Citi expects working capital will lift to 20% of sales in FY21 and remain at that level going forward.
While Reese has $1bn in cash on the balance sheet debt hasn’t been repaid and the broker expects some debt repayment towards the end of FY21. However, there is opportunity for acquisitions.
The broker reiterates a Sell rating as the P/E ratio is stretched. While the balance sheet is strong Citi does not believe this is sufficient to offset a lack of earnings growth over the next three years. Target is raised to $9.60 from $8.55.
Sector: Capital Goods.
Target price is $9.60.Current Price is $12.37. Difference: ($2.77) – (brackets indicate current price is over target). If REH meets the Citi target it will return approximately -29% (excluding dividends, fees and charges – negative figures indicate an expected loss).
