Fleetwood Ltd

The fund managers believe that Fleetwood Ltd. presents a compelling investment opportunity due to its undervalued stock and clear path to earnings growth, particularly within its Community Solutions division. In their opinion, Fleetwood’s key asset, Searipple Village, is poised for significant earnings growth as occupancy rates are projected to increase from 34% in FY24 to 65% in FY25. This growth is expected to boost margins and leverage fixed costs, potentially driving EBIT for this segment up by 140% to approximately $28 million. The fund managers believe that further upside exists if occupancy approaches 100%, with potential EBIT surpassing $40 million and a dividend yield reaching 15%.

The fund managers also note that Fleetwood’s strong balance sheet, with $39 million in cash and no debt, coupled with its stable earnings from long-term contracts with tier-1 clients like Rio Tinto, provides significant security and predictability. Despite these positive factors, they acknowledge that Fleetwood’s current share price does not fully reflect its growth potential, and the stock remains undervalued at a market cap of around $180 million. The fund managers see this as an opportunity to hold a position in a company with strong catalysts and a favorable risk-reward profile, despite the stock’s relative illiquidity. They remain confident in Fleetwood’s potential and its management’s ability to execute on its growth plans.