UBS rate NRW Holdings as deeply undervalued - TP$4

UBS clearly think NRW is well positioned and under valued ... this released last week

First ReadNRW Holdings LimitedStrong balance sheet, deeply undervaluedNWH has released an update on its debt positioning and repayment schedule. NWH'sbalance sheet is robust with corporate debt expected to be ~$45m by FY20E and assetfinancing of ~$188m. This correlates to a ND/EBITDA of 0.6x in FY20E and 0.2x inFY21E (both ex-AASB16 debt). AASB16 debt for FY20E will include ~$40m of propertyleases and ~$60m of equipment leases (can be returned with minimal notice and nocancellation cost). We believe NWH has one of the lower COVID-19 impact scores inour coverage universe (see COVID-19: Key Impacts and Ideas) and stands out with itslow COVID-19 Impact Score vs high price reaction (-60% since Feb highs). NWH notedit has not experienced any material impact and that activity levels remain consistentwith expectations. NWH's mining operations provide strong visibility and represent~67% of FY20E EBITDA (63% of FY21E). It recently announced a $48m Civil contractfor an airport upgrade at Olympic Dam (BHP) and upside catalysts remain near-term forthe Civil business. NWH remains well positioned to be awarded works across Iron Ore(Eliwana/Ironbridge) and Public Infrastructure projects (Bunburry Outer Ring Road,Freeway North extension, Ellenbrook rail). Risks from second derivative COVID-19impacts (labour) are manageable but material risks exist if key commodities come underpressure (Coal, Iron Ore). We believe the risk-return profile is highly favourable withNWH deeply undervalued; FY21E PE of 4.9x and P/FCF of 3.1x. Buy.Figure 1: NWH has provided its debt and repayment profile for FY20-21ESource: NWH, UBSEquitiesAustraliaIndustrial Services12-month rating Buy12m price target A$4.00Price (20 Mar 2020) A$1.37RIC: NWH.AX BBG: NWH AUTrading data and key metrics52-wk range A$3.40-1.10Market cap. A$0.51bn/US$0.29bnShares o/s 376m (ORD)Free float 93%Avg. daily volume ('000) 3,382Avg. daily value (m) A$8.2Common s/h equity (06/20E) A$0.45bnP/BV (06/20E) 1.3xNet debt / EBITDA (06/20E) 1.0xEPS (UBS, diluted) (A$)UBS Cons.06/20E 0.22 0.2306/21E 0.28 0.2806/22E 0.30 0.27