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South Africa Builders Richest Since 2008 Seen Extending Advance

         Date: 2012-03-15

           Tag: South Africa, South Africa Builders

Summary: South African construction stocks, trading at their most expensive levels in more than three years, are poised to keep rising on government infrastructure spending, according to RMB Morgan Stanley a…

South African construction stocks, trading at their most expensive levels in more than three years, are poised to keep rising on government infrastructure spending, according to RMB Morgan Stanley and Avior Research Ltd.

The 10-member FTSE/JSE Africa Construction & Building Materials (JCBDM) index, which sank 26 percent last year, has climbed 18 percent in 2012, outpacing a 7.6 percent rise on the FTSE/JSE Africa All Share Index (JALSH). The construction index trades at 13.5 times forecast earnings compared with 11.7 for South Africa’s benchmark measure, the biggest premium since November 2008.

President Jacob Zuma unveiled plans in his Feb. 9 state-of- the-nation speech for a “massive” infrastructure drive help spur investment and support growth in the continent’s biggest economy.

RMB Morgan Stanley raised Murray & Roberts Holdings Ltd. (MUR), South Africa’s second-biggest construction company by market value, to overweight, the equivalent of buy, from equal- weight on Feb. 16, while Avior has buy recommendations on Aveng Ltd., Wilson Bayly Holmes-Ovcon Ltd. (WBO) and Group Five Ltd.

“We’ve got a lot more bullish on construction this year; we think that at some point the negative sentiment probably shifts toward more of a focus on infrastructure build again,” Chris Meyer, chief executive officer of RMB Morgan Stanley, said in a Mar. 13 interview. “Government is under pressure for delivery to create jobs. We think even a small change in that sentiment will improve things.”

The Treasury allocated 844.5 billion rand ($112 billion) to telecommunications, energy, transportation, housing and water projects in the three years through March 2015.


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