There are plenty of high-profile ASX shares in the S&P/ASX 200 Index (ASX: XJO). But, a few quiet achievers have also done incredibly well. Reece Ltd (ASX: REH) shares look like a hidden gem.
Past performance is not a reliable indicator of future performance, but over the past year, the Reece share price has lifted 45%. And it's almost 120% higher than it was five years ago.
It's a good ASX 200 share that is quietly doing a very effective job. Below are some of the reasons why I like the company.
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Diversified growth
Reece may be best known for its bathroom products and national showroom network in Australia, but there are plenty of other areas where the business is growing.
An acquisition in 2018 gave Reece a strong presence in the United States, particularly in the southern 'sunbelt' states. Last year, the company opened 15 new branches and made a strategic acquisition of a "small" 12-branch refrigeration wholesaler in Texas. It expects a "sustainable rate of growth being around 10 to 15 branches per year". The US growth could be an important driver for Reece shares from here.
At the ASX 200 share's AGM, it said its US store rollout (and the Reece rebrand) was "progressing at pace." The business is open to using bolt-on acquisitions to expand its scale.
It's investing in Australia and New Zealand with network upgrades and non-plumbing network expansion.
Solid performance
After all the interest rate rises and strong inflation in Australia, it'd be understandable if demand for bathroom suppliers declined. Despite that, Reece's numbers continue to be strong and resilient.
In the first quarter of FY24, total sales were up 3% year over year to A$2.6 billion. ANZ sales were up 3%, and US sales, in US dollar terms, were flat. The US has faced very strong inflation and interest rates as well.
However, Reece does expect cost inflation pressure and a softening demand setting. But, in my opinion, any downturn could be relatively short-term for Reece's profit.
Strong long-term focus
Reece CEO Peter Wilson told the AGM:
Our focus remains on the long term. By delivering our customer promise and continuing to invest, we know we will be able to emerge from a cyclical downturn as a stronger business.
In summary, we delivered another strong FY23, and believe we are well placed to continue managing a softening external environment. As ever, we will maintain our long-term focus and continue investing to deliver our 2030 vision.
The Wilson family has been managing Reece for decades and, with ownership of Reece shares, has billions of dollars at stake. This means the CEO (and other family members) are highly motivated for the ASX 200 share to keep doing well and not take any unnecessary risks.
