Business that got punished at end of mining services boom because its profit relied too heavily on the stream of income from the Searipple accommocation village that was full in the construction phase of mining boom. Once construction fell away so did the occupancy.
Other stream of business was building caravans.
Board is now completely new. Loss making businesses have now been sold. There are now three streams to business. Modular accommodation, accommodation villages and RV spare parts.
Modular accommodation is best of these by far.
- NSW government has announced $3.8b in spend to increase capacity across overcrowded prisons. Current procurement contract shared amongst 2 suppliers
- NSW government has also announced $6b spend on 170 new schools, 2000 classrooms to accommodate 44,000 additional students
- VIC have 45 schools to build in this electoral term
FWD have already won major business for VIC schools.
Don't think dinky little sheds for modular buildings. They have built two story hotel in Wagga Wagga. Prison cells are more robust than on-site accom at a caravan park.
This year they purchased another modular accom business with location in Western Sydney. FWD had no presence in Sydney and there will be significant spend with schools and perhaps new airport.
You can imagine that modular buildings are very popular for Govt because they are delivered in 6-9 months. This allows delivery within electoral cycle.
In addition to organic growth, new businesses are accretive. Last financial year would've had 50% higher EBIT had those businesses been part of FWD. Of course we shouldn't expect the value within FWD to be that high. Accounts would've been maximised for profit on sale and there can be reduced efficiency in integration.
Other strategic factors for the modular accom business is lower cost housing for returees.
So there is definite upside while FWD is on a P/E of 10 and has no debt.
For downside, well if they don't execute and revenue/earnings stay the same then there won't be too much down side from a P/E of 10.