Shares of NRW Holdings Skyrocket 32%; Knock Down Previous Trends

  • May 21, 2020 09:05 PM AEST
  • Kunal Sawhney
    Kunal Sawhney
    CEO Kunal Sawhney
    2781 Posts

    Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of T...

Shares of NRW Holdings Skyrocket 32%; Knock Down Previous Trends

With COVID-19 putting unprecedented pressure on the share markets and economy, the Australian government and regulators have placed their ambitious regulatory program on hold for six months to allow businesses to focus on managing the COVID-19 pandemic. However, the Australian share market is getting back on track by gradually re-opening some regions and easing concerns surrounding the worsening China-Australia tensions and the US-China trade conflicts.

In recent days, the industrial sector in Australia has shown positive growth that has helped the share markets revive as the country begins its journey to recovery. The sector comprises mining, resources & energy, together with manufacturing, transport & logistics, farming as well as animals and conservation.

On 21 May 2020, S&P/ASX 200 Industrial Sector settled at 5,624.5, indicating a rise of 0.3% compared to the last close, while benchmark index S&P/ASX 200 traded at 5,550.4, a drop of 0.41%.

In this backdrop, let us acquaint you with an ASX-listed industrial stock which was over 32% up today powered by record revenue generation – NRW Holdings Limited.

About NRW Holdings Limited

ASX-listed civil and mining contractor NRW Holdings Limited (ASX:NWH) is engaged in offering a range of diversified services to the resources, energy and civil infrastructure sectors across Australia. NRW has its operations in South Australia, NSW, Western Australia, Victoria, and Queensland.

The Company has a workforce of approximately 7k employees supporting over 100 projects across Australia for assisting clients across the resources, industrial engineering, infrastructure, maintenance, including urban sectors.

Highlights from Recent update (Share price skyrocketed ~32%)

On 21 May 2020, the NWH stock last traded at $2.190, shooting up 32.727% compared to the previous close. The Company has a market capitalisation of approximately $704.03 million with 426.69 million shares trading on the ASX. The annual dividend yield of the stock is 2.73%, and P/E ratio stands at 16.840x.

According to an ASX announcement dated 20 May 2020, NRW Holdings updated the market with its financial year 2020 performance and dividend payment. The Company also provided the operational, financial performance and business update to the end of April 2020.

Payment of Interim dividend

On 26 March 2020, the Company intended to defer the interim dividend pending a review by the board to be conducted in August 2020. However, given the continued robust performance of the business, the directors have progressed that review a bit earlier. They have also resolved to pay an interim dividend of 2.5 cents per share on 9 June 2020.

Highlights from the operational front:

The Company disclosed that processes had been implemented across its operations for reducing COVID-19 associated risks as outlined previously by the Company. Moreover, NRW continues to work with its clients for lowering risk and deal with the challenges faced amid the pandemic. Additionally, the Company notified that it had not observed any material impact on its supply chain concerning the current projects- mining and drill and blast operations.

Currently, the Company have not observed any material change to its proposed activities in any of business divisions- Mining, Civil, Drill & Blast and Mining Technologies.

Highlights from the financial front (unaudited ten months to April 2020):

  • The Company reported record revenue of $1.6 billion that includes revenue from associates, the outcomes for only ten months, represents a record revenue for the group compared to any previous complete fiscal year.
  • EBITDA was reported to be nearly $177 million, pre-adoption of AASB16 (compared to $94.6 million at 30 December 2019).
  • NRW revealed that continued strong earnings generation with normalised earnings EBITA of $107 million compares to $62.1 million in the first six months of the fiscal year 2020.
  • The Company observed significant improvement in net debt as of 30 April 2020 to $115 million.
  • NRW anticipates a much lower AASB16 debt of approximately $60 million to be reported as at 30 June, further reviews of equipment rental agreements are projected to decrease the liability recognised in the half-year accounts at $122 million.

Business Highlights:

  • Incorporation of BGC Contracting is progressing well and all project teams now reporting through the NRW business structure.
  • The key milestone on the BGC Contracting W2B Pacific Highway contract is currently under the leadership of the Golding business achieved on 31 March recognised by the client and consistent with the anticipation.
  • The Company, through its RCR Mining Technologies, is working with DIAB Engineering and secured almost $17 million fabrication package. This package would be for Tanami Expansion 2 Project of Newmont, which is for development of the Head Frame and Skyshaft steelwork.
  • NRW Contracting and WBHO infrastructure chosen as one of two dealers by the government of WA to tender nearly $215 million Mitchell Freeway north extension.
  • Notably, tunnel boring of the twin 8-kilometre tunnels on the Forrestfield Airport Link finalised in April. This is a significant milestone for the project which NRW is working on in Joint Venture with Salini Impregilo.

It is noteworthy to mention that regarding the outlook for the financial year 2020, the Company remains on track to meet revenue guidance of nearly $2 billion.

On the business performance of NRW its CEO and managing director Mr Jules Pemberton commented:

Moreover, the bidding activity of NRW is high and after the acquisition of BGC the product pipeline continues to improve, given the likely burst of speed in public infrastructure projects. Addition to this, the Company is very well placed to address a growing list of opportunities through both its Golding business on the east coast and the significantly enhanced construction business in the west.

NOTE: Currency is reported in Australian dollars unless otherwise indicated.



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