A shin­ing light in a gloomy mar­ket

Finweek English Edition - - HOUSE VIEW -

WE WERE re­cently treated to an­other peach of a de­liv­ery from Con­sol­i­dated In­fra­struc­ture Group (CIL), which re­ported in­terim re­sults to the end of Fe­bru­ary. Hav­ing seen the com­pany trad­ing on much higher mul­ti­ples i n the past, I can com­fort­ably sug­gest it more than jus­ti­fies its cur­rent R28/share price that puts it on a P/E ra­tio of 13.54. Com­pare that to growth rates for rev­enue of 26% (to R1.7bn), earn­ings be­fore i nter­est t ax and de­pre­ci­a­tion (EBITDA) of 23% (to R206m), and HEPS of 24% (to R1.10), and you can sur­mise that if th­ese growth rates persist, this is a very cheap en­try point.

As an in­fra­struc­ture play – its largest seg­ment is Con­sol­i­dated Power Projects (Conco), which is in­volved in the con­struc­tion of elec­tric­ity dis­tri­bu­tion sys­tems – the com­pany re­ports on the size of its or­der book, which acts as a sig­nal for fu­ture earn­ings. In this re­gard, things look very en­cour­ag­ing; the or­der book ad­vanced 30% for Conco to R3.7bn. Conco ac­counts for 53% of prof­its af­ter tax, a share that is de­creas­ing. A large chunk of Conco’s busi­ness in South Africa comes from in­stalling and build­ing re­new­able en­ergy projects – as many as 70% of the ven­dors awarded con­tracts by the depart­ment of en­ergy in the third round of the pro­gramme were con­tract­ing Conco in some form. Ne­go­ti­a­tions are on­go­ing with the bal­ance.

With the chal­lenges at Medupi now de­lay­ing out­put sub­stan­tially into 2021, you have to won­der how gov­ern­ment can­not fur­ther ac­cel­er­ate the re­new­able en­ergy pro­gramme. In its cur­rent for­mat, it has been one of the fastest build-out pro­grammes the world has ever seen – show­ing just how ef­fi­cient a public-pri­vate part­ner­ship can be.

The com­pany’s other ma­jor profit cen­tre is its An­golan en­vi­ron­men­tal ser­vices di­vi­sion, which ad­vanced prof­its by 90% to R50m. Con­sid­er­ing some of the hor­ror sto­ries of what Cor­po­rate SA has en­dured in that coun­try, the re­sult comes as a pleas­ant sur­prise. In a mar­ket look­ing in­creas­ingly de­void of growth, CIL is a shin­ing light.

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