Renew Share Discussion Threads

[rivaldo] 22/2/2023 11:48

Stockopedia yesterday ran a screening for Warren Buffett stocks of all those with a minimum market cap of £50m, using his criteria of ROCE, EPS, book value per share, gearing etc etc.

RNWH were the 7th highest rated stock of all of them, with a Stock Rank of 94:

[wfcreserves] 12/2/2023 11:35

Could be potential investors wary about the discount needed for the last placing? Or seeing better dividend yields elsewhere with inflation as it is currently?

[harrogate] 10/2/2023 15:39

Surprised at recent weakness on low volume. Wonder if there is a deal coming with some placing element? Seems to be being walked down.

[rivaldo] 06/2/2023 10:16

Shore Capital have a 950p target and say Buy, with upgrades likely - RNWH are "anomalously cheap":

Extracts:

"We believe EPS could be ahead of our current number and consensus by a high single-digit percentage.

Renew has consistently had a very high level of visibility with c.70% of current year forecast sales usually in the order book. This has helped thegroup meet or beat consensus profit forecasts in every year since the group came into its current form in 2006."

"We anticipate that the adjusted operating margin will remain at the elevated level of c.6.9% with very low downside risk, given the cost-plus nature of the group’s contracts."

"Valuation and recommendation

We believe Renew presents an attractive opportunity for investors to benefit from the UK government’s commitment to spend £600bn on infrastructure from 2022 to 2027. Given the nature of Renew’s variable, cost-plus contracts, we believe it is very well placed to pass on inflationary pressures to customers. We also believe it is protected against economic downturns given that its revenue is driven by the public sector.We continue to believe Renew has a lower risk profile than the market perceives, possibly due to associations with peers servicing much larger fixed contracts. Renew’s ability to control costs and resilience during the pandemic was much greater than the majority of Industrials and worthy of a greater re-rating, in our view."

"We maintain our BUY recommendation and 950p DCF-based fair value (30% upside). As of yesterday's closing price, the shares trade on 12.3x our conservative FY23F EPS forecast and 7.6x on an EV/EBITDA basis. We consider this valuation to be anomalously cheap, given the company’s consistent c.30% ROIC, 18% adjusted EPS CAGR since 2011 and current net cash position."

[wad collector] 03/2/2023 14:07

Xd 11.3p next week.

[rivaldo] 02/2/2023 11:31

Numis reiterate Buy with a 900p target after the AGM update, and Shore Capital also say Buy:

[rivaldo] 02/2/2023 09:06

Agreed Harrogate. The current year forecasts at around 60p-61p EPS look very conservative to say the least.

I'd also comment that the Puma fund manager's commentary is understated given RNWH's high profile in fast-growth infrastructure areas like nuclear, water management/flooding, 5G, highways, EV charging, rail electrification etc.

And Peel Hunt have now reiterated their Buy with a 900p target:



"Peel Hunt: Renew is a key engineering pick

Engineering group Renew (RNWH) is benefiting from multiple growth opportunities and compounding cashflows, says Peel Hunt.

Analyst Andrew Nussey retained his ‘buy’ recommendation and target price of 900p on the stock, which slipped 0.5%, or 3p, to 729p yesterday.

A short update from the group for its annual general meeting confirmed trading was in line and the order book was growing.

Nussey said the outlook for the group was positive ‘given the structural growth drivers, specialist capabilities, order book visibility, and proven ability to manage inflation and skills pressures’.

He said he ‘confidently’ retained his recently increased 2023 pre-tax profits estimate of £61.5m.

‘The September 2023 estimated price/earnings ratio of 12.1 times fails to reflect the quality of the compounding cashflows as well as the multiple growth opportunities afforded by the sector-leading balance sheet and management team,’ said Nussey.

‘Renew remains a key sector pick.’"

[harrogate] 02/2/2023 07:34

Thanks for that info. I have never been more certain that RNWH will beat this year. There is a total disconnect between the current revenue number in the broker forecasts which has no growth once the acquisition is included and the constant reference to inflation protected contracts. Inflation is 10% and while I wouldn't expect that in the revenue number there had to be some significant element. For me it is when will they be confident enough to upgrade. Maybe at end of March with H1 update.

[rivaldo] 01/2/2023 23:51

It's interesting that the Puma Fund Manager above states that a P/E of 16 is too low for RNWH.

Since at 740p RNWH are on a historic P/E of only 12.7 based on 58.3p EPS, that would equate to a minimum share price target of around 950p.

[harrogate] 01/2/2023 15:00

Don't forget the order book now includes that of the November acquisition. That could be £30m based on their sales.

[thorpematt] 01/2/2023 14:33

A lot of trading statements (or AGM updates as it maybe), stating "On track" are not so exciting. But when your order book is 16% y-o-y, well that's the kind of track I want to be on.


Of course stocks with very high 5 yr CAGRs for book value growth, ROE, ROCE (and y-o-y order book above +15%) don't come cheap.

Which I guess is why the forward PER is so high here?

....oh, no, wait it's 12.

12

Wonderful company, very reasonable price (IMO).

[davebowler] 01/2/2023 13:07

Puma Fund Managers view -
Renew Holdings provides scheduled maintenance
and renewals tasks, as well as emergency reactive
works across all UK infrastructure segments.
Founded as YJ Lovell, Renew has been on a transformation since
the 1990s, to become a market leader in providing repair and
maintenance activities across UK infrastructure. This covers sectors such
as rail, nuclear, water, highways and telecoms. Paul Scott and Sean
Wyndham-Quin, Chief Executive and Chief Financial Officer respectively,
have an aversion to involvement in large capital spending projects, and
the group intentionally retains its focus on the repair and maintenance
of critical infrastructure networks.
The business has been built up through acquisition of maintenance
businesses that typically have skills related to one industry. Brand names
are usually retained if well known. It has a small specialist building
services division, which selectively offers construction services, with
recent schemes being for medical and laboratory developments.
Quality
Renew has lower profit margins than the average of our portfolio,
at 7%. However, with a cost structure based on contracts that allow
for variations in the price of materials, margins are very consistent from
year to year. The workforce is directly employed, meaning that labour
costs are well controlled, despite a tight labour market. Renew is a
capital-light business, with returns on capital exceeding 30%.
Growth
Given the industry segment in which it operates, and how selective
management is on pricing new work, Renew is unlikely to significantly
grow above the rate of infrastructure spending. The opportunity arises from
acquiring new businesses in growing segments, with the focus on ongoing
maintenance. Renew has a net cash balance and remains acquisitive.
Valuation
Renew has a high return on capital and stable profit margins, however
the lower growth nature of its industry and its lower profit margins,
warrant a lower rating than businesses with similar returns on capital.
Nevertheless, a P/E multiple of 16 and a free cash flow yield of 8% appear
too low for a business that has had an earnings-per-share CAGR of 18%
over the past 11 years.

[rivaldo] 01/2/2023 07:12

An encouraging AGM update - can't ask for more than that at this stage. Everything's trading well and with "momentum", giving confidence ahead.

The key takeaway is that the order book is absolutely storming ahead - it's now £861m, compared to £775m at 30th September. A rise of 11% in just four months is extremely impressive:

[rivaldo] 30/1/2023 09:32

Cheers for the reminder - the update is only two days away then.

I'm looking forward to it given the outlook from the prelims:

"Pleasingly, our positive trading momentum has continued into the new financial year and we enter 2023 with a strong order book and believe the structural growth drivers in our end markets, underpinned by committed regulatory spend, continue to provide the Group with significant opportunities."

[wfcreserves] 25/1/2023 09:22

Perhaps someone could raise these points up at the forthcoming AGM 1st February?

[wad collector] 24/1/2023 21:26

Does raising the profile of the company to the stock market increase business? Presumably, a bit .

[grahamburn] 24/1/2023 14:53

Perhaps a happy compromise might be for Renew to issue non-RNS announcements for unusually large or short term contracts. Many other quoted companies do just that.

[rivaldo] 24/1/2023 13:42

With a £574m m/cap, contract wins would have to have a large and immediate material financial impact to be announceable via a full RNS, which is not the way RNWH works, so this is completely unsurprising imho.

My point is only that there's a lack of imagination here. This contract win news isn't even on AmcoGiffen's web site, let alone being announced on RNSNON, which would be the ideal way of announcing such important news which nevertheless doesn't have an immediate financial effect so isn't RNSable.

[harrogate] 24/1/2023 12:35

You would need to go back many years to see a contract win RNSd by RNWH. Maybe to the previous management. I do find it strange - but does tie in with the very low organic growth over the last few years and the even more anaemic growth forecast going forward. The conclusion surely is that these wins are already included in the broker forecasts in essence and they are not incremental and so not worthy of an RNS

[rivaldo] 24/1/2023 09:01

Excellent news, cheers - this is a "bumper" £2 billion framework securing income through 2024-29 with an option for a further three years to 2032. RNWH are one of only five contractors on the framework, but have won substantial work in winning two of the six contracts - you'd have thought this might be worth an RNSNON at the very least.

Great to see RNWH winning the electrification contract, proving that the acquisition of Giffen was a smart move and hopefully setting AmcoGiffen up for many more electrification contract wins.

I also note that these "will be followed by similar contracts for signalling later in 2023".

[igoe104] 20/1/2023 11:46

AmcoGiffen wins major Network Rail contracts for Wales AmcoGiffen wins major Network Rail contracts for Wales and Western Region

[igoe104] 19/1/2023 12:00

Good to see Amco-giffen named as part of this 2 billion framework.

[rivaldo] 16/1/2023 08:58

"Floods and travel chaos across the UK", particularly across the rail networks, should be good news for RNWH if not so good for everyone else:



And a news item from RNWH - good to see AmcoGiffen and Carnell working successfully together on their debut major highways contract:



"10/01/2023

Our highways joint venture AGC has successfully completed its first major barrier scheme on National Highways' vehicle restraint system contract on its Scheme Delivery Framework (SDF).

We used a find-and-fix method on a long stretch of the M69 identifying safety critical defects and their swift remediation. We were unable to predict what would be required from one day to the next, so it was essential for us to work together with our client National Highways, partner Chevron Traffic Management and our supply chain. Working in collaboration combined with our adaptive management and delivery capabilities led to the contract’s success.

Over the course of the scheme, we surveyed a total of 30,800m barrier, and 5,950m beam and removed and replaced 4,500 barrier posts.

The original scope was for 15 kilometres of the M69 between junctions 1 and 3 in the East Midlands. But, as we progressed and with fewer than anticipated defects, the scope was extended to include 9 kilometres of the M6 to junction 1 heading into the West Midlands, completed for the same budget.

etc"

[mattboxy] 04/1/2023 17:16

Market likes it too!

[rivaldo] 04/1/2023 10:31

RNWH's Annual Report is well worth a read for the Strategic Report at the front which isn't on RNS. The impressive opportunities for RNWH are spelt out in detail:

- £51 billion spend in Water via AMP7 into 2025. Now we're in the latter part of the cycle, regulatory expenditure should accelerate nicely
- £30 billion spend in Wireless telecoms upgrades for 5G etc
- £53 billion spend in Rail via CP6 into 2024, including rail electrification and increased focus on renewal and maintenance, which are RNWH's strengths
- £124 billion Nuclear decommissioning spend, with 75% allocated to Sellafield where RNWH are strongly represented
- £24 billion spend on Roads via RIS2
- almost £1 billion on Electric vehicle charging
- £5.2 billion on Flood and coastal protection through the next six years
- £20 billion on UK Electricity/Power networks for transition to renewables
- 40 UK airports requiring increased renewal and maintenance expenditure (new area for RNWH?)