CONSTRUCTION stock earnings are expected to recover next year but there may be some improvement in results from the third quarter of this year.
The construction sector struggled after the end of the 2010 Soccer World Cup because of a lack of reliable projects in South Africa. But improvements in the global economy saw local companies undertake projects abroad. Meanwhile, the state has started providing tenders for its multibillion-rand infrastructure plan.
"I think a recovery in earnings will only take place in 2014. I would start looking at construction stocks’ earnings from the third quarter of 2013," Afrifocus analyst Hugan Chetty said on Tuesday.
The latest positive news for the sector came from construction company Group Five on Monday. In its trading statement, the company said that it expected its earnings to improve this year. Its earnings for the six months to December were likely to be 10% to 20% higher than for the same period in 2011.
Group Five CEO Mike Upton said late last year that the company had accumulated an order book with high-quality South African projects.
As much as 70% of the projects were local.
Since July 31, Group Five’s share price increased from R22.67 to just more than R30. Its share price closed 2.38% down at R30.75 on Tuesday.
Group Five and other listed companies, including Raubex and Stefanutti Stocks, competed last year for projects aligned to the government’s infrastructure programme.
"We believe we will be the preferred bidder for large parts of the 17 strategic infrastructure projects," Mr Upton said.
Raubex shares have gone up from R13.50 to R17.87 since July, growing 33%.
Some listed companies such as Esorfranki had also picked up work that smaller construction companies had failed to finish.
Infrastructure projects could still be held back by bureaucracy but listed companies were obtaining international business, which pleased analysts.
"Even though we are building a pipeline, many construction companies believe our sector could be much busier. Waiting periods are volatile for projects in South Africa, which makes planning difficult and doing business more expensive," Stefanutti Stocks CEO Willie Meyburgh said.
Avior Research analyst Dirk Noeth said this week that he was particularly interested in the cross-border markets Group Five had taken on.
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