May 2019

Reliance has revised down its guidance for the full year, with EBITDA expected to be ~7% lower than previous forecasts. Somewhere between $260-$270m

In the US, sales have come under pressure from the lack of cold weather related pipe damage, and due to channel partners destocking. The company notes that demand at the point of sale remains consistent.

In Europe, although the John Guest acquisition continues to perform to expetactions, the RWC core has sufferred as it has shifted away from certain product lines, and due to weaker demand in Spain.

In Australia, the company spoke of a sharper than expected drop in residential construction (another canary in the coal mine for those cautious towards the domestic economy).

Finally, to make matters worse, Reliance said that the US/China trade war would likely have an impact on costs (although they were looking to mitigate this).

It's unhappy reading for a business that was enjoying a decent growth multiple.

Nevertheless, with shares around $3.65, the company is on a forward EV/EBITDA ration of~12.5x or a forward PE of ~21.

That's not terrible for a business that is expected to sustain double digit growth in the coming years (at least according to consensus analyst forecasts). However, if sales continue to come under pressure, shares could easily trend lower.

I havent done enough work to have a firm opinion, but at a high level I think shares are 'about right' at present.

Read the full ASX announcement here