Reliance Worldwide (ASX: RWC) is up almost 4% today after releasing an upbeat investor presentation. Management discussed the business’s plans to grow profitably in their core markets of repair and maintenance, whilst also expanding into adjacent market segments like fluid technology. They also talked about their international expansion plan, which covers continental Europe, South America and Asia. Management did however highlight that the expansion would mainly occur through distributors, indicating that new markets would still be non-core for some time. The presentation also included positive rhetoric around their StreamLabs product, which does not have to be installed by a plumber and can provide precise alerts detecting leakage in any part of a person’s home. This innovation helps take advantage of smart home technology in the plumbing space.
Reliance has rallied today, but had a tough year in which a number of prominent institutional investors got burnt (Credit: RWC)
Reliance Worldwide makes and sells plumbing parts that are manufactured and distributed across the market. What makes their product special though is that they produce parts according to a patented system called “push to connect”. This means that a plumber will just have to cut both sides of a damaged pipe and insert the replacement component, a quick and easy process. Usually a plumber will have to heat the metal pipe up with a tool that blasts the metal with fire, causing it to expand, and then insert a smaller pipe in. This traditional process is time consuming and, given how much plumbers typically charge, quite expensive for customers.
The company has de-rated in recent times (25x to 18x earnings) as a result of concerns around the impact that Brexit and slower US economy. The two recent Fed rate cuts highlight the slowdown in core markets for Reliance, but the company’s earnings stream has held up strongly, indicating that their exposure to cyclical factors like dwelling construction is less pronounced than the market expected.
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