Tuesday, 16 October 2012 12:26

Urban Africa growth to drive wealth creation

Significant growth opportunities predicted for the African continent by 2020. In fact with a rapidly increasing population, sharp rise in cost of living and an increased need for employment, migration from rural to urban areas has intensified considerably.

The primary social benefit of this sector of the housing market cannot be denied but there is a bigger, indirect, benefit that affordable housing and construction provides

Finance Minister Trevor Manuel’s allocation of an additional R13,2-bilion to the social grants programme bodes well for ApexHi Properties Limited’s one million square meter retail portfolio

Monday, 19 January 2009 02:00

Construction groups bank on state work

Construction companies are counting on the government’s multi billion-rand spending programme in infrastructure projects to see them through the lean economic times caused by the global credit crunch, which has seen work from the private sector dwindle.

Construction IndustryThe global economic meltdown has created a lot of uncertainty for construction companies, most of which saw private sector work decline towards the end of last year.

A number of private sector clients of construction companies have suffered cash flow problems due to the financial crisis, which has affected certain projects.

From the second quarter of last year, the construction sector has been severely downgraded by the stock market on fears of a recession and depleted future work opportunities.

With commodity prices plummeting in recent months, the mining sector, which provides a big chunk of work to several construction companies, has scaled back on capital expenditure.

However, with the government reiterating that it will not put the brakes on its infrastructure spending programme, construction companies will be seeking more exposure to this public sector investment.

In his medium-term budget speech last year, Finance Minister Trevor Manuel said the government would continue to invest in several areas of infrastructure, including rail, roads, ports and energy in a bid to boost economic growth.

Group Five CEO Mike Upton said last week the group had a “reasonably good” order book to see it through the turmoil. “This (the order book) is quite well in tune with the public sector spending. The private sector has taken a turn for the worst, with capital spending, especially in mining, expected to drop significantly,” he said.

At the end of June last year, the group's one-year order book stood at R8,5bn, which it said at the time reflected its strategic positioning in the public infrastructure cycle with a mix of 65:35 in favour of public works.

“We are not negative at this stage but cautious.

“Our projections are not the same as last year, and we are not seeing the same security of work as we did six months ago. We have seen a number of projects from private sector clients that have been curtailed in recent months due to the credit crunch.”

WBHO CEO Louwtjie Nel said with work from the private sector drying up, the company was shifting emphasis towards government projects.

He said whereas two years ago the split between public and private sector work was about 20:80, that split was now about 50:50.

“We were traditionally focused on private sector clients, but we are now swinging in a big way towards government infrastructure work, such as roads, energy and hospitals — which should get us through 2009 quite comfortably.

“Beyond that, nobody really knows what is going to happen,” he said.

Nel said the group’s civils division was feeling the pinch the most as work, especially from the mining sector, had almost dried up.

“But overall we are now getting well exposed to government spend.”

Murray & Roberts said its outlook for this year had not changed from what it was in November when the group reported that it had been forced to restructure its operations in the light of the global credit squeeze.

The group said then that it had delayed or suspended some of its projects as some of its clients felt the pinch of the credit crunch.

“There are a number of significant public works and other strategic opportunities in the group's domestic and international project pipeline that are likely to proceed and which will provide stability through the difficult times ahead,” it said.

 

Friday, 24 October 2008 02:00

Timely fund boost for Bay stadium

Nelson Mandela Bay will receive a cut of the extra R1,4-billion allocated for 2010 stadiums.

Friday, 22 February 2008 02:00

Construction growth to last at least to 2015

As expected, in Finance Minister Trevor Manuel’s budget, an enormous amount of money is to be spent on infrastructure.

Trevor ManuelAs I mentioned yesterday, there’s no shortage of money to help alleviate poverty and develop our economy — the problem is to manage the resources efficiently.

For construction companies — as I cited from Group Five’s results for the half-year ended December 31 — a fundamental investment problem is the difficulties in managing the awarding and implementation of contracts.

In due course, the infrastructural plans in the budget will be implemented and Group Five and other construction companies will benefit from these.

“In due course” is, of course, an elastic period of time. Even so, there is some solid evidence that the construction sector is in a growth phase that could last at least beyond 2015.

In its 2007 financial year-end (June 30) presentation, Group Five showed a chart of the market outlook for the construction sector. The chart was sourced from Stellenbosch University’s Bureau of Economic Research. The figures used were of real (inflation excluded) investment in construction works.

The chart confirms that the sector is in a five-year growth cycle. In 2003, total construction work was valued at about R25bn, which in real terms was below the figure in 1991 when it last enjoyed a growth phase.

In 1981, the peak year of previous state infrastructural growth, total construction work amounted to R40 billion. Only last year was that figure again reached.

Stellenbosch’s bureau forecast takes this figure to more than R65 billion by 2015, of which the public sector is expected to contribute R50 billion.

Five years ago, Group Five’s share price was about R5,30. Its historic price:earnings ratio then was around five, and its share price trend was boringly flat. But as the cycle sector progressively improved, the company’s turnover and profits rose and the share price responded positively.

In the 2003 financial year the company’s headline earnings per share were 120c. Last year they were 283c. The share price is now at about R51,50 — about 10 times the 2003 figure — but the historic price:earnings ratio is more than 17.

Murray and Roberts (M&R), the construction counter we hold in the Private Investor portfolio, is on an historic price:earnings ratio of more than 20. Rather than believing M&R is overpriced, there is good reason to believe that Group Five is underpriced.

My guesstimate of its forward fully diluted headline earnings per share for the financial year ended June 30 this year is about 330c, giving the share a forward price:earnings ratio of about 15,5 — a bit low relative to earnings growth expectation of about 30% 40% over the medium term.

Group Five also looks an interesting buy on the technical indicators. The share price is still in a bear trend, but the price has broken through all its moving averages. It has a count to R58, a less probable count to R63 and its resistance is around R52.

 

 

Despite rand weakness, inflation moving upwards and SA’s electricity crunch, the government will forge ahead with its infrastructure development programme

Thursday, 24 May 2007 02:00

Politicians back EL port expansion plan

Port expansion plan for East London is getting the support of Eastern Cape politicians

Thursday, 08 March 2007 02:00

State limits cash for stadiums

Trevor Manuel is not budging on the R8,4 billion he has budgeted for the 2010 soccer World Cup stadiums

Although Finance Minister Trevor Manuel did not specifically include any property-friendly items in his budget speech last week, his scrapping of taxation on interest for pension funds is expected to be a major boost for the listed property sector.

Page 1 of 4

Most Popular

The next wave of property development in Africa is coming

Jul 31, 2019
 NIYI ADELEYE
The past decade has seen South African property developers and investors forge their way…

SA focused REIT Dipula makes bid merge with SA corporate real estate

Jul 31, 2019
 IZAK PETERSEN
Dipula Income Fund, a diversified, South-African focused and Black-managed REIT, today…

Vukile’s Spanish assets top €1bn, and it gets a credit ratings upgrade

Aug 02, 2019
 LAURENCE RAPP VUKILE
Vukile Property Fund today announced that its listed Spanish subsidiary, Castellana…

Growthpoint Investec African Properties steps up its acquisition trail in Africa

Aug 06, 2019
 THOMAS REILLY
Growthpoint Investec African Properties (GIAP), the pan-African real estate investment…

Credit and mortgage balances in the first half of 2019

Jul 31, 2019
Jacques Du Toit Absa Home Loans
Credit and mortgage balances in the first half of 2019, with divergent home loan…

Please publish modules in offcanvas position.