Financial Mail - Investors Monthly - - Opening Bell - Fifi Peters

Share price: R28.26 JSE code: GRF

SELL GROUP FIVE’S MO­TOR­WAY con­ces­sions busi­ness, In­ter­toll, is prov­ing to be a life­line as prof­its from tra­di­tional con­struc­tion work are be­ing squeezed.

Man­age­ment has been proac­tive in chan­nelling in­creased in­vest­ment flows to the East­ern Euro­pean In­ter­toll busi­ness to off­set de­clin­ing rev­enues from other units.

In the year to June, Group Five said op­er­at­ing profit from the in­vest­ment and the con­ces­sions busi­ness leapt nearly three­fold to R917.4m, boosted by sig­nif­i­cant fair value gains that took the group from a loss-mak­ing to a profit po­si­tion.

At the in­terim pe­riod, the group said it, to­gether with in­ter­na­tional fi­nanc­ing part­ners, had ac­quired a 12.7% stake in a 10-year mo­tor­way project in Hun­gary. This fol­lowed the com­mence­ment of a 20-year road con­tract in North­ern Ire­land, where the group con­tin­ues to ex­plore new prospects. It is also fish­ing for op­por­tu­ni­ties in North Amer­ica to cap­i­talise on ex­change rate gains in hard cur­rency.

In terms of its rat­ing, the mar­ket ap­pears equally split be­tween a “buy” or a “hold”.

Group Five has con­sis­tently paid a div­i­dend, but its prospects out­side its con­ces­sions busi­ness are wor­ry­ing. Prof­its slumped in its en­gi­neer­ing & con­struc­tion, build­ing & hous­ing, civils, and man­u­fac­tur­ing clus­ters. Projects and en­ergy mar­gins im­proved, but the out­look for the lat­ter re­mains un­cer­tain.

And then there is the headache from civil claims. Group Five also has a pend­ing case at the com­pe­ti­tion com­mis­sion.

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