Growth Portfolio

Overview: Fleetwood Corporation Limited (“Fleetwood”, “the Company”) is an Australian consumer company focused on recreational vehicles (‘RV’) and housing solutions. Fleetwood‘s RV business includes the manufacture and sale of caravans, parts, and accessories. In addition, the company supplies transportable homes and modular buildings for the residential, education, tourism, and resource sectors.

Catalysts: Fleetwood is showing early signs of a turnaround following a number of restructuring initiatives that were designed to simplify the operating model whilst reducing capital expenditure. Recent management changes and a renewed focus on key growth markets have helped the company lift revenue in every half-year period since 2H15. Continuation of the recent trajectory may enable management to reward shareholders via capital management initiatives as early as FY18.

Hurdles: The Company’s recreational vehicle business has experienced operational challenges which resulted in downgrades and impairment charges. Earnings have been lumpy and there is no guarantee that the mixed trend won’t continue. Further deterioration in business activity may restrain management from creating shareholder value and further dilution appears inevitable.

Investment View: Fleetwood offers transitional exposure to demand affordable housing solutions and recreational vehicles. We are attracted to recent management changes and Fleetwood’s improving operational performance. However, the company experienced operational challenges during the past few years and there is no guarantee the recent recovery is sustainable. As the business stabilises, a return to positive EBITDA may see the reintroduction of a dividend that ceased in 2014. Seeking to monitor recent business momentum and acknowledging the company’s ‘turnaround’ potential, we initiate coverage with a ‘buy’ recommendation.