Murray & Roberts produced strong revenue growth in 1H23, above the restated financials, taking into account the lost Australian operations. Earnings, however, were eroded by higher finance costs and a taxation issue that the group is carrying. The group order book weakened during the period as work was delivered, but there are sufficient ‘near orders’ to replace the work. Along with increased activity in the Americas and SA’s renewable energy market, we expect an improved order book by year-end. We do have concerns over SA’s public sector renewable energy market and the future of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Bid Window (BW) 6 saw only 16.5% of planned capacity awarded, with the remainder of projects not awarded due to insufficient grid capacity. With the tediously slow rollout of large-scale transmission tenders, we believe that MUR’s focus should shift to private sector renewable energy, especially if the stop-gap substation transfer capacity cannot be sufficiently increased. The outlook for MUR is positive. There is significant potential for growth from the Mining platform in the Americas, which could be a driver of profitability and should improve further as TNT secures new work after the Covid slump. The PIW platform is expected to break even in FY23 and return to profitability in FY24 through the BW 5 awards. Its continued success is dependent on its ability to secure sufficient private renewable energy work, in our view, and we expect the PIW platform to outperform once transmission-line projects are brought to market. While that is unfortunately unlikely to happen in the short term, it could secure substation projects to sustain the platform and potentially aid the recovery of the REIPPPP.
