The share price of Raubex hit its highest level in more than a month on Wednesday after it told shareholders it expects a bump in earnings in the year to end-February.
The company cited its successful diversification into Australia, completion of the Zimbabwe border post project and an uptick in SA construction activity.
It said that headline earnings per share, a standard profit measure in SA that excludes certain items, are expected to rise 25%-35% year on year to 371.8c-401.5c and earnings per share 20%-30% to 367.1c-397.7c.
The construction and materials group reported that its operations in Western Australia contributed a fifth of the group’s total operating profit.
Similarly it made progress in Zimbabwe where it has been contracted to modernise the porous border’s truck, bus and light vehicle as well as pedestrian terminals, saying it had received in February the taking-over certificate, issued by clients to contractors as a record of its work, for the staff village, the final section of the project.
“Only minor works need to be completed in the new financial year to hand over a high-quality final product to the client,” said Raubex.
Raubex’s share price rose as much as 7.69% after the news broke to touch the R28 mark before settling 5.38% higher at R27.40.
Increased demand
The R5bn JSE-listed company said that in SA it is “encouraged” by increased activity in tender awards in the roads and earthworks sector over the past few months. It was awarded Sanral contracts to the value of about R2bn since October, enhancing an “already solid” order book.
The deal comes as the company experienced increased demand for the supply and application of bitumen products in the construction materials category in the second half of the year. These are asphalt and tar-like products used in road surfacing, roofing and paints.
“The group has maintained a robust balance sheet and a healthy cash balance throughout the period, which combined with its diversified operations and strong leadership, enable it to extract further value from future opportunities,” Raubex said in a trading statement.
The slight upswing in Sanral contracts is set to benefit not just Raubex, but to bring some relief to the entire construction sector, which has been in the doldrums on low infrastructure spending, said Small Talk Daily analyst Anthony Clark. Companies such as Afrimat will also benefit.
“We know the economy is very tight and the government is not spending but clearly somewhere in the commercial sector things are beginning to pick up, and the roads contract, albeit small, is a start,” Clark told Business Day.
Affected profitability
“So Raubex, given a mid price-to-earnings [ratio] of about 7.1, looks like extremely reasonable value and remains one of the last quality men standing in the construction sector, which has been decimated with Murray & Roberts, Aveng and WBHO among others.”
The Centurion-based group lamented that the delay in the start of the risk-mitigation independent power producer round of renewable energy projects affected profitability in the infrastructure division.
The company said that it is positioned well to benefit from the rollout of the fifth and sixth rounds of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Its focus has shifted to the private renewable space. Advanced contract negotiations were expected to be finalised soon.
Raubex, which acquired a further 24.7% shareholding in fellow-listed Bauba Resources at 36c a share in 2022, owns 51% of the diversified mining and exploration company.
The group reported that this business generated most of the materials handling and mining division’s profit for the period, supported by the successful turnaround strategy and working capital injection, which had a positive effect on production at the Moeijelijk and Kookfontein mines.
It previously outlined plans to delist Bauba shares from the JSE.
Founded in 1974, Raubex has been undergoing strategic changes in leadership and operations since 2020. Raubex CEO Felicia Msiza, appointed in August to replace Rudolf Fourie, ushered in the establishment of materials handling and mining, a fourth division.
The company’s final results are expected on May 15.
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