Murray & Roberts (MUR) – A speculative buy

MUR’s 1H24 was challenging but much improved. Revenue growth was driven by the PIW segment on the back of two wind farm projects awarded in FY23 and supported by smaller transmission-line projects, while the Mining segment faced setbacks in Africa, constraining topline growth.

Growth was also held back by the group’s weak SA financial position. It was denied asset-backed financing and had its bank accounts frozen, leading to a sharp reduction in capex and loss of work. MUR has to repay its term debt this financial year but does not have the balance sheet to do so. It is currently in negotiations with banks in the hopes of finalising the refinancing within the next three months. If it is unable to do so, operations will be constricted and its only recourse may be to sell another business as a rights issue is unlikely to be supported.

MUR has taken great strides in improving profitability and cash flow. It is in the process of restructuring its businesses, reducing overhead costs and rightsizing its capital structure. As a result, the group is set to be profitable in FY24 and, with no discontinued operations expected in FY25, operating profit is likely to improve.

We do have concerns about the weaker order book and near orders, and the effect that a lack of access to funding could have on the procurement of work in SA and the rest of Africa. However, MUR is confident that it will be awarded two mining contracts in 2H24. The question is, will it have the balance sheet to execute them?