Key message: Diversity of earnings helps replace high-margin Beitbridge project.

  • Raubex recently reported 1H FY24 results. HEPS increased 19% on a 15% and 14% increase in revenue and operating profit. An interim dividend of 63c (3x cover) was declared.
  • Materials Handling & Mining: Bauba performed well and contributes the bulk of the divisions earnings. Earnings should at least maintain on the back of stable chrome ore sales, with growth through production expansion and ore processing. Bauba is creating work for other Raubex entities (SPH, B&E) The 5-year Namdeb contract has now commenced. Capex was high at R732m to fund Bauba expansion and Namdeb equipment.
  • Construction Materials: High costs (fuel, bitumen) impacted margins. 75% of bitumen requirements are now imported (the associated price volatility can be difficult to recover from customers). Activity levels are picking up in the north of SA.
  • Roads & Earthworks: Excluding the Beitbridge impact in the comparable period, revenue and OP increased 4% and 122% respectively (margin increased to 5-6%). SANRAL projects are performing well, and private concession projects provide diversity. The Senqu Bridge project (RBX portion R800m) commenced after some delays.
  • Infrastructure: Australia continues to perform well. Excluding the Beitbridge contribution in the previous period revenue and OP increased 50% and 114% respectively. Renewable energy projects in the private sector are a focus with delays in the public REIPP process.
  • Raubex has successfully replaced the high-margin Beitbridge project work and has been able to grow earnings off this high base (although without Bauba earnings would have declined). The diversity that Raubex has built up over the years is paying dividends and should help protect against possible SANRAL delays due to the cancellation of most recent tenders.
  • The order book maintained at R20.29bn (Feb 2023: R20.04bn), with a project burn rate of R50m/day. Relative to a very strong 2H FY23 we expect FY24 HEPS to be flat YoY with growth into FY25, and we increase our Target Price to R32.50 (from R30.00).

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