Renew Share Discussion Threads

[rivaldo] 07/11/2023 11:11

The prelims will be issued on November 28th:



They should be good as per the trading statement:

- revenues, operating profit and the cash pile will all be ahead of expectations to varying extents
- and "The Board looks to the year ahead with confidence, with the Group well positioned to continue to benefit from the UK's committed infrastructure spend. Renew's exposure to long term operating budgets continues to provide demand across our core markets"

[rivaldo] 31/10/2023 08:43

Further info on Friday's acquisition of TIS:



Extract:

"The acquisition, which will see TIS operate within Shepley Engineers subsidiary West Cumberland Engineering (WCEL), continues the growth of the Shepley Group and expands its already impressive portfolio of nuclear specialist capabilities.

TIS was founded in September 1995 by Managing Director Tony O’Pray, and has grown to be a leading nuclear fabrication specialist. The acquisition will double the WCEL workshop capacity and increase crane capability, ensuring that West Cumberland Engineering can not only continue to deliver its current workload, but also expand its capacity for new and existing clients, supporting nuclear decommissioning, nuclear new build and SMR’s. The acquisition secures the future of hundreds of highly skilled employees across the region."

[rivaldo] 30/10/2023 08:38

Great news for RNWH's water division from The Times, with spending from 2025-2030 in the sector on wastewater etc tripling from the previous period to £40 billion:



"The 17 water and sewerage companies operating in England and Wales plan to spend £272 billion upgrading sewage plants, outfalls and drinking water facilities over the next 25 years"

"Most of the spending (70 per cent) will be on improvement to wastewater infrastructure, with Moody’s saying that £70 billion would be spent on sewage outfalls alone. Work to improve the resilience of drinking water provision against drought will be concentrated in the southeast of England.

Spending from 2025 to 2030 should total £40 billion, Moody’s said, about triple what was invested in the previous five-year regulatory period."

[rivaldo] 27/10/2023 08:12

Interesting article from earlier this year about McMenon, with whom TIS Cumbria have a nuclear collaboration (both are based in Workington) as part of the North West Energy Coast Alliance:

"Together they have won two machining and fabrication contracts at Sellafield, as part of its Programme and Project Partners Framework".

McMenon "want to be a £1bn enterprise in five years".

They expect to see "much more (growth) in 2023 following the twin successes of winning multiple contracts at Sellafield and a global product line acquisition".

And "One space I'm very keen to diversify into is clean energy. We have made substantial inroads into the nuclear, water and wind sectors and sold products into various projects,” he says.

“However, I do believe there could be much more. Hydrogen is possibly a natural extension, because we have been in the energy sector for so many years".

[rivaldo] 27/10/2023 06:21

Good to see RNWH's nuclear decommissioning and new build division expanding with the £4.7m acquisition of TIS Cumbria.

Per TIS's last accounts to June '22 it seems they were operating at essentially breakeven given the change in retained reserves, with 27 employees.

However, they also own a freehold property valued at £3.2m (before a £0.74m bank loan), so it would seem RNWH have acquired the entire business for not very much at all on a net basis:

[igoe104] 12/10/2023 09:48

Local firms join Sellafield's Programme and Project Partners

Four north-west companies have become the first smaller suppliers to join a long-term framework to help deliver major projects at Sellafield.

[rivaldo] 11/10/2023 08:10

This from VP PLC's update today bodes well for RNWH:

"Within the Group's UK businesses, infrastructure, including water, transmission and rail, continues to perform well, with longer-term regulatory programmes proving supportive"

And news of an ambitious new partnership:



"hyperTunnel and AmcoGiffen sign UK exclusive distributor agreement
October 10, 2023

hyperTunnel, a technology company innovating underground construction methods, has signed an exclusive distributor agreement (EDA) with AmcoGiffen for the application of its technologies and systems in the UK rail sector.

Under the EDA, AmcoGiffen will have exclusive rights to use hyperTunnel technology – including digital twins, robotics, 3D printing and digital underground surveying, supported by AI and VR – for all enhancements, repair, rehabilitation and monitoring of underground spaces, slopes and track bed infrastructure, including stabilisation and water management....

....Dave Thomas, Operations Director at AmcoGiffen added: “We are convinced that the future of maintaining underground structures lies in robotics and automation. AmcoGiffen is equipped and ready to partner with hyperTunnel to pioneer its approaches in the UK rail sector while being fully aware of the challenges that may lie ahead for an early adopter of such exciting technology. This exclusive contract represents a significant business opportunity for AmcoGiffen and reflects our long-term ambition to lead innovation in the UK rail sector.”

[rivaldo] 05/10/2023 07:59

In the current market simply oscillating around the £7 area is probably as good as it gets compared to most stocks at present :o))

Meanwhile Investors Champion are very happy with RNWH's performance:



"Renew: reassuring as always

Renew (AIM: RNWH), the engineering services group supporting the maintenance and renewal of critical UK infrastructure, announced that revenue and operating profit for the year is set to be marginally ahead of market consensus, which was for revenue of £927.9m and adjusted operating profit of £62.3m.

Net cash at 30 September 2023 is also anticipated to be ahead of market expectations, which were for net cash of £31.5m.

Renew remains well positioned to continue to benefit from the UK's committed infrastructure spend with exposure to long term operating budgets. Renew shares have proved to be commendably resilient in the small cap sell-off - long may it continue!"

[wfcreserves] 04/10/2023 14:08

It's just oscillating around the £7 mark as it has done most of the year. The market doesn't seem to be impressed by marginal increases?

Perhaps cash in hand from dividends is thought better than future aspirational capital gains in a period of uncertainty. And there are plenty of greater dividend yields available.

I am holding for the long term value but it does look like an increasingly long term wait.

[wad collector] 04/10/2023 10:25

Yesterday's drop surprised me enough to pick up some more at 701p. Already have too many but I suspect these will give me a quick 5% . And if not, then a slow 10%....

[rivaldo] 03/10/2023 07:14

Agreed rimau. I've already addressed Harrogate about this before, so will repeat my prior post as they render his point about EPS forecasts completely redundant.

Forget the conservative broker forecasts going forward - they've always been irrelevant in the past and they will likely continue to be so.

For newbies, I repeat....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.

Since then EPS has grown from 40.5p EPS to Sept'19 to 59.3p EPS to Sept'22 - almost 50% in 3 years, always beating broker forecasts. And that's with Covid.

- so it's best to ignore forward 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.

And to update regarding this year to Sept'23, we now know that RNWH have yet again beaten forecasts.

In Oct'22 Numis were forecasting 55.4p EPS for the year to Sept'23. It's now likely that RNWH will have achieved between 63p-65p EPS. Another significant outperformance.

The various 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.

[rimau1] 03/10/2023 06:50

Harrogate - as i mentioned yesterday i appreciate your contrarian views as it sense checks my own (and i read your blog sometimes) but you are just repeating yourself here. We have a very subjective stalemate where the bulls expect Renew to beat broker expectations and we value RNWH's defensive inflation protected earnings higher than you do and attach a premium to them. Healthy debate of course! Long term holders also have a decent t dividend yield no? Lack of PI engagement is also a bit fluffy is it really a reason not to buy? Pure guesswork here so forgive me but did they ignore your request for a mgt call perhaps and you are a bit miffed?

[harrogate] 03/10/2023 06:26

That has been the case for a good while so what is going to change that? The company barely announces any news, they don't engage positively with PIs, the broker numbers are showing barely any growth in EPS over the next 2 years and with interest rates where they are the yield is not that attractive. I have made very good money like many on here with an average but price if £1 over my 16 years of ownership. But that is not a good reason to buy at £7 is it?

[rivaldo] 03/10/2023 05:50

"Anomalously cheap".....



"Shore Capital: Renew is ‘anomalously cheap’

Engineering group Renew (RNWH) is much lower risk than the market thinks and also has the ability to benefit from government infrastructure spending, says Shore Capital.

Analyst Tom Fraine retained his ‘buy recommendation’ and ‘fair value’ target price of 950p on the Citywire Elite Company, which climbed 2.4%, or 17p, to 730p yesterday.

‘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,’ he said.

‘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.’

Fraine said Renew has ‘a lower risk profile than the market perceives’ as its peers service much larger contracts.

He said the valuation of the company was ‘anomalously cheap’ given its return on invested capital, earnings, and cash position."

[spiceboy] 02/10/2023 16:20

Also my biggest holding...by quite some margin! Bought my first lot at 70p and some more at 90p and have added a few times since. Definitely a stock that rewards patience and a long-term view...

[wad collector] 02/10/2023 14:39

My biggest holding , and I remember now why I bought so many. It will creep up in time...

[thorpematt] 02/10/2023 10:09

Dividend payout ratio is rather cautious here....although caution in this market is somewhat better than reckless debt accrual.

On balance I prefer being a holder of stocks that Mr Market under-apreciates, yet are in truth, solid with positive balance sheets and positive outlooks.

[harrogate] 02/10/2023 09:34

I agree if they can use the cash to buy 8p+ of earnings then we are off again.

[rimau1] 02/10/2023 09:07

Thanks for your posts Harrogate good to get the bear case. I had 10x on a cash adjusted basis. I am in transit but i assumed without an acquisition they could have £70-£75m net cash by year-end FY24. I think that is worth 8p of earnings on top but do call me out if my maths is wrong. To be honest if its 11x or 12x i am still a buyer in this market. Harrogate is missing the premium for reliability of earnings but its subjective so fair enough.

[rivaldo] 02/10/2023 08:05

All RNWH needs to achieve the 900p-950p valuation range which all the covering brokers agree on is a little more institutional buying.

What will bring that about is a combination of:

- growing recognition that RNWH has either met or beaten expectations every year since 2006
- further recognition of RNWH's long-term expanding and diversifying markets which all need ever-increasing amounts of maintenance and renewal expenditure (nuclear, water, 5G, highways, rail etc)
- likely earnings-enhancing acquisitions from the growing £31m+ cash pile
- plus there's been whispers of predatory interest in the past, and I suspect this will continue given the huge and secure forward order books and a historic P/E of barely 11 which is looking just too low given the prospects

[harrogate] 02/10/2023 07:42

Numbs note out this morning. Upgrade FY23 by 2% and leave FY24 unchanged and state inexpensive on a FY24 PE of 12. What you don't explain Riv is why they should rerate in this market to your 14x. They need a deal to increase EPS or a significant hike in the dividend to get us moving north from here and the mooted changes in IHT by both parties continues to weigh on all AIM shares

[rivaldo] 02/10/2023 07:30

I'm delighted to see RNWH beating expectations at all given the current inflationary environment and profit warnings everywhere else in the market from even the highest quality companies (just look at XPP this morning).

Numis raised their revenues and cash forecasts at the interims, and today's figures are actually ahead of those upgraded numbers.

Shore Capital saw "scope" for further upgrades, and today's RNS indicates that the results will be higher than the consensus numbers quoted, which are in turn ahead of Shore's forecasts for revenues, profit and net cash.

I suspect these brokers will be raising their rather conservative forecasts for the current year - even 65p EPS would put RNWH on a P/E of barely 11.

The brokers have valuations of 900p-950p - around the 925p midpoint and a P/E of around 14 would seem reasonable at present.

And this could be increased substantially with another acquisition.

[harrogate] 02/10/2023 06:56

Well I am disappointed - the brokers have been flagging that they thought there would be a high single digit beat on earnings and I don't think they have done that. Given the acquisition and the inflation proof contracts I suspect volume of work has been below expectations.
With the fairly low dividend I see no reason these should move at the moment in these markets.
Broker forecasts for Fy24 are for around 61p ( with the increased tax rate impacting ) so not sure where you get your 10 x. They are close to 12 x and that is the 5 year average for us
I sold a chunk at £7.50 in the middle of the year but will keep the rest in the hope we have a nice deal as you never get any nasty surprises.
Have been a great investment for me

[rimau1] 02/10/2023 06:31

Excellent performance and we remain under the radar and undervalued. Forward rating of 10x fails to reflect the quality of earnings. I am sure we continue to assess bolt-on's to turbo charge our growth but i am reassured regarding our continued selectivity and refusing to overpay.