Reliance Worldwide Corporation Ltd 

Reliance Worldwide Corporation Ltd (ASX: RWC) is known to be a leading manufacturer of push to connect (PTC) plumbing fittings across the globe, and it also deals into water control valves. The group had reported net profit after tax growth of 0.58% to $65.99 million for the year ended 30 June 2018 while net sales were up about 28% to $769 million over last year. Diluted Earnings per share were 12.1 cents while the same were 12.4 cents in FY17. Net operating cash flow, however, was about $80.09 million against $71.92 million noted a year before. The group declared the final dividend to be 3 cents and this led the full year dividend to be 6.5 cents which is up against 6 cents of last year. While the result has been a mixed one (double digit revenue and earnings growth offset by higher material costs and one-time charge on product re-classification) and not at its top notch, the group still has a significant market share in the US when it comes to PTC fittings segment, and has stable footprint across Asia-Pacific and Europe regions along with North America. Earnings profile has been decent given the sector-driven movements. The market leading position with 80% share in terms of volume has been good to consider for the US segment. The group has strong product portfolio, which includes SharkBite product. The group also expects high single digit revenue growth from John Guest in FY19 while monthly UK plumbing revenue has been up.


Support from market fundamentals (Source: Company Reports)

Reliance Worldwide generated a below-average return on equity of around 8.8% for FY18 and this is below the industry ROE and group’s last year’s percent as well. While the latest performance was underwhelming, the stock was able to rebound of the 200-day moving average (now around $ 4.9224) and is continuing with its downtrend streak. The stock may remain in oversold zone for some time as it has dropped about 8% in last three months with a year to date rise of 34%. On the other hand, the group’s earnings retention, which is opposite to the dividend payout, has gone down a bit and current ratio has improved. The group has maintained its gross margin over 2018 and 2017 at over 41% while operating margin has gone down.
The group is trading at $4.990 and at a price to earnings ratio of about 40.980x. It is a watch given the trading scenario while we look for a better entry opportunity as the group may perform a bit conservatively  in the near term.


Key Metrics (Source: Company Reports and Thomson Reuters)
 

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