Warming to water stocks despite soggy start

Shares in this global water management group have been soggy, to say the least. They floated on the stock market in September 2021 and rose to $1.90 on a tide of enthusiasm, which soon ebbed. Watching a chart of RWL since has been like watching the Finke flow into the Simpson.

In the latest quarterly rebalance of the stock market indices, they were dropped from the all-ords index. That puts them off limits for any investment funds that track the indices. Now almost no one is interested in the stock. Some days they are not traded at all.

The Punter was right to cut his losses and sell them almost a year ago at $1.20. Last week they changed hands at 64c each.

He sold mainly because of the company's relatively high short-term debt at a time when interest rates were beginning to rise. In the six months to the end of December, nearly $7 million in cash leaked away. Net bank debt was $24.6m, due to be renewed or repaid in August this year.

However, the cash outflow was largely due to delays in a massive irrigation project in India and the COVID-19 lockdown in China.

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RWL says it is confident that outstanding invoices will be paid in the current half-year. It has already secured a couple of waivers on its bank debt and expects to be fully compliant with its covenants by June.

It is sticking to its full-year forecast of underlying gross earnings of more than $12 million - a big turnaround from the first half EBITDA loss of $4.2 million.

The Punter has placed a cautious order for 3,000 RWL at 65c. The last time he looked, no one was willing to sell him any for less than 72.5c.