LAST MONDAY, more than 9m shares changed hands and this counter jumped nearly 40% in intra-day trade to 14c/share. While the Calgro M3 and RBA Holdings* stories are similar (see page 35), RBA is definitely less of a pretty company. Interim results to June 2012 stated that TNAV was up at 14c with headline earnings per share at a measly 0.44c while cash flows from operating activities were negative.
In theory, low-cost housing is a sure thing in SA, but the challenge that RBA will face is whether or not it becomes one of those businesses where payments from Government trickle into the system and the company constantly has to balance cash flows. I’m a tentative buyer here, but investors might want to wait to see if the business is actually turning around before committing to it.
*The writer holds shares in RBA Holdings.