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Cement upstart and irrepressibly confident Sephaku released a Sens announcement proclaiming the bright future it sees for cement demand in South Africa at the same time as main man in the cement game – Pretoria Portland Cement – released an earnings warning. Sephaku Holdings [JSE:SEP] announced it’s building another plant in Limpopo as it readies itself to tuck into the local market by 2014, when its Aganang cement and ash plants are completed and SA’s demand for cement is hopefully healthy again.
However, it’s hard to value a share when its developments aren’t yet finished. So perhaps we’ll have to review its investment value in the next two years.Meanwhile, keep your ear to the ground – these guys are fiercely ambitious and its share price increased by 5% on the day of the announcement. According to its results for the six months to end-December 2010, Sephaku’s tangible net asset value increased from 190c to 434c. Let’s also not forget Africa’s biggest cement group – Dangote Industries – pumped close to R1bn into Sephaku for a slice of the South African pie.
Traditionally, PPC is the one-stop share for exposure to the cement industry and pleasing dividend payouts. However, analysts are now questioning whether it can maintain its high levels of profitability. With a 40% drop in expected earnings, it will be very difficult to spend money on new equipment and still be able to declare impressive dividends.
Sephaku will be coming off a low base and is offering investors an exciting growth story. That is if Government’s planned infrastructure spending plan starts to take off. Sephaku says it’s a case of when, not if.
However, it’s more likely that by the time Sephaku’s flashy plants are completed, that there’ll be an oversupply of cement in the market. This is a wait-and-see play, there’s no need to get in there soon.
However, it’s hard to value a share when its developments aren’t yet finished. So perhaps we’ll have to review its investment value in the next two years.Meanwhile, keep your ear to the ground – these guys are fiercely ambitious and its share price increased by 5% on the day of the announcement. According to its results for the six months to end-December 2010, Sephaku’s tangible net asset value increased from 190c to 434c. Let’s also not forget Africa’s biggest cement group – Dangote Industries – pumped close to R1bn into Sephaku for a slice of the South African pie.
Traditionally, PPC is the one-stop share for exposure to the cement industry and pleasing dividend payouts. However, analysts are now questioning whether it can maintain its high levels of profitability. With a 40% drop in expected earnings, it will be very difficult to spend money on new equipment and still be able to declare impressive dividends.
Sephaku will be coming off a low base and is offering investors an exciting growth story. That is if Government’s planned infrastructure spending plan starts to take off. Sephaku says it’s a case of when, not if.
However, it’s more likely that by the time Sephaku’s flashy plants are completed, that there’ll be an oversupply of cement in the market. This is a wait-and-see play, there’s no need to get in there soon.
