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Views Article – Sharenet Wealth

Share Picks, South Africa

Murray & Roberts: Spending R250m To Buy Its Own Shares

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At a time when many construction companies are hunkering down, just hoping to live out the current recession, it is heart warming to find companies with good news in the sector.

Stand up, and take a bow Murray & Roberts (M&R), who have just announced a R250 million buyback of its shares, in a move that could put fresh heart into the forlorn construction sector.

M&R has exited the traditional heavy construction market and reached a position where its portfolio of businesses is aligned with its strategy to be a multinational engineering and construction company focused on the natural resources market.

Some 80% of future earnings are expected in either Canadian, US or Australian dollars.

“There is a consensus amongst researchers that the metals and mineral cycle has turned, after a down cycle of several years,” says Ed Jardim, Group Investor and Media Executive for M&R.

 “We have recently concluded our three-year business plans and analysis of our project pipeline, and near orders indicate that market activity, especially in the global metals and minerals sector is picking up. Activity in the oil and gas sector is expected to only improve in the medium term, although we have noted that clients have started to award smaller tenders.”

Where will the growth come from?

“Mainly from metals and minerals, followed by oil and gas in the medium term. Our growth expectation is based on research showing that the commodity cycle is busy turning, and this bodes well for our business that is providing services to the global natural resources sector.”

M&R says there are several sizeable project opportunities in the metals and minerals market they are bidding for.

In many cases, M&R is one of two or three bidders shortlisted for these projects.

Why pursue a buyback and not a special dividend?

“When shares have been trading for a long period at prices below intrinsic value, whether due to negative sentiment or any other reason, a share buyback is preferred over a special dividend.”

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If M&R directors know the inside story on future profits, maybe investors should follow their example, and buy the shares.

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Jeremy Woods

Jeremy Woods trained for three years as a journalist on the Herts Advertiser, St Albans, in the U.K. Once qualified, he left England to work as a crime reporter on the Vancouver Sun in Canada. After three years, he worked for the Los Angeles Times as a trainee financial journalist, spending most of his time reading company accounts and finding publishable stories in them. He moved to South Africa and for the last five years in journalism worked for the Sunday Times, Business Times, as Investment Editor. He has also published a financial thriller called “Special Payments”, which was a best-seller on publication, and optioned three times for a film.


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