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It's worth looking at the H1/H2 earnings splits.
RNWH made 31.3p EPS in the last H1, up 14% year on year. Last year they made 27.4p EPS in H1 and 36.1p EPS in H2.
Let's only assume they better last year's H2 by 10%. This would imply 39.71p H2 EPS, which added to this year's H1 gives just over 70p EPS, which would smash expectations.
Yet another analyst raise their target price per today's news wires:
"Deutsche Bank raises Renew Holdings target to 1,180 (1,150) pence - 'buy'
More re Berenberg's increased 1200p target price:
Https://citywire.com/investment-trust-insider/news/expert-view-currys-greggs-renewi-headlam-and-bioventix/a2442398?page=3
"‘Buy’ high quality engineer Renew, says Berenberg
Renew (RNWH), the AIM-listed engineering services group, can continue the momentum it has built in the past six months given its ‘high-quality proposition’, says Berenberg.
Analyst James Bayliss maintained a ‘buy’ recommendation but lifted his target price from £10 to £12 as the shares gained 2.4%, or 24p, to £10.26, valuing the company at £812m.
The six months to 31 March ‘reflected another record performance’, with group revenue up 17.2% at £552.8m and operating profit also 17% higher at £33.1m, ‘both driven by strong demand and performance across all end-markets and the group’s high-quality, low-risk business model’.
Bayliss said net cash of £42.5m leaves the group ‘well placed for further organic and inorganic investment, while strong momentum in the first half has carried through to the start of the second half’.
Management is continuing to tender for and win new contracts and so Bayliss ‘sees no reason that this momentum cannot continue’ and he upgraded his earnings forecasts by 4% for full-year 2024.
‘We move our price target to £12 to reflect Renew’s continued momentum and its high-quality proposition,’ he said."
It's been posted elsewhere that the two brokers have raised their target prices as follows:
New target prices :
Berenberg 1200p (from 1000p)
Peel Hunt 1150p (from 1050p)
Https://www.investorschronicle.co.uk/news/2024/05/14/the-uk-s-need-for-infrastructure-repair-is-a-boon-for-renew/
"The UK's need for infrastructure repair is a boon for Renew
Acquisitions have helped the company widen its reach ahead of new five-year framework deals
May 14, 2024
The UK’s creaking infrastructure may be a source of complaints among users of the country’s roads, rail and rivers but it is providing a steady stream of work for Renew Holdings (RNWH).
The Leeds-based contracting group reported a 13 per cent increase in operating profit for the six months to 31 March and has continued to convert most of this into cash. It finished the period with net cash of £42.5mn (excluding leases), up from £35.6mn at the end of September and £17mn a year ago.
The company has been something of a cash compounder in recent years and it has funnelled proceeds back into the business by making bolt-on acquisitions that have added either new capabilities or expanded its geographical reach.
Chief executive Paul Scott flagged Rail Electrification – acquired for £5.3mn in 2021 – as a business that, working alongside two existing rail businesses, has placed it in a much stronger position to win work on the industry’s latest five-year framework agreements. New budgets are also being set for the next five-year programmes to be carried out across the road and water networks, with spending on the latter likely to increase by 87 per cent based on current business plans.
Renew’s focus on maintenance work means it’s less likely to be affected if whichever party wins this year’s election decides to take an axe to planned capex schemes. Although its shares look quite pricey compared with contracting peers – they trade at 15 times earnings, having risen by 40 per cent over the past 12 months – its strong track record and resilient end markets suggest they remain good value. Buy."
Yes, good results and comprehensive report other co’s would do well to study.
Time the luxury house building side was disposed of; it’s a very low margin distraction.
Extremely encouraging H1 report today both re H1 and looking forward.
The H1 performance suggests forecasts will be beaten for the year given the acquisitions during the period and the increased order books.
Particularly as the higher margin Engineering Services order book has increased beautifully to £831m from £780m - it's the very low margin Building order book dropping to £67m which has meant the overall order book is only up by £8m overall.
The cash pile has roared ahead to £42.5m and is way ahead of forecasts - with tghe suggestion today that more acquisitions are on the cards.
With the big Rail and Water divisions thriving, and Roads, Telecoms, EV Charging and Nuclear all looking good too, RNWH look set for impressive multi-year growth.
Guitarsolo, re your prior question, the 91p EPS is after tax (EPS is always calculated after tax).
News - Amco Giffen have won places on this £1 billion framework from Network Rail (and if you look at the bottom of the link, there's also additional work for QTS and Amco in other frameworks):
"Lot 1A generalist buildings and civils with an estimated value of £1bn – Amco Giffen, Bam Nuttall, Morgan Sindall and Story Contracting":
Https://www.geplus.co.uk/news/network-rail-appoints-15-suppliers-to-3-5bn-eastern-region-partnership-framework-10-05-2024/
"Network Rail appoints 15 suppliers to £3.5bn Eastern region partnership framework
10 May, 2024"
"Network Rail has appointed 15 suppliers to its £3.5bn Eastern Routes Partnership (ERP) framework, which covers buildings, civils and geotechnical works.
The ERP framework will be in place for control period 7 (CP7), Network Rail’s five-year funding period between 1 April 2024 to 31 March 2029.
The framework includes four lots that cover buildings, civils, structural and geotechnical works; signalling and telecoms; contact systems works; and distribution and plant for routes in the North East.
Network Rail’s Eastern region includes areas from the borders of Scotland to London and encompasses other cities such as Newcastle, Leeds, Sheffield, Derby, Norwich and Cambridge.
The first framework lot covering geotechnical works has been split up into three. It has been filled as follows:
Lot 1A generalist buildings and civils with an estimated value of £1bn – Amco Giffen, Bam Nuttall, Morgan Sindall and Story Contracting"
Thanks Rivaldo,
91p for 2025-26 would be quite a lift from the 60s for the current 2023-24 period. Is the 91p a pre-tax figure? If so, it would be more like mid-70s after tax which would be more in line with a circa 10-15% uplift each year.
However, an earnings-accretive acquisition that can immediately feed say 5-8p to the EPS line would make it possible.
Very glad to see this nudging £10 and am happy to hold. No need to rebalance the portfolio just yet!
Guitarsolo
News this morning that RNWH's Seymour Civil Engineering have won a place on Northumbria Water's framework to deliver its £3.6bn AMP8 capital investment programme:
Https://www.constructionenquirer.com/2024/05/09/33-firms-wins-spots-on-3-6bn-northumbrian-water-framework/
Not you?! :)
Worth flagging up the first trade this morning - a buy at 1,000p (for the first ever time I believe). Even if it is for 10 shares!
From today's news wires - I believe 1150p is the highest price target yet:
"Deutsche Bank starts Renew with 'buy' - price target 1,150 pence"
New all-time highs again.
Peel Hunt have raised their price target to 1050p, but with material upside potential in a 19 page note.
Their upside model incorporating (1) higher organic growth than their conservative forecasts and (2) acquisitions from the cash pile, would deliver 91p EPS to Sept'26. This would certainly support a share price of 1500p and possibly 1700p-1800p imo.
They summarise:
"Momentum and visibility drives TP increase
• Time to revisit – Ahead of the 1H24 results (14 May), we revisit the powerful investment case and update our M&A/blue sky scenarios.
• Upside risk – We retain estimates across the horizon, but see upside risk building, given profitable market share opportunity across key markets.
• Increased target price – Visibility into new regulatory periods, positive drivers and the M&A opportunity lead us to raise our TP from 950p to 1,050p.
We believe that Renew’s strategic focus on developing its leading positions across infrastructure-led markets, through its operationally-led competitive advantages, leaves it well-positioned to sustain attractive, cash compounding growth. The shares remain undervalued, in our view, given the quality of earnings and both the organic and acquisitive opportunities. We retain our Buy rating."
"Investment case.
Growth is underpinned by consistent cash generation, leading to compounding free cash flows. We look for FY24E net cash of £47m, providing management with attractive capital allocation options. We expect the M&A pipeline to be reasonably active with management remaining disciplined (we note the two small transactions already announced this financial year). We believe that under this leading management team, Renew remains well positioned to continue to deliver attractive, long-term shareholder returns. A better appreciation of these opportunities has supported a deserved rerating, but the September 2025E PE of 14.2x and FCF yield of 7% still fails to reflect both the organic and inorganic opportunities and the synergies that both drivers can bring to Renew, in our view. Our target price implies 15.9x FY25E EPS."
Great finish - in particular a large £383,000 buy of 39,528 shares at 968p reported after the close.
I'd get that money up front from Thames Water! ;-)
QTS have won substantial new contracts with Network Rail:
Https://www.qtsgroup.com/qts-wins-north-west-and-central-capital-delivery-works/
"QTS Group is among the winners of Network Rail’s nearly £2bn capital works delivery frameworks for CP7 in the North West and Central region.
The leading railway contractor has won Civil Engineering Lot B (Renewals design and build) and Lot C (Renewals build only) in the North West and, covering the entire North West & Central region, Civil Engineering Lot D (Reactive) with On-call provision."
And J Browne have won further work with Thames Water.
Https://www.linkedin.com/posts/j-browne-construction-ltd_engineering-infrastructure-water-activity-7186633615919710210-YZyY?utm_source=share&utm_medium=member_android
"We are pleased to announce that Browne has been awarded the Surbiton trunk mains renewal works by Thames Water as part of the wider FA1488 PROG2011 Trunk Mains Programme"
A nice £5m highways company acquisition today, which in particular addresses the growth to come from the structures renewal programme within the UK Government's planned investment in the next Road Investment Strategy (RIS3) from 2025 to 2030:
Https://uk.advfn.com/stock-market/london/renew-RNWH/share-news/Renew-Holdings-PLC-Acquisition-of-Route-One/93621615
Https://www.networkrailmediacentre.co.uk/news/multi-million-pound-investment-to-futureproof-world-famous-glenfinnan-viaduct
"Thursday 4 Apr 2024
Multi-million-pound investment for world famous Glenfinnan viaduct
Network Rail will start a £3.4m investment to carry out repairs on the 123-year-old Glenfinnan viaduct this month.
Along with principal contractor AmcoGiffen, engineers will assess the condition and strength of the viaduct, while carrying out work to protect it from water erosion, completing concrete repairs and making improvements beneath the track to keep the stone ballast in place.
etc"
Per this from last week, the framework quoted below is worth nearly £2 billion in total:
Https://www.newcivilengineer.com/latest/network-rail-announces-partners-for-cp7-capital-works-delivery-in-north-west-and-central-region-27-03-2024/
"AmcoGiffen has recently been appointed to six lots on Network Rail's North West and Central CP7 framework. This significant achievement is a result of our capabilities, commitment to excellence, operational efficiency, and testament to the dedication of our people. Our lots include medium and small projects including design and build options and will extend our asset management relationship with Network Rail.
The five-year framework, which starts this month will support our sustainable growth allowing us to continue collaborating with Network Rail to generate employment and development, create local supply chain spend and drive lasting and positive change to the region and the rail industry."
Https://www.linkedin.com/posts/amco-giffen_rail-delivery-designandbuild-activity-7181669482480766977-MsF0?utm_source=share&utm_medium=member_android
Thanks for your recent posts Rivaldo.
The pipeline of work for RNWH should remain solid and it clearly knows how to do this at an acceptable profitable margin. More of the same please!
It feels like we have had a bit of a silent re-rate. Nothing dramatic, no major announcements or broker notes with dreamy predictions. But somewhere between £9-£10 feels about right on a p/e basis.
Trading at 6 months was in line with expectations; read it will slightly under promise and over deliver at full year.
A decent earnings accretive acquisition will help push things along in the right direction.
Guitarsolo
This news from Network Rail looks good for RNWH - Network Rail have announced £2.8 billion of expenditure in the next 5 years to protect railways from climate change and extreme weather.
They particularly note repairing railway cuttings and embankments, improvements in drainage, anti-flooding measures etc which are RNWH's bread and butter.
In addition, there's a £19.3bn spend on replacing old assets with new ones and investing in projects such as digital signalling, with £12.6bn earmarked for maintenance - again all grist to RNWH's mill:
Https://news.sky.com/story/network-rail-to-invest-2-8bn-on-protecting-railways-from-climate-change-and-extreme-weather-13107105
The respected columnist Richard Beddard has just carried out a thorough analysis of RNWH to conclude whether to buy shares for his ongoing Decision Engine portfolio.
He scores RNWH with 7 out of 10, which indicates it's good value, and will be returning to potentially buy RNWH if one of the existing portfolio members is sold or excluded for some reason:
Https://www.ii.co.uk/analysis-commentary/shares-future-analysing-new-company-my-top-40-ii531225
From memory the broker commented that RNWH have always either beaten or met expectations since 2006, and that continues this morning.
Once again RNWH is trading nicely in line and experiencing "strong demand for its services across all key markets", with "excellent" visibility for H2 given the order books and long-term framework contracts.
Last year's H1 update was worded almost exactly the same, and RNWH ended up beating expectations by some margin.
The cash pile was up to almost £36m at the year end, so should have increased further since and provides a healthy backdrop to likely acquisitions soon.
Looking forward to the H1 trading update given the positive outlook and rising order books in the prelims - the last couple of years have seen updates on 3rd April and 1st April, so next Tuesday or Wednesday after the Easter break seems likely.