Can we rely on Reliance?
Following share price weakness ahead of its full-year result, we added Reliance Worldwide Corporation to our portfolio. Reliance is a global plumbing supplies business specialising in reliable and premium branded water flow and control products including the market-leading 'SharkBite' push-to-connect fittings.
We consider Reliance to be a high-quality global growth business with a structural growth opportunity given the push-to-connect category, from which it derives much of its revenue, is a relatively immature and high-growth category in the overall plumbing fittings market.
The company subsequently released a strong set of FY17 results, with revenue, EBITDA and NPAT all exceeding prospectus and consensus forecasts.
After a strong re-rating, the Chairman and major shareholder, Jonathan Munz, reduced his shareholding from 30% to 10% in an underwritten sell-down process that took some of the gloss off the stock’s re-rating.
Nevertheless, Reliance continues to trade +10% on our entry price and we remain confident the ongoing roll-out of SharkBite to Lowe’s in the US will help underpin strong near-term earnings growth and that the well-established and diversified business will be a long-term investment for our portfolio.
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Robert was appointed Head of Investments in 2009 and has been a Portfolio Manager since joining OC Funds Management in 2001. Robert is also an Executive Director of parent company, Copia Investment Partners.