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Reliance Worldwide (RWC) $3.91

Since the start of the year, RWC has fallen over 30% moving from a traditional ~10% premium to the ASX200 to a painful and out-of-character ~20% discount. The niche provider of plumbing fittings that are primarily used in ‘behind the wall’ systems has a flagship product called the Sharkbite which is a range of brass push-to-connect fittings. Towards the end of 2021 they made another acquisition to boost their footprint in the US buying an appliance connector business called EZ-FLO for $434m which specialises in connections for dishwashers, heaters & washing machines. They derive around ~50% of their earnings in the US and it’s been a tough period for them which is being reflected in the share price.

Higher input costs are the main headwind short term however like JHX and REH rising rates are also a concern for future demand. Issues in the supply chain have seen customers buy up more stock than normal which means that they’ll have a tough time growing on FY21 this year, however, MM would argue there is not a lot of growth priced in on just ~14.15x FY23 earnings while a projected dividend yield of 3.62% is also a nice bonus.

While there is value in RWC below $4, the momentum is clearly on the downside, and we ’d be more of an accumulator rather than outright buyer, leaving room if they miss FY23 earnings expectations. A stock we are considering for the Emerging Companies Portfolio.

RWC
MM is neutral/positive RWC below $4
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Reliance Worldwide (RWC)
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