Renew Share Discussion Threads

[rivaldo] 04/1/2018 14:06

Happy New Year to everyone here. RNWH are looking quite strong at these levels - hopefully it's time for the next leg upwards.

[robow] 20/12/2017 11:43

Good spot Rivaldo

[wad collector] 12/12/2017 11:43

It has been quite a good trading share this year ; bit of volume and it narrows mostly. I mostly hold but occasionally trade here as it has been a bit volatile.

[sharw] 08/12/2017 19:25

That is because it is on SETS and so the spread becomes variable - at 13 28 today it was just 432.75/434.75. When that widens RSPs quote within - you just have to do some dummy orders to find out what the real situation is. Loads of small caps are like this.

[gswredland] 08/12/2017 16:50

Crazy spread on these. Suprised that p i's buy!

[rivaldo] 04/12/2017 13:55

Finncap's quarterly note on the Support Services sector is out today. In it, they highlight how infrastructure will be disrupted by smart technology.

They highlight six companies well placed to benefit from this transformation. RNWH is one of them (I also hold DSCV, which is another):

"Renew specialises in maintenance and renewal work for UK infrastructure. Its
electrical engineering skills mean that it is well placed to help clients implement
smarter solutions. Renew also has particular expertise in the provision of 2G, 3G,
4G and Wi-Fi technologies. Communication technologies (particularly the
forthcoming 5G) are key to Smart Infrastructure."

[wad collector] 01/12/2017 16:54

Thanks for that Rivaldo ; seems to be tipped everywhere still. Sp not impressed though ; suits me as trying to pick some more up cheap!

[rivaldo] 30/11/2017 14:55

Tipped here FYI:



"One resilient growth stock I’d buy ahead of Just Eat plc

Meanwhile, I’ll turn my attention to engineering services and specialist building provider Renew Holdings (RNWH), which released its full-year results today.

Defensive qualities

I like the company because it seems to have a defensive element to its business. More than 80% of revenue and 90% of operating profit come from the nuclear and conventional energy sectors, and from the environmental and infrastructure markets. The directors say these areas are “governed by regulation and benefit from non-discretionary spend with long-term visibility of committed funding.” The firm earns the remaining 10% of its income from the high-quality residential building market in London and the home counties.

The figures today are good, though not as spectacular as those we’ve become used to from Just Eat. Revenue rose 7% compared to a year ago, adjusted earnings per share lifted a decent-looking 22% and the order book stands 4% higher at £438m. The directors expressed their ongoing confidence in the outlook by pushing up the dividend by 12.5% — nice!

The current share price of around 426p throws up a forward P/E rating of 12.5 for the year to September 2018, which I find much more comfortable than Just Eat’s rating. There’s also a forward dividend yielding almost 2.5% and forward earnings look set to cover the payment more than three times. The company is doing a good job of growing the dividend payment, which is up 150% over the past four years. If dividend growth continues in the future, Renew Holdings could end up performing well as a stock from here."

[harrogate] 29/11/2017 17:16

The general trend to investment and thinking about rail can only be good for RNWH. The key though is the next rail framework which is coming in 2019 and is larger than the last framework and is more heavily skewed to repairs etc that are in AMCO's sweet spot. I see that as the key potential growth driver outside an acquisition on the horizon.

[wad collector] 29/11/2017 17:12

But they also pointed out that there will be no central funding so can't see too many local authorities queueing up to speculate on reopening lines that have been built around and over. Expensive to buy out the current land/property owners. Look how long and expensive HS2 has been .
But you never know , might be a few ..

[rivaldo] 29/11/2017 11:43

The Times reports that hundreds of miles of previously closed rail lines are to be re-opened. This should bring in much additional tunnel work, maintenance etc for RNWH - presumably including lots of preparatory work:



"Rail lines axed by Beeching will reopen to tackle overcrowding crisis"

Hundreds of miles of rail lines shut under the notorious Beeching cuts 50 years ago will be reopened as part of plans to tackle overcrowding and boost capacity on the network.

The Department for Transport will announce today that bids will be invited from metro mayors to resurrect some of the 5,000 miles of tracks closed in the late 1960s. Chris Grayling, the transport secretary, said talks had already begun to reopen five commuter lines to ease pressure on a network “bursting at the seams”. Many are freight lines that will be redeveloped for passengers.

This includes the lines from Okehampton to Exeter and from Portishead to Bristol, a new passenger route through Birmingham and a new link from Ashington and Blyth into Newcastle. The reopening of the Varsity line between Oxford and Cambridge is scheduled for the mid-2020s.

etc"

[rivaldo] 28/11/2017 10:03

Here's the summary page from the new Finncap note FYI:

"Essential services carefully selected
BUY

Renew provides essential repair and maintenance services for UK infrastructure. These are very large, long-term markets providing significant potential for growth, but the key to Renew’s model is being selective with a focus on profits rather than just sales. Hence, while underlying Engineering Services sales in FY 2017 were flat, underlying EBIT was up +12% and total EPS up 17%. With very high and rising ROCE, strong cash flow characteristics and the potential from large, defensive long-term markets, we reiterate our Buy recommendation.

Essential services. Renew repairs and maintains the UK’s infrastructure. It has a strong position in the rail, nuclear energy and water markets, providing mechanical, electrical and civil engineering services.

Large end markets. Renew provides its work through framework agreements that typically last for 3-5 years, but the requirement for the work will continue
indefinitely. For instance, £3bn p.a. is being spent on nuclear decommissioning
and Network Rail has £48bn of funding for 2019-24 (up from £41bn).

Rising margins. Evidencing Renew's selective approach, operating margins rose to 4.6% in FY 2017 (2016: 4.2%) and are up from 3.5% three years ago. The risk to these margins is relatively low with the vast majority of work completed on a cost reimbursable or plus basis.

Strong cash flow. Despite the acquisition of Giffen requiring a working capital
injection in FY 2017 (as planned), operating profit conversion into cash has
averaged 103% over the past three years.

Highly differentiated. Renew employs staff directly, uses relatively little capital and completes relatively small, repeatable jobs in regulated industries where health & safety and technical competence are key. This is very different to the majority of contractors.

Target price of 586p supported by free cash flow and ROCE. We maintain our target price of 586p, which now equates to a mkt. cap/FCF of 22.4x in calendar 2017. This is still a 9% discount to wider contracting peers who generally have a much poorer track record and very different risk profile."

[rivaldo] 28/11/2017 10:00

Finncap only initiated coverage of RNWH, with the 586p target, 10 months ago.

The market is what it is, and often the current share price is meaningless in terms of assessing value since it's so easily affected by sellers or buyers. Over recent months Canaccord's clients' holding has been slowly reducing. Octopus have bought some of the slack, but it's possible that the share price has been held back purely due to this. Canaccord may simply be doing a bit of top-slicing, which may already have ended or may continue for a while, or they may dispose fully, which seems unlikely.

I agree that an acquisition is overdue - this would certainly catalyse the share price. Anyway, on to the new Finncap note.....

[harrogate] 27/11/2017 12:03

Hi Riv. Yes the note reads well but they have been saying all that for well over a year I think and the market is pricing RNWH at a different rating with TSR negative in the last 12 months. They have a new team and as far as I know no 5 year plan to replace the last one which drove the share price and the company in those days. We need a deal !!! Ha ha. But I am not a seller at this price at the moment.

[rivaldo] 27/11/2017 11:31

Finncap have issued a big new 9-page note this morning, reiterating their Buy and 586p target price.

They note that even this 586p target is "still a 9% discount to wider contracting peers who generally have a much poorer track record and very different risk profile".....

Which would imply a 644p target price to put RNWH on the same rating as its peers, i.e around 50% upside from here.

More extracts at a later date.

[mfhmfh] 24/11/2017 14:28

This was one of IC's tips of the week.

[rivaldo] 24/11/2017 13:42

Cheers penpont - good to see the Buy tip's emphasis on non-discretionary, critical spending which comprises the large majority of RNWH's revenues.

Looking ahead, Numis forecast 36.3p EPS next year, up from 34.3p EPS this year.

Hopefully we'll soon see an earnings-enhancing acquisition given that RNWH are now building up a cash pile.

[penpont] 24/11/2017 12:21

From IC
By Mark Robinson
You can only delay infrastructure spending for so long. That forms one of the underlying investment themes for Renew (RNWH), particularly over the long haul. The Leeds-based group provides support for the UK’s infrastructure, in areas such as rail and water; where the imperative to commit funding for maintenance and renewal has moved from desirable, through to compelling, and in some cases critical.

RNWH:LSE
Renew Holdings PLC

1mth
Today change
0.00% Price (GBP)
425.25
The 4 per cent rise in the engineering services order book in the year to September is therefore welcome, not only because the division generates four-fifths of group revenue, but as it underlines an “established position in long-term" – and crucially – "non-discretionary programmes”. Another telling metric is the 40-basis point increase in the underlying operating margin. Renew has tried to boost the quality of earnings to ratchet up margins. To this end, the group has exited its lossmaking small diameter gas pipe replacement activities. However, disregard the resulting £5.8m impairment charge and amortisation, and underlying profit was 16.4 per cent up at £25.6m.

After a strong increase in the year to September, revenue at the specialist building business could reduce by as much as £35m this time around. Despite this, Renew is confident the division's operating profit will hold steady.

Broker Numis gives adjusted pre-tax profit of £26.7m for the September 2018 year-end, giving to EPS of 34.3p, compared with £25.3m and 33.1p in FY2017.

IC View

As Simon Thompson has pointed out, even a slight improvement in margins will amplify profitability, so impressive is Renew's top-line growth. With the shares changing hands at an undemanding 12 times forecast earnings, we reiterate our buy call.
Last IC View: Buy, 467p, 23 May 2017

[wad collector] 23/11/2017 14:15

Ah , HVS , always good to hear from an expert. The price of lithium must have gone up..

[hvs] 22/11/2017 22:09

Thank you rivaldo.

But you does have IDIOTS WHO have NOTHING . LIKE this one. IDIOT or not ?????

The market seems to be mildly unimpressed with the numbers. I suppose part of the trouble is the way a number of high profile engineering/service companies have published rosy results and statements , then suddenly the share price has bombed with "unexpected" bad news. The margins are relatively small so does not take much to trash the balance sheet , like the small diameter gas pipes. That said , there seem few caveats in the statements. Happy to hold.

LOL !!!!

AND ITS HAPPY

[rivaldo] 22/11/2017 11:56

Numis' forecasts are slightly ahead of Finncap's at 34.3p EPS this year followed by 36.3p EPS, plus 9.5p and 10p dividends.

The current year is only 12.5. For a company which has performed as consistently as RNWH has, and which has secure, non-cyclical revenue streams going forward - with potential for strong growth in water, rail, nuclear etc - this is cheap. Especially in the current market.

I think we'll see more institutional buying. RNWH has never issued or needed flashy RNS's. There should hopefully be a steady rise from here.

Further to the institutional and press roadshows over the next couple of weeks RNWH should also see some nice coverage in the IC, SCSW etc.

The reasons for Finncap's 586p target price are pretty clear to me - unlike many others for companies with huge m/caps and very low profitability or revenues.

[harrogate] 22/11/2017 09:29

All ok really apart from the large hole in cash created by the gas acquisition which has proved to be a mistake. The question is why would the share price go up from here with EPS growth at 5% and yield at sub 2.5%? The comparison to other support services companies who have hit the rocks we know is wrong as Renew only do small jobs and all repair type work. We have a completely new team now in CEO,CFO and Chairman and with deals surely not been looked at while the FDs transitioned I think we have a period of steady as she goes until we see a deal or get a sense that AMCO is in line for a decent slug of growth from the new rail programme from 2019. Shareholder return in last 12 months has been negative and I would hope that the management incentive payments reflect that. It is one of my core holdings but not sure why I would be a buyer. Newsflow these days is rare re new business wins so what is going to get it moving?

[rivaldo] 22/11/2017 09:21

Good coverage of the results here, with some good quotes from the CEO:



"The ​Leeds-based group works on critical infrastructure assets, such as nuclear, rail and water maintenance, so money has to be spent on projects despite what is happening in the wider economy. Renew's chief executive Paul Scott said: "We are accessing non-discretionary funding programmes. Not doing them is simply not an option."

"The (Giffen) acquisition broadened our offering as a major engineering services provider to Network Rail, as well as​ ​providing services to London Underground and Train Operating Companies​," said Mr Scott.​ "The integration of Giffen is going well. We've made good progress. We are now working with London Underground. These are areas we couldn't get into before."

"Renew operate​s̴3; across the energy market for clients including Sellafield, SSE, Magnox​ and​ E.ON​. ​"​We are well positioned on key frameworks associated with high hazard risk reduction operations at the​ ​Sellafield nuclear site in Cumbria​," said Mr Scott​. ​"​We are strategically placed on all three lots of the ten-year​ ​Decommissioning Delivery Partnership Framework that has an estimated value of £500m with the headroom to increase to £1.5bn over the term to 2025.

"Renew was appointed as sole supplier on the national seven-year MEICA Framework for Canal and​ ​River Trust which will see ​it​ support 1,000 water assets for this new client.

At the Palace of Westminster, ​Renew said ​the cast iron roof restoration is progressing well and puts ​the group​ in a good position​ ​for future opportunities at this World Heritage site. During the year, the Courtyards Conservation Framework​ ​was extended to 2025."