Bingo Industries Limited
BIN Details
An Update on Scheme Implementation Deed: Bingo Industries Limited (ASX: BIN) is engaged in waste management and recycling process in Australia. The company provides environmental and waste management solutions across the waste management supply chain. Its services comprise of Skip Bins, Commercial Waste, Liquid Waste, Recycling Centers, Contaminated Soils and Education. On 27 April 2021, the company entered into a Scheme Implementation Deed (“SID”) with Recycle and Resource Operations Pty Ltd, owned by Macquarie Infrastructure and Real Assets (MIRA). Under the SID, MIRA will buy 100% share capital of BIN through scheme of arrangement. BIN shareholders may either receive $3.45 cash per share or mixed of cash and holding in the newly incorporated entity “Rollco”. The scheme is subject to certain conditions which need to be fulfilled before the scheme can be implemented. The company also mentioned that if the Scheme is implemented, BIN shareholders will receive a cash consideration of $3.45 per share, less any special dividend (which is expected to be $0.117 per BIN share (fully franked)).
1HFY21 Financial Highlights: The company has registered a decline in underlying revenues to $241.1mn in 1HFY21 as compared with $248.9mn in 1HFY20 on the back of Covid-19 lockdowns. The company has posted a decline in underlying NPAT to $16.7mn in 1HFY21 as compared with $28.4mn in 1HFY20, mainly on the back of higher labour cost.
Revenue Growth (Source: Company Reports)
Key Risks: The company is exposed to Covid-19 related risks. The company has seen higher labour costs and other operational costs during Covid-19 situation, which has impacted the profitability of the company. The company requires regulatory approvals to carry out its business efficiently. Any delay in regulatory approval may result in financial losses for the company.
Outlook: The company is expecting a weaker construction activity in residential and non-residential segments in 2HFY21 though there are expectations on robust infrastructure activities from its existing and committed order pipeline in late FY21 and going further. The company is positive about its network capacity and expecting it to offer sustainable growth from FY22.
Stock Details: In the last one month, BIN has increased by ~7.59% and by ~4.93% in the last three months. The current market capitalisation of BIN stands at ~$2.09bn as of 27 April 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$1.82-~$3.43. On the technical analysis front, the stock has a support level of ~$3.28. As per the company, BIN shareholders do not need to take any action currently. we suggest that investors should not take any fresh positions in the stock currently and wait for the company to announce final dates for scheme to take place. The details of the scheme meeting are expected to be sent to shareholders in June 2021 and the shareholders are likely to be given an opportunity to vote for the scheme, which is expected in July 2021. Looking at the proposed price consideration for the deal and special dividend, the offer seems lucrative at current levels. The stock is currently trading at the market price of $3.40, up by ~6.249% as on 27 April 2021.
BIN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
Reliance Worldwide Corporation Limited
RWC Details
Quarterly Trading Update: Reliance Worldwide Corporation Limited (ASX: RWC) is engaged in the design, manufacture and supply of water flow control and monitoring products and solutions for the plumbing and heating industry. The company has registered an increase of 14% YoY in its consolidated net sales to $359.4mn in Q3FY21 on the back of strong demand for plumbing products, owing to higher spending for residential repairs. The company has seen a robust growth from US region on the back of freezing weather, which has resulted in increased demand for plumbing supplies. EMEA region has registered a 13% increase in net sales (Constant Currency Basis) in Q3FY21, due to growth in repair and remodeling activities in UK, resulting in demand for plumbing and heating supplies. The company is likely to pass on the increased metal and commodity prices to the consumers through price adjustments.
1HFY21 Financial Highlights: The company has registered an increase in net sales to $642.4mn in 1HFY21 as compared with $569.3mn in 1HFY20. The company has reported an increase in NPAT to $91.4mn in 1HFY21 as compared with $50.1mn in 1HFY20. RWC has seen a decline in its cash and cash equivalent position to $39.62mn as on 31 December 2020 as compared with $82.16mn as on 30 June 2020.
Key Metrics Growth in 1HFY21 (Source: Company Reports)
Key Risks: The company operates in multiple countries, which exposes the company towards foreign exchange related risks. Any severe price movement in foreign exchange may lead to financial losses for the company. The company requires regulatory approvals to carry out its business efficiently. Any delay in regulatory approval may result in financial losses for the company. The company may see an impact on its profit margins with an increase in commodity prices.
Outlook: The company is expecting an inflation pressure with an increase in Zinc, steel, and resins prices along with an increase in freight and packaging cost. The company will be focusing on balancing its inventory levels and cost savings and efficiencies in FY21. The company may explore M&A opportunities in FY21 with its presence in UK region.
Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative)
Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, RWC has increased by ~7.89% and by ~20.0% in the last three months. The current market capitalisation of RWC stands at ~$3.85bn as of 27 April 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$2.34-~$5.35. On the technical analysis front, the stock has a support level of ~$4.775 and a resistance of ~$4.988. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of high single-digit upside (in % terms). We believe that the company can trade at a slight premium as compared to its peer average, considering a growth in net sales across regions and increase in NPAT. For this purpose, we have taken peers MAAS Group Holdings Ltd (ASX: MGH), Bingo Industries Ltd (ASX: BIN), GWA Group Ltd (ASX: GWA). Considering the company has registered an increase in consolidated net sales in Q3FY21, focusing on balancing inventory levels, exploring M&A opportunities in the UK region, valuation, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $4.92, up by ~0.819% as on 27 April 2021.
RWC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
Note: 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.
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