Renew Share Discussion Threads

[bsdjj] 06/6/2023 07:02

Berenberg have a note out today with a 950p price target. I think this a new coverage from them.

[igoe104] 22/5/2023 17:37

Good to see VHE construction part of this 600 million frame work...

[rivaldo] 22/5/2023 07:24

Following the 90% increase in Specialist Building's order book to £110m since the year end, an encouraging news update issued late last week from Walter Lilly:

[rivaldo] 19/5/2023 06:27

Big news yesterday was that the water companies are planning to TRIPLE their spending on sewage, wastewater etc before 2030 to £10 billion.

This is of course after all the hoo-ha about polluted rivers and oceans in the UK.

Not great news for water bills, but terrific news for RNWH given their increased presence in this sector following the acquisition of Enisca:

[wfcreserves] 18/5/2023 15:29

Wouldn't mind Investor Champion's share price of 6732p! (should be 732p?).

As said before 2.5% is decent at these levels but doesn't really give incentive to buy more.

[rivaldo] 18/5/2023 10:00

Peel Hunt say Buy with a 900p target:

[rivaldo] 18/5/2023 08:02

Investors Champion are also keen on RNWH:



"Renew: looking good as always

Renew Holdings (AIM: RNWH), the Engineering Services Group supporting the maintenance and renewal of critical UK infrastructure, announced excellent interim results for the six months ended 31 March 2023.

Renew's activities are focused into two business streams: Engineering Services, which accounts for over 98% of the Group's adjusted operating profit, focuses on the key markets of Rail, Infrastructure, Energy (including Nuclear) and Environmental, which are largely governed by regulation and benefit from non-discretionary spend with long-term visibility of committed funding.

Specialist Building focuses on the Science, Landmark and High Quality Residential markets in London and the Home Counties.

Group revenue in the period increased 13.8% to £471.8m which includes a contribution from the acquisition of Enisca since December, as well as organic growth of 11.6%. Group adjusted operating profit was 8.8% higher at £28.3m with the adjusted operating profit margin 6.0% (HY22: 6.3%).

Across the two business streams…

Engineering Services activities saw revenues climb 15% to £435.8m with adjusted operating profit up 11.6% to £29.7m. Performance was driven by continued positive momentum in the Rail, Infrastructure and Environmental sectors, with the Engineering Services order book standing at a highly supportive £780m at 31 March 2023 (31 March 2022: £705m).

The Government's Autumn Statement re-confirming a commitment to a record £600bn investment in transforming the UK's infrastructure to meet the target of net zero carbon emissions by 2050 is good news for Renew. As are ambitious plans to scale up affordable, clean, homegrown power and build thriving green industries to boost the UK's energy security.

Within this, Network Rail, a significant customer for the Group is expected to invest £44bn over Control Period 7, which runs from 2024 to 2029 with expenditure expected to focus on operations, maintenance, and renewal of the national rail network. This plays to the Group’s strengths as does the Government's commitment to a rail decarbonisation programme including a significant investment in electrification programmes, as part of the overall UK target to deliver net zero by 2050.

Of the £24bn committed over a five-year period to England's strategic road network, £11.9bn of this funding is ringfenced for operations, maintenance and renewals which gives Renew a unique advantage from which it has continued to benefit.

With pressure on public expenditure as a result of the difficult macroeconomic environment, Renew is seeing an increased focus on maintaining and renewing existing assets instead of major infrastructure enhancement projects.

Revenue in the Specialist Building business was broadly flat at £36.0m (HY22: £36.9m), with operating profit £0.5m (HY22: £0.6m). The order book here has strengthened to £110m (HY22: £66.0m), providing good visibility for the second half and into 2024.

The net operating cash inflow was £24m and free cash inflow £22.6m, lifting period end net cash to £17.0m after £13.3m was incurred on acquisitions.

The overall Group order book at 31 March 2023 has strengthened to £890m (HY22: £771m) underpinned by long-term framework positions.

Trading has started well in the second half of the year and the strong forward order book underpins confidence that the full year will be in line with the Board's expectations.

The interim dividend was lifted 5.8% to 6.00p with the forecast full year payout of 18.15p reprsenting a yield of approx. 2.5% at the current 6732p share price.

This consistent performer, which is a popular stock for IHT planning portfolios, continues to deliver."

[harrogate] 18/5/2023 08:02

Yes that is the situation in a nutshell. I think they are looking to do a decent sized deal hence the low dividend. This would change the dynamic and get growth back.

[lammylover] 18/5/2023 07:27

I've got a holding here and sleep well at night, as this is rock solid business.

However the share price anomaly for me, is because the dividend at around 2.3% doesn't encourage holding as a defensive stock.

Board need to increase divi to match other defensives or start to significantly grow business (by acquisition) to raise this share price.

[rivaldo] 17/5/2023 10:51

Here's Shore Capital's full conclusion:

"Forecasts

We increase our revenue forecast by 6% to £920m and our adjusted operating profit forecast by 3% to bring us in line with the top end of consensus at £62m. Our revenue forecast implies 8.4% growth, which we consider to be conservative given the growth achieved in H1 and the order book. We see very low downside risk to profit forecasts, given the cost-plus nature of the group’s contracts. Due to the increased tax rate, we currently forecast minimal growth in adjusted EPS, but see scope for revenue upgrades.

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 the group meet or beat consensus profit forecasts in every year since the group came into its current form in 2006.

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.

We maintain our BUY recommendation and 950p DCF-based fair value (30% upside). As of yesterday's closing price, the shares trade on 12x our conservative FY23F EPS forecast and 7x 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."

[rivaldo] 17/5/2023 08:31

I've just explained above why a rerating is possible. Quiet apart from the acquisitions which are likely.

You want to go back further? In Jan'17 the forecast to Sept'19 was 35.8p EPS. RNWH achieved 40.5p EPS.

In Jan'18 the forecast to Sept'20 was 37.9p EPS. RNWH achieved 40.9p EPS - even with six months of Covid! Prior to that RNWH beat forecasts from earlier years in each of 2016, 2017 and 2018.

EPS has grown from 40.1p EPS to Sept'19 to 59.3p EPS last year - almost 50% in 3 years, and that's with Covid. It's therefore completely incorrect to say that RNWH "are not growing EPS".

[harrogate] 17/5/2023 08:14

You picked 2 years where the numbers in the market were reduced due to massive Covid uncertainty and the impact on RNWH was not as great as anyone thought. I hope you are right but I am less optimistic than I was that we can best by the high single figure percentage expected by Shore. Why would we rerate to 15 x which is needed to get to broker price targets. The brokers don't really answer thatWe are not growing EPS and the tiled these days is not attractive. We need a deal to move the share price

[rivaldo] 17/5/2023 07:57

There are many things to say about that post :o))

- back in December'20 the forecast to Sept'22 was for 45.4p EPS. RNWH actually achieved 59.3p EPS - beating that forecast by a whopping 30%
- similarly, back in Sept'20 the forecast to Sept'21 was for 40.8p EPS. RNWH actually achieved 50.1p EPS
- so it's best to ignore the broker forecasts, which are evidently and traditionally conservative not only in terms of organic growth but also because they (rightly) exclude potential earnings-enhancing acquisitions
- the perception of RNWH is shifting to a more exciting proposition with high visibility of future income, yet also involvement in multiple long term growth sectors and much less contract risk than other sector comparators
- institutions love companies which consistently outperform and have high security of income. Thus over time RNWH should benefit from a double whammy of outperforming or at least meeting conservative forecasts and a re-rating from the current multiple to one more befitting of RNWH's record, i.e imo around 15-16.

The analysts covering RNWH have converged around a price target of 900p-950p. I see no reason why the share price shouldn't move towards this from here, with further upside from acquisitions and/or trading statements.

[harrogate] 17/5/2023 06:23

Thanks for posting that. They are a safe holding of course with a very capable team. But the question remains given as it states that we are at the average PE ratio of the last 5 years, what is going to make the rerate happen? My point is that the 12 times is going to stay so the only way that the price goes much higher is to get EPS up. Given brokers forecast no real EPS growth for 3 years is by a beat or a deal. Still a string hind but not sure why you would buy

[rivaldo] 16/5/2023 21:39

Nice Buy tip in the IC tonight:



"Renew's low-risk model drives results

This maintenance contractor’s low-risk model offers decent returns
May 16, 2023

Order book up 15 per cent to £890mn
Net cash of £17mn provides scope for acquisitions

Even in the technical world of construction, Renew Holdings (RNWH) is at the dull end of the market.

It doesn’t announce major project wins to build towers or power plants, rather places on framework agreements for maintenance programmes with titlessuch as CP7 (rail), AMP7 (water) or RIS2 (highways).

These are less risky than big-ticket contracting, though, with agreements mainly allowing for inflation to be passed through. Renew has used the steady cash flows these generate to reinvest – the £15.6mn acquisition of water specialist Enisca in November was its eighth over the past decade.

Even after funding this, it finished the first half with net cash (excluding leases) of £17mn, having generated cash flow from operations of £24.1mn (2022: £22.9mn). It also started the second half well, with its £890mn order book 15 per cent ahead of the same period last year.

This means there is scope for more deals. “We continue to be on the lookout”, chief financial officer Sean Wyndham-Quin said. “We’re seeing a lot of opportunities, but there’s nothing which has met our threshold.”

Shore Capital said Renew enjoys “a very high level of visibility”, with 70 per cent of forecast sales typically in its order book. This has helped it to either meet or beat consensus profit forecasts each year since 2006.

As such, the broker’s analysts view the company’s current share price of 12 times forecast earnings as “anomalously cheap”, although this is just about in line with its five-year average. But given the fact that Renew has generated an 18 per cent compound annual growth rate in earnings per share over the past 12 years, the shares still seem good value. Buy."

[thorpematt] 16/5/2023 18:01

Shore cap. morning note is a nice summary.

This bit is startling really: -

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 the group meet or beat consensus profit forecasts in every year since the group came into its current form in 2006.


Uner the circumstances, it is rather good value.

[rivaldo] 16/5/2023 09:57

Looks like the market is happy with the results and outlook, especially given current markets and inflation and supply constraints etc showing through in many other companies' results.

RNWH only need to do 32.6p EPS in H2 to reach 60p EPS for the year, and they already state they're "confident" that H2 trading will lead to results around that level. A P/E of 15 seems more and more reasonable to me as the company is re-rated whilst the market's understanding of RNWH's attributes continues to improve.

With markets looking forward to the year starting October 1st, Shore Capital's 950p valuation would then seem appropriate.

[harrogate] 16/5/2023 08:16

My initial reaction is one of mild disappointment. Solid as has been said but I like Shore believe we have to beat this year. But if we take their high single digit estimate beat that would mean say 66p this year. Can they really do 40p + in H2? That would be amazing. Don't see these results driving the price higher. We need a deal to do that. They are clearly trying and the M&A language seemed a little more prominent this time

[rivaldo] 16/5/2023 07:51

Shore Capital this morning retain their 950p price target and Buy recommendation.

They say the current share price is "anomalously cheap".

There's now "increased scope for upgrades", and they state EPS could be ahead of consensus - and their own "conservative" forecast - by "a high single-digit percentage".

It's worth noting that Shore Capital are NOT one of the two house brokers, so this view is entirely independent.

The 728p mid-price is now up 6p today, but this stock must be re-rated at some point soon given the largely impeccable record of recent years, the huge forward income visibility and the high growth rate potential in a multitude of areas.

[lammylover] 16/5/2023 07:41

Solid results, but this share is completely off the radar of majority of investors.
Truly bizarre!

[wad collector] 16/5/2023 07:28

And yet the price remains unchanged this morning. So far.

[pugugly] 16/5/2023 06:37

Thanks for quick summary.

[rivaldo] 16/5/2023 06:27

Excellent H1 results today, as we've come to expect.

PBT is up 21% on revenue up 14%, and RNWH are nicely on track to meet forecasts of around 60p EPS to 30th September.

Plus there's now a fast-rising £17m cash pile, with the dividend up 6% suggesting an annual 18p dividend.

All divisions are doing well - including the Specialist Building division where the order book is up by two-thirds.

The overall order book is up a whopping 15% since the year end to £890m, which bodes well.

And there's mention of further acquisitions. I note there were £554k of aborted acquisition costs so RNWH are evidently being careful about their next moves. And EPS though up by 5% was held back by an increased tax charge.

These very encouraging results (and the optimistic narrative) should continue to support broker price targets from Numis etc of 900p or thereabouts.

[wfcreserves] 15/5/2023 14:08

The share price is all over the place on small volumes.