Share price: R116,90 JSE code: ELB

Financial Mail - Investors Monthly - - Opening Bell - Stafford Thomas

SELL ELB GROUP FEA­TURES ON FEW in­vestor radar screens. This is not sur­pris­ing, given its mar­ket cap­i­tal­i­sa­tion of only R1,5bn and trade in its shares av­er­ag­ing a mere R22m/month. But ELB’s size be­lies its 112-year his­tory as a re­spected heavy en­gi­neer­ing con­struc­tion and equip­ment spe­cial­ist. Among its on­go­ing con­tracts is con­struc­tion of a con­veyer belt to sup­ply coal to Sa­sol’s Se­cunda plant. Be­yond SA, ELB is en­gaged in con­tracts in nine African coun­tries, Is­rael and In­done­sia.

ELB has avoided the ill for­tunes of the con­struc­tion sec­tor since 2010. De­liv­er­ing solid re­sults in the five years to De­cem­ber 2014 the group grew head­line EPS at an av­er­age of 15%/year and div­i­dends at 18,2%/year.

“They [ELB] did not play the game of grab­bing more con­tracts at any price,” says Piet Viljoen, chair­man of RECM. “They are al­ways ul­tra­con­ser­va­tive.” An­drew Dit­tberner of Can­non As­set Man­age­ment is equally pos­i­tive on ELB. “It is ex­cep­tion­ally well man­aged and has great ex­po­sure in Africa,” says Dit­tberner. “It also has no long-term debt and cash of al­most R400m on its bal­ance sheet.”

ELB is trad­ing on an his­toric 10,4 PE, roughly in line with its long-term mean. It is a level at which Dit­tberner be­lieves ELB of­fers good value. But he con­cedes: “The sec­tors it is in are not ex­cit­ing. You will have to wait it out.”

ELB is an im­pres­sive small cap but there ap­pears lit­tle rea­son to rush to buy. Ex­ist­ing share­hold­ers should con­sider tak­ing profit.


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