15 March 2006
The government’s multi-billion rand infrastructure spending plans are attracting growing interest from South Africa’s investment community, with the listing of two construction-related companies on AltX in the space of a month, and a third to follow close on their heels.
Esor Limited, one of the country’s four largest geotechnical engineering specialists, listed on the JSE’s alternative exchange for small to medium and growing companies on 14 March.
This followed construction group WG Wearne’s AltX listing on 21 February, and according to Business Day another construction-related company, PSV Holdings, is due to list in April.
The government’s budgeting of a massive R372-billion for upgrading and building of new infrastructure over the next three years is set to be a powerful growth driver for South Africa’s construction industry.
Added to this is the country’s preparations for hosting the 2010 Football World Cup, which will see stadiums being upgraded and new ones built, associated work on roads and airports and knock-on expansion in the hotel and leisure industry.
Investor confidence in both Esor and WG Wearne was evident, with the latter listing at almost double the price of its earlier 100c a share private placement.
In the case of Esor, 5.3-million shares changed hands within two hours of listing, in 320 transactions with an aggregate value of R10.2-million. The share hit an early high of over R2.05 after a strong debut on the exchange at R1.83, giving the company a market capitalisation on listing of R219.6-million.
Esor is celebrating its thirtieth year of profitability, with projected revenue to February 2006 of R117.3-million, up 17% on 2005, expected to yield a net profit of R11.9-million.
“Esor’s net profit forecast for 2007 of R15-million is underpinned by an order book for the current financial year that is already healthy,” CEO Bernie Krone said in a statement issued by AltX.
The company’s new contracts span a range of projects, including an R8.5-million municipal stormwater outfall pier at Umhlanga in KwaZulu-Natal, a R7.5-million project on the Delft-Gateway Collector Sewer in Cape Town, and a R4.5-million piling contract for luxury residential units in the Zimbali Coastal Resort in KwaZulu-Natal.
Krone said Esor’s order book could benefit from a planned new terminal at Johannesburg International Airport, as well as from construction work associated with one of government’s most profiled infrastructure projects, the Gautrain rapid rail link connecting the airport, Johannesburg and Pretoria.
Noah Greenhill, head of business development at the JSE, said it was “heartening to see a company such as Esor, in the infrastructure environment, successfully taking advantage of the current growth opportunities.”
A partnership between the JSE Limited and the Department of Trade and Industry, AltX gives smaller companies the opportunity to issue new shares, raise capital, widen their investor base and have their shares traded in a regulated market.
Launched in October 2003 as a parallel market to the JSE, AltX is specifically aimed at fast-growing businesses, start-ups, family-owned businesses, black economic empowerment companies and junior mining companies.
In its early days, when AltX comprised a handful of “transferred” listings, sceptics wrote the market off as a “junior bourse” that would soon fizzle out.
Now, as Fin24 correspondent Marc Hasenfuss noted recently, “the AltX functions as a vibrant little corner of the JSE with 16 listings (and a few more in the pipeline) with a collective market capitalisation that should shift closer to the R5-billion mark in the months ahead.”