Share price - Quo vadis

If some of the rows in tables below overflow their lines, shrink the font size.

If one looks at NWH's revenue over the years, one realises that it can bounce around significantly, so a year-on-year change cannot reasonably guesstimated by some reasonable factor like 10% or 20% a year. Amounts below are historical revenue in $ millions:

FY09 - FY10 - FY11 –– FY12 –– FY13 –– FY14 – FY15 - FY16 - FY17 - FY18 - FY19
509.6 - 609.7 - 745.3 - 1,358.8 - 1,374.4 - 1,134.5 - 775.9 - 288.0 - 370.3 - 685.4 - 1,100.0

This suggests that when guesstimating FY20 and FY21 revenue, we may as well guess the value in dollars, rather than using a percentage uplift factor. We know that there is a lot of work to be had, and that Management enhanced its tendering team in the recent past. We know from the Euroz Presentation that NWH has locked in as much revenue for FY20 as it expects to report in FY19 – that is, $1.1b. We can also reasonably suggest that Management is keen to lock as much in for FY21 and beyond to be able to make fleet investment decisions. I'll simply add $300m to FY20, and a further $200m for FY21, to Get $1,100m, $1,400m and $1,600m for FY19,FY20 and FY21 respectively. Add your own numbers in to get guesstimates of revenue for FY20 and FY21.

On EPS, I am simply going to prorate what I expect EPS might be in FY19 (16 to 17 cents) by the revenue – that is retain the same NPAT margin. Margins could improve because there is no need for Management to cut tendered prices to secure the work, and because the greater capability of NWH should lead to better margins in some contracts. I'll take a neutral stance on debt, because the tendency to reduce debt that we have witnessed is likely to be reversed via finance leasing of new equipment.

........................ FY19 – FY20 – FY21
Revenue $ ....... 1100 – 1400 – 1600

EPS 16c .......... 16.00 .. 20.36 .. 23.27
EPS 16.5c ....... 16.50 .. 21.00 .. 24.00
EPS 17c .......... 17.00 .. 21.64 .. 24.73

Within a few months people are going to look forward, and base their thinking on FY20 expectations, so using a PER of 14 or 15, which I think NWH has now earned, we get:

FY20 EPS 20.36c .... PER 14 ..... $2.851 target price
FY20 EPS 21.00c .... PER 14 ..... $2.940 target price
FY20 EPS 21.64c .... PER 14 ..... $3.029 target price
FY20 EPS 20.36c .... PER 15 ..... $3.055 target price
FY20 EPS 21.00c .... PER 15 ..... $3.150 target price
FY20 EPS 21.64c .... PER 15 ..... $3.245 target price
Average ...................................... $3.045 target price

So there we have it, a target share price of about $3.00. When? As soon as the market gets a fix on the likely revenue for FY20, and we know from the Euroz Presentation that $1.1b is already locked in. NWH usually gives a revenue forecast when it releases its Annual Report in late August – on 23/08/2018, the report stated “Expecting revenue growth of 40% in FY19 to circa $1.1 billion - $950 million secured.” This tempts me to suggest we shall see Managements revenue outlook then, so I'll moot $3.00 by September 2019 – earlier than my vague $3.00 by 30 June 2020.