Our opinion on the current state of RBX

Raubex (RBX) is a construction company that was started in 1974 and listed on the JSE in 2007. The company has three divisions in construction, materials, and infrastructure. Recently, with the dearth of work in road-building, especially from Sanral (who have halved the value of the tenders which they issue), the company has branched out into solar and wind energy and has won contracts worth R500m in this area, doing work on the Droogfontein photovoltaic farm and the Copperton wind farm in the Northern Cape. The company is bidding for contracts all over Africa and has benefited from the increase in contract work from the South African government, especially Sanral from whom it has won R6bn worth of orders. However, this is a well-managed company that is managing its costs closely and which has a strong balance sheet. The company has businesses in Cameroon, Namibia, Botswana, and Zambia and owns Westforce Construction in Western Australia. In its results for the year to 28th February 2023 the company reported revenue up 32,2% and headline earnings per share (HEPS) up 32,1%. The company said, "The performance is largely attributable to the successful completion of our flagship Beitbridge Border Post project, a full year contribution from Bauba, while SANRAL projects in KwaZulu-Natal gained momentum. The Western Australian operations contributed 19% to the Group's total operating profit, demonstrating the robust performance of these operations". In a trading statement for the six months to 31st August 2023 the company estimated that HEPS would increase by between 15% and 20%. Raubex is one of those companies that will benefit directly from any significant improvement in the South African economy. The share looks cheap on PE of 6,54. In our view, this is a share to buy on weakness when things begin to improve in this country's economy. Technically, it was in a strong rising trend until May 2022 and since then it has been falling. We suggest waiting for a clear upside break through its downward trendline.