Exciting future for REH

Excluding Actrol, revenue for 2014 is $1,668m.
Including Actrol's 5 month contribution, revenue for 2014 is $1,776m.

Actrol's 5 month contribution is $1,776m - $1,668m = $108m (compared to forecast of $100m given at the time of acquistion on 31/01/2014)
Extrapolating to 12 month = 12 / 5 * $108m = $259.2m

Hence proforma 2014 revenue is $1,668m + $259m = $1,927m.

Assuming 5% revenue growth in 2015, 2015 revenue will be $1,927m * 1.05 = $2,023m.

Average Net Profit Margin since 2000 is 7.10%.

Given REH is quite secretive on financial data that it releases to the market, it's a bit hard to do some financial modelling on the effect of the Actrol acquisition on the Net Profit Margin.

Given that in 2014 when there are a number of one-offs negatively affecting the result, REH is still able to achieve a Net Profit Margin of 6.91%, I will just assume that in 2015, all the extra financing costs and operating costs are balanced by various costs savings and economies of scale that they can achieve.

If REH can achieve 7% Net Profit Margin in 2015, NPAT will be 7% * $2,023m = $141m.

At $32, current market cap is $3,187m. Hence it's currently trading at PE of around 3,187 / 141 = 22.6.

It's definitely not cheap, but I believe the company is one of the best companies trading on ASX.

I expect REH will try to pay down the debt in the next few years. Given the company's consistent history of generating operating cash flows greater than the net profit, this shouldn't be too hard to achieve.

The Wilson family has 66% of the company and is a very conservative operator. They wouldn't do this Actrol acquisition just for the sake of it, I'm pretty sure they have confidence in being able to achieve more with Reece an Actrol combined.

I will definitely top up more in any price weaknesses.