Biggest news over the past week wasn't press coverage of BGC (NRW will NEVER buy assets in a contested auction, just investment bankers feeding drivel to the press). The biggest news was the AGM materials released to the ASX yesterday.
NRW has dropped a huge positive hint. re. earnings. Check out the future earnings hurdles for the two tranches of JP's performance rights to vest out to 2022 and 2023:
2022 EBITDA expected to be $209-$222m, 2023 EBITDA of $230-$248m.
Consensus earnings amongst brokers (e.g. UBS) is a peak of $181m EBITDA in 2021/22, before rolling over.
This is a big disconnect...analysts are again asleep at the wheel...they are underestimating the strength and duration of the construction/replacement cycle. Upside to analysts estimates is $30m-$70m EBITDA compared to NRW's own forecasts. Any analyst worth their salt should be feeding these higher numbers into their spreadsheet and boosting their price targets (imo, $4 is fair value).
Sure, an earnings uplift might come from acquisitions (most likely in the asset maintenance space), but this would be welcome news. We know that NRW have an excellent track record in M&A and want to emulate Monadelphous in terms of asset mix. Win/win!
NWH Price at posting:
$2.47 Sentiment: Buy Disclosure: Held
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