CONSOLIDATED INFRASTRUCTURE GROUP
A shining light in a gloomy market
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.