Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      Court battle brewing over contentious Joburg CCTV by-law

      7 July 2025

      Biometrics boss slams home affairs over R10 ID query fee

      7 July 2025

      TCS | Connecting Saffas – Renier Lombard on The Lekker Network

      7 July 2025

      Rain’s new Loop lets you carry your Wi-Fi and music everywhere

      7 July 2025

      Medupi unit 4 rejoins grid, easing winter load shedding fears

      7 July 2025
    • World

      Cupertino vs Brussels: Apple challenges Big Tech crackdown

      7 July 2025

      Grammarly acquires e-mail start-up Superhuman

      1 July 2025

      Apple considers ditching its own AI in Siri overhaul

      1 July 2025

      Jony Ive’s first AI gadget could be … a pen

      30 June 2025

      Bumper orders for Xiaomi’s YU7 SUV heighten threat to Tesla

      27 June 2025
    • In-depth

      Siemens is battling Big Tech for AI supremacy in factories

      24 June 2025

      The algorithm will sing now: why musicians should be worried about AI

      20 June 2025

      Meta bets $72-billion on AI – and investors love it

      17 June 2025

      MultiChoice may unbundle SuperSport from DStv

      12 June 2025

      Grok promised bias-free chat. Then came the edits

      2 June 2025
    • TCS

      TechCentral Nexus S0E4: Takealot’s big Post Office jobs plan

      4 July 2025

      TCS | Tech, townships and tenacity: Spar’s plan to win with Spar2U

      3 July 2025

      TCS+ | First Distribution on the latest and greatest cloud technologies

      27 June 2025

      TCS+ | First Distribution on data governance in hybrid cloud environments

      27 June 2025

      TCS+ | First Distribution on cloud cost management in Microsoft Azure

      26 June 2025
    • Opinion

      In defence of equity alternatives for BEE

      30 June 2025

      E-commerce in ICT distribution: enabler or disruptor?

      30 June 2025

      South Africa pioneered drone laws a decade ago – now it must catch up

      17 June 2025

      AI and the future of ICT distribution

      16 June 2025

      Singapore soared – why can’t we? Lessons South Africa refuses to learn

      13 June 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CambriLearn
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SevenC
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » News » Why Reunert may be worth a punt

    Why Reunert may be worth a punt

    By Agency Staff6 January 2016
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp

    stock-share-market-640

    Reunert has weathered excess capacity and produced commendable bottom-line growth, while still holding onto the cash from the disposal of Nashua Mobile’s subscriber bases, which is earning decent interest income. The group is sitting on a cash pile of R2,7bn with an unlevered balance sheet.

    Management says the funds will be aimed at de-risking operations by diversifying currency income streams. It generates 83% (FY 2014: 84%) of revenue from South Africa.

    While we feel there are other value-enhancing possibilities such as a special dividend or a share buy-back programme, it does seem conducive to buy related businesses at a bargain.

    This is particularly so given the deteriorating business environment for its sectors, which rely heavily on both public and private capital spending. According to a Moneyweb report, corporations are not spending cash, with the top-100 JSE-listed companies sitting on a record R403bn.

    This is not surprising given the poor investment climate characterised by a low-growth economy, commodity price crunch, power outages and unreliable water supply. And government is fidgeting with its much-hyped R1 trillion infrastructure roll-out.

    Reunert’s revenue growth of nearly 7% is commendable given the cyclical nature of its businesses and its heavy reliance on capital expenditure. Most of Reunert’s close peers have been beaten down, registering negative growth during the 2015 reporting season. Exports to Asia and the rest of Africa grew, while Europe shrank marginally and other markets remained flat. The 50% drop in attributable earnings emanated from the recognition of profit from a discontinued operation (Nashua Mobile subscribers) in the prior year.

    Otherwise, attributable earnings from continuing operations rose 146% to R952m. Costs were well contained, boosting the operating margin to 14,1% from 7,5%.

    The board declared a gross final cash dividend of 302c/share (FY 2014: 275c/share). Including the interim distribution, the annual dividend adds to 407c/share (FY 2014: 370c/share), translating into a healthy dividend yield of 6%.

    The company has maintained good metrics over the years. It is trading on a price:earnings multiple of 12, which compares favourably to close peer Altron (negative), its industry (15) and the all share index (19). Its dividend yield has bettered its peers over the past four years and its yield, now at 6%, beats Altron’s 4% and the all share index’s 3%. Reunert’s average return on equity of 23% and return-on-assets of 15% over the past four years is also superior to Altron (3% and 1%). Reunert has a net ungeared position whereas Altron has a net debt:equity ratio of 49%.

    Sectoral fundamentals remain bearish but we are encouraged by the growth Reunert experienced despite demand-side challenges. The group has secured a number of new long-term contracts in applied electronics that are expected to start paying off in FY 2016. These have a hard currency exposure and are expected to bolster operational performance, given the rand’s weakness.

    Furthermore, its cost-containment exercise should continue to expand margins and the cash holdings create a platform to take advantage of value-enhancing opportunities.

    Since 2010, Reunert’s share has struggled, increasing only 25% while the all share index has almost doubled. Overall, prospects are not very exciting and we believe the counter is trading within its intrinsic value but with reasonable upside potential should the macro picture improve.

    Bull factors
    –Sizable cash pile can be used for value-enhancing strategies
    –Drive to grow a multi-currency earnings stream

    Bear factors
    –Overcapacity due to lack of capex and government infrastructure spend
    –Because of lagged contract pricing, falling copper prices put pressure on margins for transactional sales

    Nature of business
    A portfolio of businesses in the fields of electrical engineering, information and communication technologies and defence and allied technologies. Reunert’s operations are divided into three divisions: CBI Electric, Nashua and Reutech. The group operates mainly in South Africa with minor operations in Australia, Lesotho, the US and Zimbabwe.

    Disclosures

    The analyst has no financial exposure to the instrument discussed. The opinion represents his true view.

    • This piece was first published on Moneyweb and is used here with permission


    Altron Nashua Mobile Phibion Makuwerere Reunert
    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleIs SA too obsessed with matric?
    Next Article Over 100 000 speak out on e-tolls

    Related Posts

    Home affairs to roll out restaurant-style self-service kiosks

    6 July 2025

    The real edge in enterprise computing lies in strategic partnerships

    3 July 2025

    South African execs warn: AI projects stalling without strategy

    3 July 2025
    Company News

    Huawei launches next-gen fibre-to-the-room solution

    7 July 2025

    Remote monitoring tools: IT lifesavers or hacker gateways?

    7 July 2025

    The school placement crisis is getting worse

    7 July 2025
    Opinion

    In defence of equity alternatives for BEE

    30 June 2025

    E-commerce in ICT distribution: enabler or disruptor?

    30 June 2025

    South Africa pioneered drone laws a decade ago – now it must catch up

    17 June 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.