Aveng Rises by Record as JSE Sentiment on Construction Improves

  • Biggest cement producer PPC advances to two-month high
  • Industry performance, finances improving: Vunani’s Santangelo

Aveng Ltd., South Africa’s largest construction company by sales, jumped by the most on record in Johannesburg trading after forecasting better earnings and as sentiment toward the industry improves.

Aveng surged as much as 23 percent and was 17 percent higher at 5.52 rand by 11:43 a.m., taking its advance this week to 38 percent. The company said Aug. 10 it expects a smaller full-year loss. The seven-member FTSE/JSE Africa Construction & Materials Index, which dropped more than 20 percent from April 20 to July 11, rose a fourth day on Friday.

“If you look at the latest movements in the construction sector, after Aveng’s results, you’re starting to see a little bit more positivity coming into the sector,” Michele Santangelo, an analyst at Johannesburg-based Vunani Private Clients, said by phone. “That’s why they’re buying at these depressed levels, in anticipation of the market improving a little bit; that it’s not as dire a situation as expected. You’re starting to see fewer losses than in the past and maybe a consolidation in the industry.”

PPC Ltd., the country’s largest publicly traded cement maker, rose for a fourth day, gaining 5.8 percent to 9.63 rand, on course for the highest close since June 13. Murray & Roberts Holdings Ltd., the second-largest construction company, climbed 4.2 percent to 14.77 rand, advancing for a fifth day. Group Five Ltd. rose as much as 4.1 percent.

PPC in June said it arranged 4 billion rand of bank guarantees to underwrite the sale of shares to existing investors, adding to facilities it received a week prior to redeem bonds. Construction of its Zimbabwe plant, one of four that the company is building in Africa, is on track for completion this year, Johannesburg-based Business Day reported Aug. 2, citing Chief Executive Officer Darryll Castle.

PPC’s “turnaround strategy is probably quite positive overall given the situation that they’re in,” Santangelo said. “As the market absorbs that information, they’re probably thinking there’s some value in PPC at these levels if they can sort out all their debt restructuring and capitalizing their balance sheet through a rights issue.” An improvement in the company’s finances “is probably one of the biggest concerns for investors at the moment,” he said.

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