Publications
Partners
Aveng [JSE:AEG] has long been a defensive stock for investors seeking exposure to the construction industry. Yes, at some point investors actively wanted exposure to this sector. Believe it. The group is geographically and operationally diversified, but problems experienced at some of its Australian projects, plus the strong rand and Australian dollar, are expected to knock earnings by up to 40% for its year ended June 2011.
Followers of the construction counter’s fortunes won’t be shocked by that drop: we’ve seen worse on this here trip back down to the trough. Aveng’s earnings have also been knocked by a R129m Competition Commission settlement, the group reported in a trading update. However, that settlement is for the old Steeledale Manufacturing case, not the current investigation into collusion by the commission, which will most likely only be realised in a few years’ time. Let’s hope activity has picked up by then.
Things may be bad for the construction sector but, unlike some of its rivals, Aveng hasn’t yet seen the need to sell off underperforming assets or consider a rights issue. It will be interesting to see how much of its cash balance was spent during the year. Many construction firms are burning cash to keep their CAT machines moving and tenders submitted – risky business investors should keep an eye on. Though its order book grew by 3% over the year what we’d like to see is cold, hard cash. And soon.
Aveng’s price, at 3586c, is down from its peak of 7292c/share during the construction boom of 2007/2008. Though the very gutsy investors will be punting this share, Finweek believes there’s still a decent amount of money to be lost by getting in now.
Followers of the construction counter’s fortunes won’t be shocked by that drop: we’ve seen worse on this here trip back down to the trough. Aveng’s earnings have also been knocked by a R129m Competition Commission settlement, the group reported in a trading update. However, that settlement is for the old Steeledale Manufacturing case, not the current investigation into collusion by the commission, which will most likely only be realised in a few years’ time. Let’s hope activity has picked up by then.
Things may be bad for the construction sector but, unlike some of its rivals, Aveng hasn’t yet seen the need to sell off underperforming assets or consider a rights issue. It will be interesting to see how much of its cash balance was spent during the year. Many construction firms are burning cash to keep their CAT machines moving and tenders submitted – risky business investors should keep an eye on. Though its order book grew by 3% over the year what we’d like to see is cold, hard cash. And soon.
Aveng’s price, at 3586c, is down from its peak of 7292c/share during the construction boom of 2007/2008. Though the very gutsy investors will be punting this share, Finweek believes there’s still a decent amount of money to be lost by getting in now.
