GAUTRAIN “A BIG BLIP” ON M & R RESULTS?
Posted on 15 January 2010 by Railways Africa Editor
According to an observer on All Africa Global Media, the Murray and Roberts group (M&R) expected half-year bottom-line diluted headline earnings per share to be between 15% and 20% lower than in the comparable previous period. In August 2007, the private investor portfolio paid a gross share price of R71.04 for its holding in M&R. At the portfolio’s price, the historic price-earnings ratio was 22 and the earnings yield 4.5%. These ratings were justified on medium-to-long-term average annual growth in bottom-line earnings per share of about 30%. The investment fundamentals at the time confirmed that the target was achievable. The market, even more optimistic, took the price- earnings ratio for a short time to more than 30. With bottom-line earnings growth of 69% in the 2008 financial year, the portfolio’s historic price-earnings ratio was down to 12.9 and the market’s ratio was 19.
In 2009, following global economic woes, M&R’s bottom-line earnings per share rose by 23%. In the course of some two years, the investment returned better than the portfolio’s target. Historically, the price-earnings ratio on the portfolio’s investment at R71.04 had moved down to 10.52 and its earnings yield was 9.5%. In August 2009, M&R’s published 2008 results suggested that 30% growth in bottom-line earnings per share was achievable. The shares were on a forward price-earnings ratio and an earnings yield of 12.3%. The share price at the time R48 and the historic price-earnings ratio was 5.5 and 18.2%, well below the portfolio’s guesstimated forward ratings. The market was probably rating the share price on the basis that M&R’s bottom-line earnings would barely improve over 2010.
Since then the share has traded at over R60 before falling back to around R51. “Unfortunately,” says the All Africa Global observer, the Gautrain project could be a big blip.”
[Murray & Roberts is a 25% shareholder in the Bombela consortium and a 45% shareholder in a joint venture sub-contracted to complete the Gautrain civil works. – editor
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