Date of Data Capture: 7/11/2019
Name: FLEETWOOD CORPORATION LTD (FWD)
Classification: Homebuilding & Construction
Current Price: $2.25
Market Capitalisation: $213 M
Forecast EBITDA Growth: 20.06%
Yield Estimate: 2.28%
Consensus Price Target: $2.54
# Covering Analysts: 3
Discount at Current Price: 12.89%
Price Target Trend (3-Month): Flat -1.55%
Signal Timeframe: Quarterly-Monthly-Weekly
Trend Bias: Up-Down / Long-Medium
Focus: Capital Growth
Set up Notes:
• Emerging from a two-year consolidation, this modular accommodation specialist has been showing fresh price strength on good overall performance and is backed by strong forecasts.
• Softer sales took income lower in 2018, and while currently negative this is set to turn back positive in 2020 and remain strong out to 2022, supported by broad gains across sales, margins and earnings, with yield set to improve also.
• Pricing shows a downtrend reflecting the softer performance since 2017, and importantly we see the linear downtrend breaking 2 months ago and then rallying through overhead resistance - we see momentum building across all timeframes.
Support ($): 2.00, 1.75 & 1.50.
Resistance ($): 2.50, 3.00 & 4.00.
Growth Focus: FLEETWOOD CORPORATION LIMITED (FWD)
The primary focus is capital gain - stocks are selected from the ASX Top 500 All Ordinaries Index.
There is often good value in stocks coming out of consolidation, when there is already some blood on the floor and the stock is making a recovery out of a support base. We think we may have that here with Fleetwood Corporation, as the specialist homebuilder breaks out of a long-running downtrend, finds fresh strength on good forecasting and looks ready to move higher all over again.
This is a well-established company, having been listed on the ASX since 1992, and has grown to become a strong player in the niche Modular Accommodation & Construction sector. Also providing more general accommodation solutions and village management services, the company-owned brands include Fleetwood Australia, Modular Building Systems, Searipple, Osprey Village, Camec, NRV and NRC.
Roughly two-thirds of all income stems from its Modular Accommodation business, followed by Parts and Services, and then Village Operations comes in last, but is also seeing the strongest growth.
Fleetwood has been active on the acquisition front, with MBS and NRV being added to the portfolio in the last 12 months, and funding was secured through a mix of a capital raise and asset sales, with further divestment of non-core assets yet to come. The purchase of MBS reflects a key strategy point, as the company looks to secure its leadership status in the modular accommodation space, seen to be a sector bound for expansion and future growth by servicing an improving mining sector.
Performance has been improving steadily since 2017, with good overall growth despite fluctuating revenue and margins, with reporting showing strong earnings growth in 2019. This growth path is seen extending out to 2022, with a very strong pickup in earnings forecast to occur in the two years ahead, and these strong expectations are matched by a strong majority positive consensus analyst sentiment and significant discount to target price projections.
Recent pricing history shows the company making strong gains out of the GFC slump, rallying more than 300% by 2012 before entering a precipitous four-year downtrend, ending with a seemingly minor 200% rally by early-2018. We are following freshly positive long-term signalling here as the stock emerges from a good support base, with linear resistance breaking in September, after pricing fell back into downtrend again over the last two years. Volatility is expected to continue as the stock secures new support, but with an excellent long-term setup and strong forecasting we think it could be a landslide opportunity.