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SIMON BROWN: I’m chatting now with Lonwabo Maqubela from Perpetua Investment Managers. Lonwabo, I appreciate the time. Wilson Bayly yesterday eventually sent a Sens around their Australian operations, which went wobbly a little while ago, and they say no more financial assistance will be going to the unit.
The stock actually didn’t seem to mind, I suppose. In a sense that’s better than pouring more money over it. But looking at the share price, it’s back at 2007 levels and that’s probably the winner in our construction space. It’s a bit of a nightmare out there.
LONWABO MAQUBELA: Good morning. There has been kind of a complete blood bath in the construction sector for some time. The market didn’t really respond to that announcement by WBHO yesterday. They had actually previously flagged it, but there’s still one more contingency. The state of Victoria’s got to actually approve the kind of liquidation terms, and then that will be the final confirmation that the billion and a half that they’re pouring in, or the guarantee that they’re pouring in will be the final kind of payment required. So that’s probably what the market is waiting for.
But I agree with you. The share at R76 looks extremely attractive. I think if you stripped out Australia, it’s trading on five times earnings. And actually when you look at the health of the order book, it looks extremely strong. It is up by 45% to the year-end to June, and has actually grown by another 20% or so since the year end. So there’s finally demand in kind of the construction sector.
SIMON BROWN: I was going to say, would that be because certainly Wilson Bayly’s always been in many senses the better option on the local market? Of course there’s a Aveng, there’s Murray & Roberts, there’s even Stefanutti. Is Wilson Bayly still the sort of granddaddy on the JSE?
LONWABO MAQUBELA: You know, when we look at the order book, Simon, we do think so, particularly because where the growth is coming from is in the segment [with] above R1 billion projects, when we think that in that segment there aren’t many players remaining that can play there. Part of the reason is you’ve got to get bank guarantees, etc, so you’ve got to have the balance sheet to support them, and actually the rest can’t. So we do think that Wilson Bayly is kind of the last man standing and should actually benefit as a result. Those in Australia complicated that for a while, but we are of the view that they should actually benefit disproportionately.
SIMON BROWN: Okay. So Wilson Bayly. Certainly Murray & Roberts, the market didn’t like their update or their results, and Aveng is a favourite of the sort of penny stockers. But it really has not been a great space. We’ll leave it there.
That’s Lonwabo Maqubela at Perpetua Investment Managers.
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