Morgan Stanley views Reliance Worldwide Corp's purchase of EZ-Flow as a good strategic fit but, given it was struck on a full multiple, says serious synergies would be needed to be extracted before being considered attractive.

The broker does spy cross-selling and/or range expansion opportunities and a potential for 10% accretion in the seocnd year.

Reliance's September-quarter trading update broadly met the broker, revenue slightly outpacing, causing the broker to tinker with FY22 earnings forecasts. Morgan Stanley notes the acquisition could result in a 6% upgrade to FY22 earnings and a 10% and 11% upgrade for FY23 and FY24.

Equal-weight rating retained and $6 target price retained. 

Sector: Capital Goods.

Target price is $6.00.Current Price is $5.20. Difference: $0.80 - (brackets indicate current price is over target). If RWC meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

© 2021 Acquisdata Pty Ltd., source FN Arena