Reliance Worldwide Corporation Ltd (ASX: RWC)

Destocking of SharkBite’s PTC product at Home Depot: 2017 was a remarkable year for Reliance Worldwide as its sale grew tremendously across channels for SharkBite and also its one of the major acquisitions of HOLDRITE was successful with an integration of HOLDRITE’s supply chain and operations. Tremendous growth was seen in few segments as office building grew by 11%, warehouse by 9%, Education by 9%, Healthcare by 2% and Transportation by 135%. As far as the financial performance is concerned, it performed well as Net Profit after tax was up by 26% and Net sales from Americas was up by 19% as compared to the last year. Reliance’s stock is getting good boost from the success of SharkBite PTC (Push-to-Connect) Plumbing Solution and the group is impressing investors by entering into the giant US market. It is planning to expand its manufacturing and distribution facilities in Tennessee and Nevada. Moreover, it is also anticipating a stable growth in housing sector because of which national spending on improvements and repairs will reach till US$324 billion. RWC is executing its growth plan of building innovative systems in newly Commercial buildings, like it has constructed a device for stopping unwanted water intrusion. Improvement was also observed from safety aspects with a reduction of 84% in recoverable injuries in the last 14 months.

Meanwhile, the HOLDRITE acquisition resulted into strong historical earning growth rate because of which revenue CAGR was more than 20% over three years. HOLDRITE will bring further scale to the wholesale sales channel in the Americas and will also accelerate entry into residential and commercial sector. It is worth noting that AMP Limited ceased to be a substantial holder in Reliance Worldwide while Challenger lowered its interest from about 9% to about 8%. Its ROE otherwise was 35.3% which outpaced its own industry. On the other hand, SharkBite PTC is no longer distributed to the Home Depot’s Pacific Northwest locations. Destocking of SharkBite’s PTC product at Home Depot is expected to impact FY18 EBITDA.
 
 

Market Fundamentals (Source: Company Reports)

Stock Performance: In the last six months (as at December 14, 2017), the share price increased by 4.1%, but in the last month there was a dip of 7.49%. Despite the dip, the stock looks “Expensive” at the current price of $3.84, considering the trading scenario and latest challenges. We intend to review the stock at a later date to evaluate any buying opportunity.     

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