Perpetual: Not so dangerous Royal Wolf - Nathan Parkin

Royal Wolf is a provider of portable container solutions to the resources, construction and manufacturing industries in Australia and New Zealand. Nathan Parkin from Perpetual writes that it came to our attention in May last year when General Finance Corporation floated just under half the company on the Australian Securities Exchange.

More recently, we've been pleased by Royal Wolf's profit announcement, with earnings before interest, tax, depreciation and amortisation (EBITDA) of $16.8 million for the first half of the financial year, which was up 18.8% compared to the previous corresponding period. All operating segments contributed to the improved results, a testament to the company's quality businesses.

These results also highlight the sound management of the company. We have confidence in Robert Allen, the CEO, who has over 30 years experience in the container leasing and logistics industry, and Ronald Valenta, a member of the board, who was involved in the original purchase of Royal Wolf by General Finance Corporation.

While the company has grown organically since its float, management have noted that they will continue to examine 'bolt-on' acquisition opportunities. This has historically driven margins as the competitor's lease fleet is added.

Regardless of acquisitions, we expect ongoing margin improvement as the company invests for growth now that it's listed.

Royal Wolf recently paid a dividend of 3.5 cents per share and we consider it to be good value at current prices.

Royal Wolf is currently held overweight in our Smaller Companies Fund and Ethical SRI Fund.

This information has been prepared by Perpetual Investment Management Limited. (PIML) ABN 18 000 866 535, AFSL 234426. It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider, with a financial adviser, whether the information is suitable for your circumstances. The views expressed in this article are the opinions of the author at the time of writing and do not constitute a recommendation to act. Any information referenced in the article is believed to be accurate at the time of compilation and is provided by Perpetual in good faith. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor's capital.