Raubex (RBX) – Gaining ground

Raubex produced a strong set of results in FY22 albeit aided by the short-term Beitbridge border post project. Excluding this project, RBX achieved a healthy 17.3% y-y growth. This growth was driven by the Roads and Earthworks (R&E) and the Infrastructure segments, while the Materials segment growth disappointed.

Materials struggled due to plant hire revenue being cut by c. R310m. Its core business, however, showed a strong recovery with revenue increasing above pre-Covid levels and volumes improving c. 19% y-y. This strong performance was dampened by the large plant upgrade and Mozambique impairment which reduced profitability. The c. 24% y-y increase in the order book and increased demand for materials suggest a positive outlook for FY23, in our view. We are concerned about its mining company purchases. Although the prospects are promising, Bauba is the only mine producing ore, but it has not made a profit in three years.

The R&E segment had strong results, driven by the large book of SANRAL projects. It outperformed thanks to Beitbridge but once completed, revenue and GPM could normalise. In our opinion, RBX has too large an exposure to government and should diversify or the low margins could persist. Materials volumes recovered and along with roads building, this segment could benefit from the KZN rebuild. The construction mafia does, however, remain a threat to the business.

Growth in the Infrastructure segment came from Australia and Beitbridge. Excluding Beitbridge, growth slows to +5.5% y-y, mostly due to the -22.5% y-y decline in core segment revenue. The renewable energy (RE) division provides the best opportunity for growth, in our opinion, and if it receives all expected projects, it could earn c. 7.5bn revenue over the next four years.