uptick in NPAT in H1FY22, adequate liquidity, modest outlook, and an upside potential as indicated by the valuation, we recommend a ‘Buy’ rating on the stock at the closing market price of $18.790 as on 17 May 2022, down ~0.37%. 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.
SVW 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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