LON:RWA | Robert Walters - It's All About Asia

20th Jan '19 by Damian Cannon

10 comments 3226 reads

Robert Walters (LON:RWA) is one of the world's leading professional recruitment consultancies, specialising in the placement of permanent, contract and temporary positions across all levels of seniority. Established in 1985, Robert Walters (LON:RWA) recruits across the accounting, finance, banking, IT, human resources, legal, sales and marketing, supply chain, procurement, engineering and support fields. With offices in 30 countries our truly global network enables us to meet the demands of clients and candidates whose needs extend beyond local markets, whilst our strong local foundations provide us with unique insights into local industry and culture.

Introduction

OK enough of the marketing BS. Generally my aim is to identify high-quality, cash-generative companies that are priced reasonably. This might seem like an overcrowded trade but even the best companies can fall back when there are concerns about cyclical markets, future growth potential and economic conditions. To find these shares I run a number of filters over the whole UK market and a while back recruiter Robert Walters (LON:RWA) popped up. After some thought I invested and saw the share price both continue upwards and plunge downward as sentiment changed; given that the price is currently at a low point I thought that I should revisit the company to see whether the investment case still stands up.

SharePad summary

Looking at the SharePad summary I very much like to see an all-green set of values. More specifically ROCE of 27.9% and CROCI of 16.8% are both high values which are continuing to improve (compared to the 3-yr average). Driving this change, in part, has been sales/profit growth and both of these are set for double-digit growth according to forecasts. This compares favourably with a P/E of ~12, where this is down from recent highs, although growth has slackened compared to the 3-year average. In my mind then Robert Walters (LON:RWA) passes the quality/value test at the high-level.

The summary from Stockopedia backs this up with a very high QualityRank of 99, largely driven by ROCE and a high Piotroski F-Score, with the ValueRank coming in at 56. This is a little lower than I'd expect with the culprits being a middling yield, of…

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LongValue

21st Jan '19

An extremely well-written piece. The company has been on my watchlist for some time. However, as you point out, it's a cyclical business and highly sensitive to the macroeconomic environment. It also does not appear to be particularly cheap when compared to its peers. And the yield is nothing special. That said, its dividends have been on an upward trajectory since 2001 and its current dividend is covered more than three times.

It's now some 34% off its all-time high, achieved in September 2018. My only concern is whether it could fall much further. But it seems to be a well-managed business where the CEO and founder, Rob Walters, still has significant skin in the game. Its international exposure also appears to make it Brexit-proof, should the latter turn into a disaster. Yes, I am certainly interested in investing in the company. Incidentally, it might be worth mentioning that it's picked up by six Stockopedia screens.

Damian Cannon

Thanks LongValue. I do think that it's a nimble, well-managed business which benefits from the continued presence of Robert Walters. Curiously he's maintained his shareholding at ~3% of the company for the last 15 years ago, I believe, although numerous options have come and gone since then.

That's a good point about the Stocko screens as I hadn't noticed that being the case. I probably won't add any more to the article, now that your comment is here, but I'll bear this factor in mind for my next article!

Damian

sgs71

22nd Jan '19

Really informative piece. Thanks for taking the time to put it together.

Richard Goodwin

27th Jan '19

Thank you Damian. Where on earth do you find the time to write such thorough articles?!

john652

28th Jan '19

Excellent post Damien, please find the time to write about other companies that you find.

Ha ha - thanks Richard! I have to admit that I spent way more time on this article than intended over perhaps a couple of weeks but I just had to scratch this itch. Fortunately I've now set up a number of bespoke charts in Sharepad and so hopefully future articles won't suck up quite so many hours.

1st Mar '19

Sparkling FY results from Robert Walters (LON:RWA) today: https://www.investegate.co.uk/robert-walters-plc/rwa/final-results/201903010700065164R/

In a nutshell these are record results with headline EPS up to 50.4p (or 45.8p fully diluted) and total dividend hitting 14.7p. Both of these are above expectations hence the share price rise. While the outlook for the year so far is in-line with expectations I reckon that analysts will have to upgrade if business momentum continues.

Usefully 73% of net fee income is now from outside the UK with both Asia Pacific and Europe registering double digit increases in NFI. Even in the UK, where Brexit uncertainty is dampening demand, NFI was up 7% for the year.

Really impressive performance.

Howard Adams

Hi Damian

I am not a holder of Robert Walters (LON:RWA) but have done in the past.

Reading your post (#7) above I wondered whether your point about .....

'Usefully 73% of net fee income is now from outside the UK with both Asia Pacific and Europe registering double digit increases in NFI.'

Might possibly it be a double edged sword in the near future with regard to a possibility that sterling might incur a strong rise in strength once Brexit decisions occur (irrespective of what they are).

Just recently sterling has risen quite a bit catalysed by less uncertainty about Brexit outcomes and I have often read that pundits suggest sterling might rise close to the £1.42 level against the dollar once some form of Brexit outcome crystalises.

As I'm sure like many on Stocko I have considered foreign earnings in a holding as a positive factor both for diversification of revenues as well as favourable translations returning against a weaker sterling. Might this view be questioned I wonder?

Regards
Howard

Fair point Howard. Your final paragraph definitely chimes with my viewpoint:

"As I'm sure like many on Stocko I have considered foreign earnings in a holding as a positive factor both for diversification of revenues as well as favourable translations returning against a weaker sterling. Might this view be questioned I wonder?"

If sterling does rise then that'll definitely have an impact on these foreign earning stocks but I don't really have a feel for what's going to happen with the currency. On one hand removing uncertainty should help the pound but equally we're still a long way from actually leaving the EU even if Theresa May's deal is somehow passed.

So on balance I'm happier owning shares with a lot of non-UK exposure or shares with UK exposure that are relatively defensive (thinking of leisure, pawnbrokers, etc).

Damian

Strange times indeed. Robert Walters (LON:RWA) has just announced a strong set of figures and the stock, as I write, is up over 10% on its opening price. Out of curiosity, I have just taken a look at the London South East bulletin board. The last comment relating to Robert Walters (LON:RWA) was at the end of November 2018. If I look at a resource company by the name of Red Emperor Resources NL (LON:RMP), the stock price is down over 63% from its open. For today, there are over 300 comments on the latter on the same bulletin board. This is for a company that appears to have never made a profit or paid a dividend.

The point I am making is that there seems to be an inverse relationship between performance and bulletin board chat. It's as though a lack of financial performance is being substituted by talk, much of it fatuous. An earlier poster on a different thread made an interesting observation that a lack of discussion about a company on ADVFN was actually a positive. Broadly speaking, I tend to agree.

Robert Walters - It's all about Asia

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Damian Cannon

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