Reliance Worldwide Corporation Limited
RWC Details
Latest Business Update on Issuance of Notes in the USPP Market: Reliance Worldwide Corporation Limited (ASX: RWC) is engaged 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. Recently, the company has finished an issue of US$250 million unsecured note in the US Private Placement (USPP) market. The funds raised would support the company with long term debt funding which supplements other borrowing facilities.
1HFY22 Financial & Operational Summary: During the first half-year, the company posted decent set of results with strong domestic demand in Australia on the back of increased new residential construction activity and growth in remodelling activity supported APAC sales.
Financial Summary (Source: Analysis by Kalkine Group)
Key Risks: Currently, the major risk with the business is supply chain issues relating to shipping and freight delays, materials shortages, and construction sector delays. The company’s performance also could be affected by rising market share of peers in the industry and forex headwinds.
Outlook: For FY22, the company expects capital expenditure in the range of $60 million to $70 million. In addition, RWC believes that the cost reduction initiatives are likely to deliver $8 million in savings for FY22. The company has scheduled to release its Q3FY22 trading update on 29 April 2022.
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 near its 52-week low level of $3.760, offering a decent opportunity for accumulation. The stock has been corrected by ~7.86% in the past one month. 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’ average, P/E 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, rising revenue, strong demand in Australia, 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 closing price of $3.830, down by ~2.047% as on 12 April 2022.
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
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 prices.
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