Reece is the main distributor of plumbing, bathroom, and HVAC-R products in Australasia, with over 38% market share.
Morgans notes strategically located distribution centres offer a wide range of products from premium brands, enabling the company to capture large-scale contractors with comprehensive requirements.
The broker initiates coverage with an Add rating and $11.60 target. Morgans is attracted to the impressive financial returns and earnings potential in the US.
The broker believes there is ample upside to the share price in the medium term, as US operations begin to benefit from consolidation.
Sector: Capital Goods.
Target price is $11.60.Current Price is $9.90. Difference: $1.70 – (brackets indicate current price is over target). If REH meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges – negative figures indicate an expected loss).