REH rose +6.8% on Wednesday as easing concerns around the war’s impact on construction activity drove a rebound in the plumbing supplier. The stock like many in the space has struggled over the last few years but after delivering a strong 1H in February with FY26 Ebit guidance coming in ~5% above consensus the stock pushed towards fresh 9-month highs Here. Overnight US homebuilders followed suit pushing up ~5%, after plunging more than 20% through March. The sector’s not out of the woods yet with the impact of higher fuel cost likely to push materials higher in the short term, but if the Strait remains open this should diminish over time.
This is a company fitting todays profile perfectly, executing well and having been sold off through March, plus for good measure its trading around its cheapest valuation in 5-years. As we’ve noted previously, we see early signs of improvement emerging for REH, although a hawkish RBA remains a headwind given ~1/3 of earnings are tied to the domestic market. With a beta of ~1.4x, if our market outlook proves accurate, REH should outperform through 2026.
- We like the risk/reward towards REH, initially targeting the $17.50 area, or ~20% higher.
