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Renew Holdings - Position halved to 2.5%

Renew Holdings (RNWH.L; Aim UK 50. Market capitalisation: £544m, 682p, 5.0% of JIC Portfolio. Medium Risk/Medium Reward = 2.5% target weight)

Renew Holdings plc operates as a contractor in engineering services and specialist building. The Company's segments include Engineering Services, which comprises the engineering activities, which are characterized using the Company's engineering workforce, supplemented by specialist subcontractors where appropriate, in a range of civil, mechanical and electrical engineering applications.

H1 trading update was on 1st April. Results are due next Tuesday 17th May.

The 1st of April update was solid and at the time I concluded:

“In line with expectations so shouldn’t have much if any impact on the share price. Nevertheless, it is reassuring to that it is managing “the industry-wide material shortages and inflation challenges effectively”. With these challenges likely to increase in the coming months, given the nature of its long-term framework contracts, Renew should be in a better position than many. It will still be tough though. Current forecasts mean that the shares are trading on a September 2022 PE ratio of 12.6x and a prospective dividend yield of 2.6%. That looks good long-term value to me. I say long term because it could of course get cheaper should the recent the last few weeks’ rally in the markets fizzle out. On Medium Risk/High Reward my target weight is 5.0%. I’m at 4.5% and would look to take up to target on a poor day in the market. I missed my opportunity at around 600p in early March but think another opportunity will present itself. If it doesn’t, fine. Happy Holder!”

I have just changed the rating on the stock to Medium Reward, thus reducing the target position to 2.5%. Since 1st April the share price has held up while all about it falls away. I think that there will be little new in the results, given the trading update, except that there must be a risk that it starts to warn about cost pressures. The obvious cost pressure will be on trained personnel. The valuation looks reasonable but not cheap enough to protect against the share price falling on disappointing news. As I said on 1st April, if it fell to 600p ish perhaps then I would add.

I sold 2250 shares at 2250 shares at 680.5p raising £15,304 and realising a profit of £5,946


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