While the JSE-listed construction sector has left many investors scratching their heads and wondering if there is value to be found, analysts seem to be casting an eye over Group Five (JSE:GRF) as offering a potential buying opportunity.
The construction group, which has a market capitalisation of around R4.7 billion and trades on a forward price to earnings multiple of around 9 times earnings, appears to be attractively priced. This is according to stockbrokerage Imara SP Reid, which recently upgraded the share to a ‘buy’ pointing to the fact that it was on the cusp of winning a R4 billion contract in Ghana.
According to nine polled analysts on FT.com the consensus view for the share is that it will outperform the market; the median 12-month forecast is a share price of R47.37. With the share price currently hovering around R42, this suggests upside of around 11% for the 12-month period.
Brokerage SBG Securities rates the stock as a ‘hold’ but have a 12-month price target of R49 per share. Pointing to the Cenpower contract in Ghana they told clients: “If the contract were to be included in the construction order book it would result in a 32% increase in FY14 to R16.5 billion (41% outside SA) vs R12.5 billion in FY14 representing the largest order book the group has achieved, based on our research. The order book implies 123% coverage of the FY14 revenues providing a good line of sight to top line growth over the forecast period.”
FNB Securities told clients that the share looks attractive on both a fundamental and a technical analysis basis. It recommended that the entry levels for a long position for conservative traders will be R40.50 and more aggressive trades should be entered at R41.40.
Stop loss should be triggered R38.70 and targeted profit taking levels are R43.30 for conservative traders and R46.10 for aggressive traders.