FWD 1H update.

• Dividend yield now 9% even after recent share price increase assuming no growth
• Dividend policy is now to pay out 100% of NPAT because they have $66M in cash after paying out the first half dividend. The market cap is only $255M. Used to be called a lazy balance sheet I recall
• Accommodation is at full capacity and they expect this to extend into the medium term. Rio Tinto extended contract for another year.
• Modular building earnings were flat due to COVID. THey have $140M order book without any work from the Govt panels

Fleetwood has announced a $41.5M contract to supply 460 modular prison cells for VIC Govt.

FWD acquired a modular building company last year that was big in NSW and FWD wanted to take it to other jurisdictions. This starts to vindicate the move. Total revenue for the modular building segment of the business last year was $230M

https://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=02278166

Other recent contract wins

$35M over next 18 months for modular building

https://www.asx.com.au/asxpdf/20191122/pdf/44bvtypdvkqqs9.pdf

Panel appointment to VIC. Before this announcement the annual report said momentum into 2020 in the VIC market was strong.

https://www.asx.com.au/asxpdf/20190830/pdf/4481tm2yz0tlmj.pdf

Awarded $17M contract to be delivered this fin year.

https://www.asx.com.au/asxpdf/20191024/pdf/449vbj8gr8ynf4.pdf

"Fleetwood Corporation Limited (ASX: FWD) (Fleetwood) is pleased to announcePindanhas awardedita ~$17 million contract for the design, manufacture and supply of modular buildings for Rio Tinto’s Koodaideri iron ore accommodation village in the Pilbara region of Western Australia.Fleetwood’s deliverables are currently scheduled to be completed by mid-2020"

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.