Reliance Worldwide Corporation Limited

Positioned to leverage from growing market opportunities: Reliance Worldwide is a well-positioned company that is primed to take advantage of the developing market opportunities. The brand in terms of the plumbing supplies business is gaining popularity with high quality and sustainable products including SharkBite fittings over many years. The market opportunity is immense and support comes from balance sheet and cash position. With latest strategic moves and acquisitions, RWC has now become the global leader in the manufacture and distribution of brass and plastic PTC (push-to-connect) technology and related products.


Product Portfolio (Source: Company Reports)

The FY18 result was decent with 28% growth in net sales over FY2017 and net profit after tax, before any contribution from John Guest, expensed transaction costs and associated financing costs, was up 20% to $78.6 million. The group’s latest acquisition of John Guest is also in line with the growth strategy and sets a widespread penetration across North America and Asia Pacific and the UK and continental Europe. RWC could also manage the acquisition through proceeds of a recent entitlement offer. Overall, the group is evolving its services and offerings on quality and disruptive products.

Decent Outlook: RWC has highlighted that its FY19 EBITDA guidance range is of $280 million to $290 million. The group though raised some concerns among investors as it indicated that the future dividends may not be fully franked in view of geographic mix of earnings, the targeted payout range for FY19 will still be 40% to 60% of net profit after tax (against FY18 figure of 63.8%). In a way, RWC is trying to be in line with dividends paid (fully franked) for FY18 of $42.1 million. The group is a cash generator with low gearing and has even expanded its facilities with the addition of a new $750 million syndicated debt facility. Lately, Paradice Investment Management Pty Ltd became the substantial holder of the group. This shows growing interest among the market experts while RWC is also expected to benefit from the ongoing shortage of skilled labour across its key geographies.

The stock has fallen about 14% in last three months and is again gaining attention with about 4% rise in last five days. We give a “Buy” recommendation on RWC at the current price of $ 4.73 with support around $4.6 and resistance around $4.8.
 

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