Investment Advisory: Invest in Raubex, offload Sasol stocks
In the dynamic world of South African business, two notable companies, Raubex and Sasol, have been making headlines. Let's take a closer look at their current investment outlooks.
Raubex, an infrastructure development and construction materials supply specialist, presents a favourable mid-term investment case in the industrial/construction sector. The company's cautiously bullish stance is underpinned by solid sector performance and stable macroeconomic conditions. Raubex's market capitalization stands at approximately ZAR 8.74 billion, with a price-to-earnings (P/E) ratio of 8.02, indicating potential undervaluation. Moreover, the company offers an attractive dividend yield of about 4.12%, making it a lucrative option for income-focused investors.
Recent developments at Raubex include the recovery of the chrome price, which, combined with management's cost-saving interventions at Bauba, point to a significantly improved outlook for the company. However, it's worth noting that Raubex's financial results were delayed due to investigations into a whistleblower's report, causing a brief dip in its share price. The market was reassured that nothing was amiss, causing Raubex's shares to recover sharply.
On the other hand, Sasol, a major South African integrated energy and chemical company, presents a more complex investment picture. The company's earnings are exposed to multiple currencies and commodity prices. While Sasol's future prospects depend on global oil and gas prices, South African economic conditions, and its strategic initiatives, including transitioning to cleaner energy, current detailed outlook information is not readily available.
Sasol's market value is approximately R59bn, but the company has consistently struggled to align earnings per share with free cash flow per share. Additionally, Sasol faces challenges as a carbon-intensive business on the ESG front. Recent management changes and a questionable capital allocation track record also cast doubt on Sasol's investment case. The company's share price is down two thirds from about R340 at the end of July 2022.
In conclusion, Raubex offers an attractive investment opportunity with its favourable valuation metrics and dividend yield, while Sasol's investment case is more uncertain due to its questionable capital allocation and recent management changes. It's essential for investors to conduct further up-to-date market analysis to make informed decisions about these companies.
- Raubex's mid-term business outlook in the industrial/construction sector presents a promising investing opportunity, especially for income-focused investors, considering its attractive dividend yield and potential undervaluation.
- Sasol, an integrated energy and chemical company, poses a more complex investing scenario due to factors such as its exposure to multiple currencies and commodity prices, ongoing transition to cleaner energy, questionable capital allocation, and recent management changes.
- In the realm of South African finance, both Raubex and Sasol are significant companies that engage in business activities ranging from infrastructure development to energy mining, offering varying investment opportunities.
