Happy to hold on

Finweek English Edition - - MARKETPLACE - *The writer owns shares in Cal­gro M3.

I sold half of my Cal­gro M3 shares back in De­cem­ber when we played a game of fi­nance min­is­ter mu­si­cal chairs, but halted the sell­ing when min­is­ter Pravin Gordhan was reap­pointed. Re­cent re­sults show it was a good hold.

Head­line earn­ings per share (HEPS) were up 26.7%; debt slightly lower; and its pipe­line of work now stands at R27bn (up from R19bn and about eight years of work). What struck me about the re­sults was how many things did not fire on all cylin­ders.

Cal­gro’s Namib­ian op­er­a­tion had been halted – although it was never go­ing to con­trib­ute rev­enue for the year – and has now started again. The re­tire­ment vil­lage wasn’t work­ing so it restarted with new mar­ket­ing, and its ceme­tery de­vel­op­ment is only just start­ing up. Yet, de­spite all this, the com­pany still had great re­sults and go­ing for­ward these projects should all im­prove and con­trib­ute more to the bot­tom line. That said, on a priceto-earn­ings ra­tio (P/E) of around 15 times I think Cal­gro is fair value, but I’m happy to hold as it will likely ex­pe­ri­ence HEPS growth of around 30% again for the 2017 full year, giv­ing us some price up­side.

Pen­nyville This Cal­gro M3 project was de­vel­oped in part­ner­ship with the City of Jo­han­nes­burg and the depart­ment of hous­ing.

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