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Big River Industries building towards a successful year

The past four years have represented a challenge for construction-linked companies like Big River Industries, but recent indicators point towards a strong 2021.
The past four years have represented a challenge for construction-linked companies like Big River Industries, but recent indicators point towards a strong 2021. The company – which operates as a sort of ‘Bunnings for tradies’, according to NAOS Asset Management’s Robert Miller – is relatively new to the ASX, having listed in only 2017.
Its recent listing, however, belies a lengthy history serving Australia’s construction sector for well over a century.
Speaking to Reach Markets’ ‘The Insider: Meet the Fund Manager’ session in April, Mr Miller said this extensive history was enough to encourage him and his team to take a position in Big River Industries’ IPO – something the fund rarely considers under normal circumstances. “We are not generally investors in IPOs at all, to be honest,” he said. “We think there’s an information advantage to the sellers of the business and the price is probably not going to be in the best interest of the incoming investors, so we look for businesses with a long track record. “This example was different, because it had such a long history.” While its past was enough to entice Mr Miller to invest earlier than he ordinarily would, its future prospects are strong enough that he named Big River Industries as one of his favourite three stocks during his presentation. Mr Miller pointed to the potential for the company to grow – At present, Big River Industries has 21 locations. Increasing this network, Mr Miller said, will enable the company to quickly introduce its products (which include formply, steel decking, timber and more) into new markets and into the hands of more customers.
Further, demand for these products is tipped to lift too, Mr Miller said.
“The whole sector went through a pretty tough period pre-COVID for a few years, and we think they’re certainly coming out of that,” he said. “And with these businesses, when you get scale and the cyclical nature of the market works with you, there’s a lot of leverage to the bottom line. “A lot of the approvals have happened for HomeBuilder [the Federal Government fiscal support package], but dirt hasn’t been turned yet.” Since Mr Miller’s presentation, the company’s shares have lifted roughly 23%.

Recovering construction sector to bolster business

Jim Bindon, CEO of Big river Industries, similarly noted the construction sector appears to be moving to a new phase of its cycle. “We certainly expect to benefit from the recovery of the construction cycle that’s been a headwind in our business over the last few years,” he told guests of Reach Markets’ ‘The Insider: Meet the CEO’ session in late May. “That was a decline in our addressable market, the most obvious one being the major decline in multi-residential, where new housing starts in Australia had halved over four years. “Q2 was almost like a switch was flicked and growth returned to our addressable market again after the pretty typical three year downturn of the construction cycle.” After making a number of changes to its supply chains and working to improve the ratio of products the company manufactures compared to this it simply trades, Mr Bindon said Big River is well-placed to capture this upswing in market activity.   Jim Bindon from Big River recently spoke on our fortnightly webcast ‘The Insider: Meet the CEOs’. All speakers on The Insider have been referred by a fund manager such as Robert Miller. Each session features a selection of CEOs who provide a succinct overview of big things their companies are doing, followed by an interactive Q&A. If you would like to join a future session you can book here.    Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position. Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you. Sources:  

 

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