GWA Group Limited

This report is an updated version of the report published on the 19 December 2022 at 3:55 PM (GMT+11) 

Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

GWA Group Limited (ASX: GWA) is a designer, manufacturer, distributor, and marketer of building fixtures and fittings products. The company offers its products for use in commercial and residential premises.

 1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~43.32% of the total shareholding. Perpetual Investment Management Limited and The Vanguard Group, Inc. are holding a maximum stake in the Company at ~10.96% and ~5.55%, respectively.

1.4 Key Metrics: The Company has reported a high fixed asset turnover ratio of around 5.75x in FY22 compared to the industry median of 2.37x. Further, the gross margin improved in FY22, which was around 38.6% in FY22 compared to 38.5% of industry median. Below is captured the trend of the EBITDA margin and current ratio:

Section 2: Business Updates, Financial and Operational Highlights

2.1 Recent Updates:

2.2 Results Highlights of FY22: During FY22, the company witnessed 16.1% YoY growth in its commercial segment order bank and is expected to continue with this momentum in FY23. Further, the normalized EBITDA rose by 7.0% YoY in FY22 to AUD 94.6mn compared to AUD 88.4mn in FY21.

2.3 Operational Highlight and Strategy: The company continued to focus on its four strategic growth pillars and lay down the foundation to support future growth. During 1QFY23, GWA witnessed growth in its revenue which rose by 8.0% pcp driven by 7% growth from Australia, followed by New Zealand up 24%, while the UK was down 3% on a pcp basis.

2.4 Dividend History: The Company declared the fully franked final dividend of AU 8.0 cents per ordinary share, bringing the full-year dividends to AU 15.0 cents per share. The Company aims to follow a pay-out policy of 65% to 85% of NPAT.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

4.2 Fundamental Valuation

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is December 19, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

Kalkine New Zealand Limited is a Financial Advice Provider (“FAP”) and is authorised by a Transitional FAP license issued by Financial Markets Authority (“FMA”) to provide financial advice. Kalkine provides only general financial advice through its research reports following a person becoming a member. The reports contain buy/sell/hold and other recommendations in relation to equity financial products. The recommendations and opinions [on this website] / [in this report] do not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions. If you act on the advice in the research reports, you may have to pay fees, expenses or other amounts (but not to Kalkine).  Further information about the complaints and dispute resolution process, as well as information about Kalkine’s duties are available on Kalkine’s website.  Please read our Financial Advice Provider (FAP) disclosure statement and Complaints Handling Guide, which are available on the website.