Ann: Half Yearly Report and Accounts, page-11

I was interested to see the following remarks on Reece's half yearly report. Of course, Reece produces plumbing supplies -- in particular, to residential construction:



"...a softer second half demand conditions in Australia and NZ"
"...the residential pipeline is exhausted. Weak approvals data..."
"...trends reversing in FY25"

None of these comments about the Australian housing market fill me with much confidence. At some point, the fact our national immigration programme is out of control, and the lack of housing / housing construction will have to come back to bite us as a nation. At that time, the pundits, and all and sundry, will be saying "of course!! Of course there was always going to be a housing construction boom". By the time though, when it's already happening and the hysterical Channel Seven news anchors are talking about it, it will be in the share price. The time to own a stock like Big River is *before* the mainstream media is full of prognostications and hysteria. While it is cheap. It's the best time to buy any cyclical stock. We need to remember to not take cues about a company's future value by today's daily price action on the market.

Unlike Reece, we do not suffer from a stretched valuation. I note also that Ord Minnett considered our result to be largely in-line with expectations:



I would be interested in reading Ord Minnett's updated broker report if anyone has it and can share it here.

I do know there has been M&A activity in the building materials sector. It is not unreasonable to think that as a small cap with a national footprint and strong balance sheet, we'd be a target. A potential takeover is no single reason to hold a stock but it certainly adds to the case for owning it.

Share prices follow earnings per share in the long term, just as certain as an apple will fall from a tree due to gravity. It's the reason the big banks' share prices have gone largely nowhere in years. Big River needs the prospect of a strong 12 months ahead, and then an *actual* reported strong 12 months. I thought about buying Beacon Lighting a few months ago and didn't. Their earnings have done nothing in the past few years (ala ANZ, Westpac, etc.) and are exposed to new home builds .Their earnings fell slightly this period. The share price is up 35-40%. Ours is down. Their share price gain is purely PE expansion. I can't understand it at all. Reece is up about 30% in three months. Ditto James Hardie, Boral, etc. It's frustrating, for sure.

I'd argue that not a lot of optimism is baked into our share price at present. Yet our balance sheet is very healthy, dividends are expected, and management gets my tick of approval. I wouldn't be too worried about ETFs and passive money though, mate. Small caps have had a torrid couple of years. It's possible that as interest rates fall (later in the year) more money will flow into the smaller cap stocks which have been left behind as the larger caps have rallied.