Financial Mail - Investors Monthly - - Opening Bell -

Share price: R6.22 JSE code: AEG

BUY AVENG HAS EMERGED AS A SHINING star in SA’s con­struc­tion sec­tor, with most an­a­lysts view­ing the stock as a “buy”.

In Septem­ber, the Public In­vest­ment Corp (PIC), Africa’s largest fund man­ager, in­creased its hold­ing in the com­pany to 5.4%.

The PIC’s share in­crease fol­lowed the re­lease of an­nual re­sults that showed the com­pany had im­proved its head­line loss by 48% to 75.2c/share in the year ended June.

In­sti­tu­tional in­vestor Kag­iso As­set Man­age­ment also nudged up its stake to more than 5% in Au­gust, adding fur­ther mo­men­tum to the rally that has boosted Aveng’s share price by al­most twofold since Jan­uary. What is be­hind the re­newed con­fi­dence? Aveng has had to adapt to leaner eco­nomic times made worse by a dearth of ma­jor in­fra­struc­ture spend from govern­ment in the past five years.

It is in the process of ex­it­ing the steel mar­ket, selling 70% of Steeledale to black-em­pow­ered, women-owned Ku­tana Group. An an­nounce­ment of the sale of Tri­dent Steel is ex­pected shortly.

It has also off­loaded four in­fra­struc­ture in­vest­ments from Aveng Cap­i­tal Part­ners to Royal Bafo­keng Plat­inum for R890m.

CEO Kobus Ver­ster says the pro­ceeds, in­clud­ing R252m from of­fload­ing Steeledale, will be used to strengthen its bal­ance sheet.

Aveng has also right-sized op­er­a­tions in fi­nan­cial 2016, slash­ing 8,000 jobs, and most loss-mak­ing con­tracts have closed out.

The or­der book in Aus­tralia, which jumped 22% to A$1.5bn, also in­spired con­fi­dence.

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