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Fundamental, Industry, Thematic, Though-Leading
Deutsche Bank Company Research's Research Committee has deemed this work
F.I.T.T. for investors seeking differentiated ideas. In this report, our construction
team provides insight to guide investors through the heterogeneous SA
construction sector. Despite the low ratings, we have a muted outlook for the
sector, and fail to see a medium-term catalyst for a re-rating. We prefer Aveng and
Group 5 for what we see as their well diversified portfolios, low base and sound
balance sheets.
Deutsche Securities (Pty) Ltd
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.
MICA(P) 106/05/2009
FITT Research
Top picks
Aveng (AEGJ.J),ZAR38.80 Buy
Group 5 Ltd (GRFJ.J),ZAR38.43 Buy
Companies featured
Aveng (AEGJ.J),ZAR38.80 Buy
2009A 2010E 2011E
DB EPS (ZAR) 4.87 4.30 5.19
P/E (x) 8.1 9.0 7.5
EV/EBITA (x) 3.8 3.8 2.4
Group 5 Ltd (GRFJ.J),ZAR38.43 Buy
2009A 2010E 2011E
DB EPS (ZAR) 5.08 5.21 5.15
P/E (x) 7.4 7.4 7.5
EV/EBITA (x) 2.7 3.4 3.5
M&R Holdings Ltd (MURJ.J),ZAR46.75 Hold
2009A 2010E 2011E
DB EPS (ZAR) 6.51 4.44 5.53
P/E (x) 9.2 10.5 8.5
EV/EBITA (x) 6.7 7.8 6.3
WBHO (WBOJ.J),ZAR117.99 Hold
2009A 2010E 2011E
DB EPS (ZAR) 16.19 17.29 16.05
P/E (x) 6.7 6.8 7.4
Fundamental: Looking for a catalyst EV/EBITA (x) 2.7 3.0 3.4
In this report we take a detailed look at the South African (SA) construction sector
with the aim of guiding investors through the underlying industry drivers for the
highly diverse group of companies, with a view to identifying potential catalysts
for a near-term re-rating. We have segmented the industries for which the
companies provide services into five key clients (SA public and private sectors,
mining, the Middle East, and Australia) and looked at the growth drivers and
outlook for each. We remain cautious on the medium-term outlook for four of
these clients, with only the Australian construction industry providing any
appealing short- to medium-term growth prospects.
Industry: Impact of global recession waning
The SA construction sector has undergone a significant de-rating over the past 12
months, driven by rising investor perceptions of the risks associated with the
sector, particularly in the context of the global recession, weak private sector
spending, and conclusion of the significant FIFA 2010 World Cup spending plans.
We expect the short- to medium-term outlook for the sector to be clouded by the
high base, weaker government fiscal position and slow rate of recovery in both
mining capex and private sector spending.
Thematic: Weak earnings outlook implies low re-rating potential
Public sector investment in SA has grown rapidly over the past three years,
averaging 16%pa growth vs its long-term 4.8%pa average, substantially outpacing
private sector investment. With the conclusion of the 2010 FIFA World Cup
projects, we expect this to slow considerably, as government priorities shift, the
fiscal balance becomes more of a concern, and the urgency to deliver on major
infrastructure projects fades. With a recovery in either the private sector or Middle
East investment still a medium-term story, only Australian construction offers
some appeal, but it accounts for just 8% of sector earnings.
Thought Leading: Cheap… but for a reason
While ratings are low, our overall assessment of the key themes driving SA
construction is that they will remain so for the time being, and we would therefore
favour those stocks coming off a low base, with diversified portfolios, and sound
balance sheets. On this basis, we prefer Aveng and Group 5 over Murray &
Roberts and WBO.
Valuation
We value the stocks on a DCF basis, using a 4.5% long-run growth rate, and 1.1x
beta, and their embedded D/E ratios. The key risks on the upside include further
reductions in interest rates, while on the down side, sustained scrutiny from the
competition commission.
【出版时间及名称】：2010年4月南非基建与建材行业研究报告
【作者】：德意志银行
【文件格式】：pdf
【页数】：72
【目录或简介】：
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