Key message: The Beit Bridge project completion leaves a large hole in profits – significant revenue growth is required to replace this.
- Raubex recently reported FY23 results. HEPS increased 32% on a 32% and 35% increase in revenue and operating profit. A final dividend of 76c was declared.
- Materials Handling & Mining: Bauba now contributes most of the divisions profit with production running at normalised levels after a working capital injection. The Namdeb contract was secured for 5 years.
- Construction Materials: Increased costs resulted in lower margins with commercial quarries increasing volumes, asphalt volumes declining slightly and bitumen volumes picking up towards YE.
- Roads & Earthworks: SANRAL work (mainly on N3) is going well, supported by private concession road work. The Senqu River Bridge will provide some replacement for the conclusion of the Beit Bridge project. R2bn in SANRAL work has been secured since Oct 2022. Margins will be under pressure with the completion of the high margin Beit Bridge project.
- Infrastructure: Commercial building and housing provides a robust order book base, with margins likely to fall with the completion of the Beit Bridge project. Renewable energy projects will only impact FY25 due to REIPP delays.
- The US$172m Beitbridge Border Post project in Zimbabwe contributed meaningfully in FY23 (revenue approx. R1.6bn at a margin of 30%). The project was split between the Roads & Earthworks and Infrastructure divisions. The high margin was mostly due to currency gains. The completion of this project will create a profit hole in FY24 that will need substantially higher revenue to fill due to the high margin.
- The order book increased to R20.04bn (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 8.3% in FY23 to 7.1% as replacement projects are likely to be at a lower margin. With replacement work still at relatively low margins, we decrease our Target Price to R30.00 (from R32.60).