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)

• The 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.
• The 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.
• In addition, the management elected not to declare a final dividend.

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 sites over the duration of 3 years. The project is likely to generate revenue of ~$33 million over the term of the contract.

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 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. Further, coupled with various long-term contracts bagged in its Construction Materials and Services businesses is expected to deliver value for the company in the long term.

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 such as shutdowns of, or restrictions on, manufacturing operations, delay in the approval of products, refusal. Disruption in local and international supply contracts could cause product delays and potential loss of profitability.

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

Technical Overview

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The company has delivered a 3-month and 6-month return of ~-18.38% and ~-31.05%, respectively. In addition, the stock is trading below the average of the 52-week high price of $2.56 and the 52-week low price of $1.415.

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 average EV/Sales multiple (NTM basis), considering a fall in fixed asset turnover at 1.36x in FY21 versus 1.39x in FY20 and higher debt to equity in FY21 versus industry median.

Considering the factors above, we give a “Buy” recommendation on the stock at the closing market price of $1.51 per share, down by 1.629% as of 23^rd December 2021.

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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.