Our opinion on the current state of RAUBEX(RBX)

Raubex is a well-established construction company that started operations in 1974 and went public on the Johannesburg Stock Exchange in 2007. The company operates across three main divisions: construction, materials, and infrastructure. Recently, Raubex has diversified its portfolio in response to the reduction in road-building work, particularly from Sanral, which has significantly cut the value of the tenders it issues. This diversification includes venturing into renewable energy sectors, securing R500 million in contracts for projects such as the Droogfontein photovoltaic farm and the Copperton wind farm in the Northern Cape.

Raubex has also expanded its geographical footprint beyond South Africa, with operations in Cameroon, Namibia, Botswana, and Zambia, and owns Westforce Construction in Western Australia. The company’s expansion and diversification strategy have positioned it well to capitalize on a broader range of opportunities across Africa.

In addition to renewable energy projects, Raubex has seen a resurgence in contract work from the South African government and Sanral, from which it has secured R6 billion in orders. This is a testament to its robust management practices and its ability to closely control costs while maintaining a strong balance sheet.

For the fiscal year ending 29th February 2024, Raubex reported a 13.8% increase in revenue and a 21.3% rise in headline earnings per share (HEPS). More impressively, the company’s order book grew by 27.5% to R25.55 billion. Detailed financial results showed significant increases in operating profit, profit before tax, and profit after tax, with group earnings attributable to owners of the parent reaching R847.6 million, up from R704.3 million in the previous year.

Given its current performance and strategic initiatives, Raubex appears to be undervalued with a price-to-earnings (PE) ratio of 7.24, making it an attractive buy in periods of economic optimism or when market conditions show signs of improvement. Technically, the stock has been on an upward trend since March 2023 and recently broke through resistance at around R30 per share. It was added to the Winning Shares List (WSL) on 21st March 2024 at a price of 3031c.

Overall, Raubex is positioned to benefit from any significant upswing in the South African economy, making it a compelling option for investors looking for exposure in the construction and infrastructure sectors, particularly those geared towards renewable energy and African markets.