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Ricardofin .... today's RNS says it has been delayed and although it came out after trading you wonder whether the delay has caused the dip. The good news is that the RNS restated the trading update that results will be good so I'm not expecting anything bad ( famous last words )
Is anyone else concerned about today's share price fall immediately before the results due tomorrow?
I'm out for now, don't fancy holding this into results. Hope your price targets are met and you all make a tidy profit, on my watchlist with a view to re-enter at some stage.
QTS are busy helping sort out the chaos in Scotland after Storm Arwen:
Https://www.linkedin.com/posts/andrew-steel-13757830_all-over-the-rail-industry-in-scotland-our-activity-6870636185555914752-7Tss/
"Andrew Steel • 3rd+ Operations Director (Civils & Geo) at QTS Group
All over the rail industry in Scotland, our teams have been out over the weekend (and many still are!) keeping the railway going and helping opening it back up after the storms. To all the Orange army (QTS included) out there, many thanks from me personally. I appreciate how lucky I am to be a manager and not out in that weather at all hours of the day any more."
Good news from VP PLC's results this morning:
"Volumes in AMP7 and CP6 expected to pick up in H2 and will provide significant upside potential for 2022"
"Engineering groundworks and more specifically the AMP7 (Water) and CP6 (Rail) long term infrastructure programmes are still some way off peak activity. As these sectors ramp up into 2022 and beyond, they will deliver further significant upside for the Group."
Great to see Octopus go above 19% - they've added almost another 800,000 shares since their last holdings RNS:
Https://www.investegate.co.uk/renew-holdings-plc--rnwh-/rns/holding-s--in-company/202111291712019403T/
Nice mention from Shore Capital this morning in a comment on HILS:
Https://citywire.co.uk/funds-insider/news/expert-view-diageo-lloyds-mitchells/a1588193
"Hill & Smith (HILS) continues to perform strongly, but there are better value options to access the infrastructure boom, says Shore Capital....
....We see Renew Holdings (RNWH) as a more attractive opportunity for investors seeking to capitalise on an expected increase in government spending on infrastructure."
Excellent summary by the way Guitarsolo.
Choo Choo,
Where are you getting your data? What do you believe the current net debt to be?
I only ask because in my experience we don't get too many updates from RNWH (but when we do they're usually a pleasant read). So any published debt figures are often quite out of date. For example, the two most recent that I am aware of state:
June 2021 accounts: "As at 31 March 2021, the Group had pre-IFRS16 net debt of £16.9m (31 March 2020: £16.1m) as a consequence of the £29.5m acquisition of Browne"
June 2021 trading update (acquisition of REL): "Renew (AIM: RNWH), the leading Engineering Services Group supporting UK infrastructure, announces that its wholly owned subsidiary, QTS Group Limited ("QTS"), has acquired the entire issued share capital of Rail Electrification Limited ("REL"), ("the Acquisition") for a total cash consideration of up to £5.3m."
So the Browne purchase at nearly £30m didn't substantially increase net debt between March 2020 and March 2021 - because they were paying down debt with the cash generated. If we add the £5.3m to the £16.9m and assume there hasn't been any other debt taken on then we would have £22.2m. My guess is that come the publication of the March 2022 position we may be down to nearly zero debt again unless there are more acquisitions. It's one of the the traits I particularly like about RNWH is that they pay off their debt quickly to allow a strong balance sheet to easily fund further acquisitions when the opportunity arises.
Guitarsolo
Can anyone shed some light on why Renew debt has nearly doubled in 2021? I know 2 acquisitions but assuming they had a loan facility to buy these companies.. any info would be appreciated. :-)
Nice finish into the close last two days here, seems to be kept low until late afternoon, MM's trying to get shares perhaps? Higher high needed on the next up leg so above 825p would be bullish, close at that level would be even better as that'd break the downward sloping resistance line which has been in affect since September. Opinions on holding to results day? I may bail before then, just wondered what others are thinking?
News from 4 days ago (Nov 19th) re Clarke Telecom's EV charging point services.....
Https://twitter.com/ClarkeEVUK/status/1461670410857160709
"Clarke EV
@ClarkeEVUK
We have been awarded a place on ESPO!
We have joined the Vehicle Charging Infrastructure 2 (VCI 2) framework for the purchase of EV charging points and consultancy services.
Our values at Clarke EV are aligned with ESPO, helping us to provide the best possible service."
This is a £1 billion framework:
Https://bidstats.uk/tenders/2021/W21/751567163
Ricardofin, sorry, the Peel Hunt note isn't available in full for public consumption :o((
Rivaldo many thanks for this. Is the full report available anywhere?
Peel Hunt's 20 page note from early November (with a 900p target) is actually very well written and a good read - finally there's someone who "gets it" as regards RNWH's attributes and both defensive and growth characteristics.
Interestingly they consider their forecasts are conservative. And they have a 957p valuation on a conservative DCF basis which does not reflect any potential from M&A growth.
They conclude as follows:
"Valuation
The shares trade on 14.6x/14.5x/13.5x FY22/23/24E EPS. We would also highlight the strong free cash flow yield: 6.2% in FY23E, rising to 6.7% in FY24E.
It is important to recognise that Renew is not directly comparable with other UK-listed contractors (given its exposure to longer-term frameworks, exposure to more resilient and enduring services, and the directly employed workforce). The
recent outperformance has in part been driven by this growing appreciation of the differentiation and operational resilience.
However, the most recent EPS upgrade seems to have been somewhat overlooked, in our view.
Historic multiples
In terms of PE multiples, Renew has traded on a 12-month forward PE of between 8.5x (December 2018) and 16x (September 2021). The market has started to recognise Renew’s quality of compounding earnings and long-term growth opportunities better, with the cash-financed acquisition of Browne (March 2021) an important catalyst.
Even more recently, as we illustrated in Chart 13, the continued growth in forward EPS has been met with some share price weakness.
Compounding growth peers
Although Renew operates in similar market verticals to other listed infrastructure companies, the different business model, financial characteristics and M&A potential materially distort comparisons. As noted earlier, we believe this
differentiator has only been partially recognised by the market. However, we are able to make some more meaningful comparisons to other growth compounding companies, in particular those that can augment organic growth (including structural growth) with selective M&A, such as Renew.
Discounted cash flow
We do not use our DCF as a primary valuation tool, but rather as a sense check.
Our standalone conservative base-case DCF values Renew at 957p. This does not reflect any potential future bolt-on M&A growth (including structural growth) with selective M&A, such as Renew.
Conclusion
Our share price target of 900p is driven primarily by the organic growth potential and compounding free cash flow model. We see our estimates as conservatively set also given our assessment of the market dynamics. Future M&A is likely to drive EPS upgrades as well as open up new opportunities. Renew remains a conviction Buy in our opinion."
On reflection it's probably even better for RNWH than I posted before, as the workloads on these frameworks tend to build up steadily at the start and accelerate as the framework matures.
Re the news I posted below, obviously we don't have info on the work allocations between the three remaining companies in the framework.
But assuming £4 billion over 5 years, at £800m per annum an even spread would now see RNWH pick up an extra £70m per annum of work from now until 2024. Not bad going at all.
Extremely good news for RNWH's Amco Giffen last week.
On Network Rail's £4 billion construction works framework for Wales and the West of England, one of the four contractors on the framework has collapsed into administration - and their workload will be allocated to the three remaining contractors including Amco Giffen (rather than a replacement contractor being appointed):
Https://www.newcivilengineer.com/latest/collapsed-contractor-will-not-be-replaced-on-network-rails-4bn-construction-framework-12-11-2021/
Extract:
"Network Rail will not seek a replacement contractor for its £4bn construction works framework for Wales and the West of England, despite one of its suppliers entering into administration earlier this week".
"The framework covers construction works for bridges, tunnels, shafts and subways in the two regions. It comes under Network Rail's five year control period 6 (CP6) delivery plan which runs from 2019-2024.
Western region works in CP6 include integration of Crossrail’s Elizabeth Line into the network and renovation and refurbishment of the roof of Bristol Temple Meads Station."
The news yesterday that the Government is scrapping the HS2 rail extension should imo work in RNWH's favour.
Instead, the £96bn of funding for routes in the North and Midlands will comprise upgrades including electrification rather than new build. This would appear to be in RNWH's sweet spot, particularly as regards its recent acquisition in the latter area:
Https://www.bbc.co.uk/news/business-59292120
There had been a horrible looking head and shoulders on the chart recently, but that hasn't come to pass. The longer term uptrend seems to be continuing.with periods of some profit taking along the way, that is always going to happen considering the significant SP rise of the last 18 months. Ultimately Renew is an excellently managed company and it looks like the good times are set to continue with increased government infrastructure spending.
Excellent finish to the week, up 3.5% today.
A £1.34m buy at 814p reported after the close last night bodes rather well (and no, it wasn't me!). There were a few other late reported buys around 814p too....today might be interesting.
More contract wins for Carnell announced today - these are in addition to the £147m announced only six weeks ago:
Https://www.carnellgroup.co.uk/carnell-secure-tst-contracts/
"Carnell Secure TST Contracts
Carnell are thrilled to announce that we have been awarded two Technical Survey and Testing (TST) – Drainage contracts for National Highways.
As the leading provider of DDMS drainage surveys to National Highways for the last 16 years, we have won the maximum number of lots allowed through the procurement process, which are:
North West – Areas 10 and 13.
Yorkshire North East – Areas 12 and 14.
The framework agreements are worth £14m across their seven-year duration and cover the delivery of ‘CS 551 Drainage Surveys’ on the strategic road network.
Following the publication of the contract notices, Andrew Sharp, Managing Director said: “This is another fantastic achievement that brings the total value of our forward programme to £161m from the TST and SDF framework successes alone. I’d like to extend my appreciation to our Water Management team, from those involved in our site operations, to our Technical Services department. All have played their part in delivering innovative and reliable solutions, which resulted in the award of these long-term TST contracts. We look forward to working collaboratively with National Highways and their partners to provide the most accurate and efficient surveys to support the management of their drainage asset.”
According to a reliable poster elewhere just now:
"Peel Hunt has 21 page note out today with 900p target with upside risks to their forecasts."
Good news for RNWH's Clarke Telecom subsidiary- in particular the plans for a wider upgrade by Telefonica:
Https://www.shieldsgazette.com/news/politics/council/plans-approved-for-5g-masts-on-south-shields-social-club-despite-health-concerns-raised-by-neighbours-3432353
"Plans approved for 5G masts on South Shields social club, despite health concerns raised by neighbours"
"Speaking at the meeting, Vicky Parsons, from planning agent Clarke Telecom, said the move is part of a wider push from Telefonica UK Ltd, to upgrade a number of their sites.
This will also provide improved 2G, 3G and 4G coverage for the area, including for Vodafone customers."
Much of RNWH's business comes from the Humber region, the North East, Scotland etc.
In addition to the major brownfield development announced as posted below, Wednesday's Budget also had details of major spending allocations from the Government's huge Levelling Up fund.
This represents £billions of funds for projects detailed here, many of which will be suitable and surely prioritised for local RNWH businesses such as Seymour Civil, Shepley, QTS etc:
Https://www.constructionenquirer.com/2021/10/27/regional-levelling-up-projects-full-list/
There should be lots of work for RNWH's VHE from today's Budget - "£1.8bn being spent on bringing 1,500 hectares of brownfield land into use and £11.5bn funding up to 180,000 new “greener” homes on brownfield land":
Https://www.mortgagefinancegazette.com/market-news/housing/budget-confirms-brownfield-development-cladding-removal-fund-27-10-2021/
Https://www.vhe.co.uk/news/bringing-brownfield-back-to-life-29-06-2015
"VHE has become widely recognised as one of the leading experts in dealing with brownfield contamination throughout the United Kingdom, using a wide number of different and effective in-situ / ex-situ remediation techniques to solve different contamination issues"