Shares to Buy NRW Holdings (NWH)
NRW Holdings (NWH) provides a diverse range of specialist services to Australia’s mining and resources organisations. NWH’s business units are split into four divisions: Civil, Mining, Action Mining Services and Action Drill & Blast.
The group’s head office is located in Perth, with branch offices spanning Australia and West Africa.
NWH’s clients are sector bigwigs, including BHP Billiton, Rio Tinto and Fortescue Metals. The group’s lucrative contracts over FY10 offset resource sector shakiness, and FY11 is looking to be a stronger year on increased resource sector activity.
This bullish resource sector outlook has resulted in NWH becoming one of the hot stocks in recent months.
Owing to its ties to the resources sector, NWH suffered over the course of the global economic downturn, in line with its peers.
After gaining ground across 2009, the group faced some volatility earlier this year, brought about in the main by uncertainty over the Resources Super Profit Tax (RSPT).
This caused a delay to contract awards for NWH, which nonetheless reported a great annual result owing to the group’s inherent strength.
Another year of growth
In FY10, NWH managed yet another year of growth, managing to maintain its double digit underlying earnings margin despite a difficult economic environment.
Despite lingering market challenges, NWH managed to increase revenue in FY10 by 20% on FY09 to $609.7 million.
Underlying earnings of $62.3 million represented a 6% increase, whilst Net Profit after Tax (NPAT) was up 2% to $37.9 million.
NWH declared a dividend of 6 cents per share, up 200% on FY09.
Net debt/equity of 23% was down from 28% in FY09.
NWH’s balance sheet is thus in good shape to underpin expansion opportunities and growth. Funding has also been implemented, giving a total facility of some $270 million.
Resources return to strength
NWH may not be a famous industry name, but its clients are amongst the resource sector’s biggest names.
In its civil division, NWH’s RGP5 South project, primarily a rail contract, is in alliance with BHP Billiton Iron Ore.
NWH is also carrying out port infrastructure and mine site earthworks for CITIC Pacific Mining at Cape Preston, working on the Christmas Creek Rail project for Fortescue metals, and assisting Rio Tinto with Hope Downs, the Western Turner Syncline project, Simandou and Tom Price Mining.
NWH’s long-term alliance with these big names ensures the group is never short of work, even during a resource sector downturn.
With the resource sector returning to boom times on a global economic recovery, NWH stands to pick up more lucrative projects with industry leaders in FY11, and will potentially be one of the stocks to watch in coming months.
NWH stands to benefit from a strong FY11, with the value of the secured revenue for FY11 currently at $620 million (89% of the minimum FY11 target).
The group has a balance of order book value of $221 million for FY12 and $180 million post-FY12, and is now focused on benefitting from a resource sector recovery with a wide range of civil, mining and oil and gas clients demanding its services.