Share price: R116,90 JSE code: ELB
SELL ELB GROUP FEATURES ON FEW investor radar screens. This is not surprising, given its market capitalisation of only R1,5bn and trade in its shares averaging a mere R22m/month. But ELB’s size belies its 112-year history as a respected heavy engineering construction and equipment specialist. Among its ongoing contracts is construction of a conveyer belt to supply coal to Sasol’s Secunda plant. Beyond SA, ELB is engaged in contracts in nine African countries, Israel and Indonesia.
ELB has avoided the ill fortunes of the construction sector since 2010. Delivering solid results in the five years to December 2014 the group grew headline EPS at an average of 15%/year and dividends at 18,2%/year.
“They [ELB] did not play the game of grabbing more contracts at any price,” says Piet Viljoen, chairman of RECM. “They are always ultraconservative.” Andrew Dittberner of Cannon Asset Management is equally positive on ELB. “It is exceptionally well managed and has great exposure in Africa,” says Dittberner. “It also has no long-term debt and cash of almost R400m on its balance sheet.”
ELB is trading on an historic 10,4 PE, roughly in line with its long-term mean. It is a level at which Dittberner believes ELB offers good value. But he concedes: “The sectors it is in are not exciting. You will have to wait it out.”
ELB is an impressive small cap but there appears little reason to rush to buy. Existing shareholders should consider taking profit.