Key message: The order book growth has stalled and while growth prospects remain good there is timing risk for replacement work.

  • Raubex reported 1H FY23 results, with revenue and operating profit increasing by 23% and 26% respectively. HEPS increased 16% to 159c. A dividend of 53c was declared (3 times cover).
  • Materials Handling & Mining: Contract crushing and materials handling volumes remain low with cost pressures increasing. Bauba now contributes most of the divisions profit with production running at normalised levels after a working capital injection.
  • Construction Materials: Production and profit was impacted by fuel price increases and load shedding. Demand from the construction sector remains subdued. Asphalt demand is linked to SANRAL tender awards, with floods and delayed N3 projects impacting demand in 1H.
  • Roads & Earthworks: SANRAL has recently awarded some of the delayed projects, although Raubex was not successful in their single bid. The current order book is being executed well and runs to FY25. Replacement projects are likely through SANRAL awards, although timing risk remains. Margins remain low.
  • Infrastructure: The Beitbridge project and Western Australia contributed well to results, with no renewable energy contribution as Round 5 delays continue. Private sector renewable energy projects are likely to impact the order book sooner with expected project wins in 2H.
  • The US$172m Beitbridge Border Post project in Zimbabwe is nearing completion but should still contribute meaningfully in FY23 (revenue approx. R1.6bn at a margin of 25%). The project is split between the Roads & Earthworks and Infrastructure divisions. The high margin is mostly due to currency gains. The completion of this project will create a profit hole that will need substantially higher revenue to fill due to the high margin.
  • The order book declined to R16.40bn (Feb 2022: R17.13bn), with a project burn rate of R50m/day. Order book growth prospects are from SANRAL and private renewable energy projects.
  • The completion of the Beitbridge project will impact FY24, with group margin expected to drop from 7.7% in Y23 to 7% as replacement projects are likely to be at a lower margin. With increased order book replacement risk we decrease our Target Price to R32.60 (from R38.70).

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