MARKETS SPECTATOR: Royal Wolf recoil?

Royal Wolf's container solutions business has boomed over the last year, as has its share price, but as the mining sector slows its future is uncertain.

Royal Wolf shareholders have howled with glee over the last year.

The shares of the company that provides containers for storage, accommodation or as a workplace have surged 60 per cent in the last 12 months. Robert Allan, the company’s chief executive, said today that revenue across all Royal Wolf divisions in the company’s 2013 financial year to date were up 10 per cent compared to the same period in 2012 at $110.6 million. EBITDA is 13.7 per cent more than 2012.

But with prospects of the mining boom ending, how great is demand for containers in remote areas where exploration or extraction of commodities is taking place? Allan says such sales remain strong. He expects sales to mining camps to increase as a proportion of overall revenue. Royal Wolf is advertising its containers as neat places for living, grabbing a beer, working in, as storage or use for special events.

But companies are in no mood to spend additional funds for special events or providing its workers with additional facilities. Households are seeking to cut their expenses not spend more on storage. Future mining investment may be curtailed. Royal Wolf’s shares may have run forward too far, too fast. Today the stock was down 2 cents, or 0.7 per cent, to $3.08 at 1253 AEST.

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