Key message: Roads and renewable energy keep the order book full – but as yet no general infrastructure spend uptick.
- Raubex reported FY26 results. HEPS increased by 2% to 611.3c on a 5% and 12% increase in revenue and operating profit respectively. A final dividend of 121c was declared (total dividend 202c). The order book increased by 12% to R31.46bn with continued strong activity in the roads and infrastructure sectors.
- Key takeaways from the discussion: Bauba had a strong 2H that added to the continued good performance from the Roads & Earthworks and Infrastructure divisions. This boosted the operating margin to 7.9% (from 7.4%). Bauba was boosted by the start of PGM sales in January 2026 and higher chrome prices. The strategic decision to sell Bauba remains intact although the process is not expected to be concluded in the short-term. Raubex is looking to exit the mining business completely and will not hold onto any of Bauba assets. We believe that this is the right decision as the mining sector is very cyclical and more capital intensive than Raubex expected. However, achieving the R1.5bn NAV value in a sale may prove challenging.
- Construction Materials demand remains strong, driven by roads projects. We expect this to maintain given the high activity levels in that sector. The expected restarting of the ferrochrome smelters should boost bentonite sales. The Roads & Earthworks division continues to execute well, but replacement of the order book is a risk as the order book declined in 2H FY26. While R5.5bn of tenders await adjudication, SANRAL has slipped back into a lull – the length of which is always uncertain.
- While the loss-making project in Australia was a disappointment, the risk of further problem contracts is low as long as Raubex sticks to simple contracting work. Integrating all of Raubex’s road and civils capabilities in Australia is a work-in -progress.
- Raubex continues to stick to their strength – low-risk contracting that delivers a steady margin. This should help maintain earnings stability, although order-book replacement could be challenging should SANRAL tenders enter a period of inactivity. Margin growth from current levels (ex-Bauba) is linked to increased infrastructure spend due to the shortage of large liquid contractors – something still awaited from government. We increase our FY27 and FY28 HEPS forecasts by 2% and 3% respectively. We maintain our Target Price at R66.