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.