Reliance Worldwide Corporation Limited (ASX: RWC) is into the operation of water delivery, and control & optimization systems. It has plumbing products with many push-to-connect brass (PTC) fittings, PEX pipes, engineered plumbing support systems, and the like. The group has fifteen highly automated manufacturing facilities and presence in around twelve countries.
On 01 February 2019, the company confirmed that its guidance range of EBITDA for FY19 stands at $280 million to $290 million. However, these are subject to the below underlying assumptions:
It stated that a higher percentage of the EBITDA is expected to be earned in the second half of FY2019, nearly 53% to 55% compared to prior fiscal years driven by the pattern of earnings at John Guest, the progressive accumulation of synergy benefits and cyclical commodity costs benefitting second half cost of goods sold.
One of the assumptions underlying the FY2019 EBITDA guidance is that a modest freeze event has been experienced in the USA. FY2019 EBITDA could be negatively impacted by between 1.5% and 3.0% as if a modest freeze event does not occur during February or March 2019. A modest freeze event is the average level of winter storms which cracks or breaks the pipes over a sustained period across the USA. The company’s business usually benefits more from freeze events in the southern parts of the USA compared to the northeast or Midwest.
The first half of FY2019 financial results are yet to be finalized and reviewed in the audit. As per the accounts of the management, the first half FY2019 EBITDA is expected to be between 45% and 47% of the forecast FY2019 EBITDA. However, the percentage is not in line with previous years, due to the impact of the $1.2 billion John Guest acquisition, in June 2018 and primarily due to the diversified business of the company. Historically, John Guest delivers stronger revenue in the January to June period.
The synergies associated with the acquisition of John Guest remain on track to be delivered in FY19. These synergies are being implemented systematically, accumulate and increase over time which means that greater synergies will be realized during the second half.
Now let’s look at the Reliance Worldwide Corporation Limited’s stock performance and the return it has posted over the last few months. The stock is currently trading at a price of $4.665 and decreased by almost 3.015% during the day’s trade, with a market capitalization of circa $3.8 billion. The stock opened at $4.630 with its day’s low at $4.450 and a day’s high price of $4.810. The stock has generated a YTD return of 8.33% and posted negative returns of 19.16% and 3.99% over the last six months, three months period respectively. It has a 52-week high price of $6.380 and a 52-week low of $3.792, with an average volume of 3,239,446 approximately. The stock is trading at a PE multiple of 39.110x with an EPS of AUD 0.123 and an annual dividend yield of 1.35%.
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