Wagners Holding Company Limited

WGN Details

Wagners Holding Company Limited (ASX: WGN) is a diversified Australian construction materials and services provider, producing New Generation Building Materials, including heavy construction materials on the environment.

Result Performance for FY21 (For the Year Ended 30 June 2021)

• Revenue stood at $320.7 million in FY21, up 28.4% YoY primarily led by an increase in precast, concrete, transport and contract crushing.
• Construction Materials and Services revenue rose 33.7%, primarily driven by a rise in revenue across cement, precast (Cross River Rail tunnel segments), bulk haulage, concrete, and quarry operations.
• EBIT stood at $25.4 million in FY21, up $16.8 million YoY, driven by higher activity across the business and higher-margin work.
• Recorded improved operational cashflow as business performance has allowed debt reduction.

Source: Company Reports, Analysis by Kalkine Group 

Recent Update

• The company, on 18 November 2021, stated that it had bagged a new contract for haulage services with McArthur River Mining Pty Ltd (MRM). Up to 3 million tonnes of materials will be loaded and hauled between the mine site, the Bing Bong Loading Facility and Mount Isa Mine processing facility over the 3-year term.

Outlook

WGN has enhanced investment in low carbon technologies, to facilitate in fast-tracking the international expansion of both EFC and CFT, to place the company in taking advantage of the current opportunities to deliver growth. Further, along with the $17.5 million investment across the Group, WGN has set a solid platform for FY22. On the back of higher international demand for the technology, the board is looking for an investment partner to drive the growth of the technology and the scaling up of operational capacity in the identified global markets. The company is enthusiastic about the international opportunities that the outlook provides in CFT and EFC.

Key Risks

Reduced demand for the company’s products and services due to delays in current capital investments and construction activity could materially and adversely impact revenue, profitability, and growth. Failure to continuously comply with regulatory requirements could result in enforcement actions. Disruption in local and international supply contracts could impact the broader business.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). In addition, a slight discount has been applied to peer median EV/Sales multiple (NTM basis), considering Covid-19 led disruption as well as challenging and volatile business conditions. However, the company is possessing decent outlook.

Considering the factors above, we give a “Buy” recommendation on the stock at the closing market price of $1.450 per share on 9^th February 2022. 

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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