Fleetwood Corporation: A picks & shovel play on the WA mining boom

About Latest Posts Mike KingMike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than …

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Fleetwood Corporation Limited (ASX: FWD) is debt free, and a 'picks and shovels' play on the booming WA mining economy. The company looks attractive, but the shares are fully priced. 

Fleetwood operates two distinct divisions. The largest division provides manufactured accommodation, mainly for the Western Australia resources sector. For the six months to December 2011, revenues for this division were down by 7% to $125.2m, but EBIT up by 37% to $37m. This division operates the largest accommodation village in Karratha, Searipple, which is expected to generate strong revenues as more resources projects start up in the region.

The company's second division manufactures caravans, parts and accessories for recreational vehicles, as well as canopies and trays for commercial vehicles. Revenues were down by 12% to $80.6m, and EBIT down 61% to $4m, mainly due to a decline in consumer sentiment for discretionary items, i.e. people are too worried about their other bills to spend a large amount on a caravan.

Overall, the company reported a 9% fall in revenues, but net profit was up 10% to $26.9m over the previous corresponding period. The difference was mainly a reduction in raw materials expenses used to manufacture accommodation and caravans and associated accessories, with expenses down from $96.5m in 1H 2011 to $68.9m in 1H 2012.

No debt

What is pleasing is that strong cash flows of $47.6m allowed Fleetwood to repay all its debt, with the company how having net cash of $13m as at 31 December 2011. This seems to be a trend for many companies in many different sectors recently (1300 Smiles Limited (ASX: ONT), ARB Corporation Limited (ASX: ARP), Noni B Limited (ASX: NBL) and Forge Group Limited (ASX: FGE), all have either no debt or net cash balances.

Companies are either repaying debts, or ensuring cash on the balance sheet more than covers the company's debt  which is very similar to how consumers are acting at the moment, putting cash away for a rainy day, and avoiding big spends on discretionary items.


Fleetwood expects to see strengthening demand in the resources sector in WA & Qld, but expects continuing soft conditions in the recreational vehicle division. As long as the demand for commodities remains high, Fleetwood's manufactured homes division should prosper.

The company is also moving towards sourcing cheaper supply from Asia which should help both its divisions reduce their costs.

The Foolish bottom line

Generating high returns on equity (28% for 2011), net cash in the bank and a forecast fully franked dividend yield of 5.8%, the company appears attractive. The only issue is the price. Currently trading at $13.02 and on a forecast 2012 P/E of over 14, it appears fully priced.

Attention: If you are looking for ASX investing ideas, look no further than "The Motley Fool's Top Stock for 2012." In this free report, Investment Analyst Dean Morel names his top pick for 2012…and beyond. Click here now to find out the name of this small but growing telecommunications company. But hurry – the report is free for only a limited period of time.

More reading

Motley Fool contributor Mike King owns  shares in ARB Corporation and Forge Group, but none of the other companies mentioned. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool's disclosure policy.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »