WBHO

Financial Mail - Investors Monthly - - Opening Bell -

Share price: R168.84 JSE code: WBO

HOLD WIL­SON BAYLY HOLMES-OVCON (WBHO), SA’s largest con­struc­tion com­pany by mar­ket value, de­liv­ered an­other solid per­for­mance in fi­nan­cial 2016, with an­nual profit jump­ing 19.4% to R721.8m.

Prof­its were again bol­stered by the strong build­ing mar­ket in Aus­tralia. And the year ahead looks equally promis­ing in that coun­try, which was re­spon­si­ble for 72% of WBHO’s or­der book of R42.7m in 2016.

Yet five of six an­a­lysts sur­veyed by Bloomberg rate WBHO as a “hold”. Only one has a “buy” call on it.

WBHO is one of the few con­struc­tion stocks that has grown in the past five years. The 50% ap­pre­ci­a­tion in the share price to R166.65 since 2010 puts it at a mar­ket cap of R10.49bn, which is more than four times the size of Aveng’s R2.6bn.

The group leads SA’s build­ing mar­ket, where con­struc­tion ac­tiv­ity re­mained strong. But mar­gins are rel­a­tively low. And pres­sures from de­clin­ing mining and man­u­fac­tur­ing orders con­tinue to weigh on lo­cal prospects.

A loom­ing risk for the next year is the pos­si­ble in­flux of civil claims for its in­volve­ment in bid rig­ging on 11 projects awarded in the build-up to the 2010 soc­cer World Cup.

This fol­lows a re­cent rul­ing from the com­pe­ti­tion tri­bunal that paved the way for third par­ties to pur­sue claims for wrong-do­ing.

WBHO was the only con­struc­tion firm not pe­nalised when the com­pe­ti­tion com­mis­sion com­pleted its in­ves­ti­ga­tion into col­lu­sion in the sec­tor due to le­niency cover it re­ceived for be­ing the whis­tle-blower.

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