Still hold­ing value

Finweek English Edition - - Companies & Markets - MARC HASEN­FUSS

SOME PUN­TERS MAY FEEL the easy run­ning has al­ready been done at spe­cial­ist construction group Ma­zor. The share has re­cov­ered from an an­nual low of 115c in Fe­bru­ary to set­tle at a more con­vinc­ing 230c. But scan­ning Ma­zor’s year to end-Fe­bru­ary 2009 re­sults should pro­vide in­vestors with enough fun­da­men­tal ev­i­dence that the share still presents good value at cur­rent lev­els.

Per­haps a more im­por­tant as­pect of the re­sults is re­in­forc­ing no­tions that Ma­zor isn’t your run-of-the-mill construction-aligned com­pany. In­deed, the group’s cladding busi­ness (alu­minium, steel and glass) seems to have suc­cess­fully tar­geted high yield­ing projects, as ev­i­denced in the group’s 37% hike in gross prof­its to R97m – which was earned at an en­vi­able 33% trad­ing mar­gin.

The group’s bot­tom line profit of R67m is of good qual­ity (backed by net cash in­flows of more than R50m) and trans­lated into earn­ings of 52c/share. A fi­nal div­i­dend of 17,5c/share was de­clared – a hardly sur­pris­ing de­vel­op­ment, with Ma­zor sit­ting on cash of R110m (equiv­a­lent to around 90c/share).

While the cash hold­ing is re­as­sur­ing in th­ese try­ing eco­nomic times, there will no doubt be some fret­ting over Ma­zor’s per­for­mance in its new fi­nan­cial year. How­ever, its direc­tors have in­di­cated the first six months should be “healthy” based on the or­der book in hand.

Sec­ond-half busi­ness could get a fil­lip from the spate of in­ter­est rate cuts, which could con­ceiv­ably boost pri­vate sec­tor spending to­wards year-end as new and de­layed projects start rolling out around the 2010 Soc­cer World Cup. The group’s fast-grow­ing glass busi­ness – which may see fur­ther ac­qui­si­tions in the months ahead – should also add a kicker at bot­tom line.

Ma­zor is cur­rently trad­ing on an earn­ings mul­ti­ple of less than five times, which seems a tad mod­est con­sid­er­ing the group should com­fort­ably post around 30c/share in the first half of its new fi­nan­cial year. Full-year earn­ings could well top the 70c/share mark.

Fin­week reck­ons Ma­zor could be worth ac­cu­mu­lat­ing while the mood per­vad­ing the smaller construction-aligned list­ings is down­beat.

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