Hi guys, I quote an extract from
www.stockpickers.co.za I like this share an welcome your views. Aveng (AEG) previously had a HOLD/SELL recommendation from us, when it was at much higher levels, but at the current price of around 4400cps, we are sure that the company is undervalued. In fact, during the group's results presentation for the year to end-June 2008, financial director, Dennis Gammie, suggested that the share should be trading at around 7800cps. We are not convinced that it is that undervalue, as we felt that the when the share was trading at around 6700cps, it was a bit overpriced. Our concerns related to the sustainability of results. However, we do feel quite certain that its fair value is above 5000cps. The share has obviously been hammered with the market in October, but there might have also been undue concern over the prospects of the steel division. The company is sitting on a stock pile of cash, and has a pretty attractive order book. In fact, the company announced that the order book to the end of September 2008 increased to R27-billion, compared with the R25,8-billion order book to June 2008. Up until now, demand in the construction, mining and engineering environment has been strong in Africa, Australasia and the Pacific. Currently Australasia, and South Africa are taking a bit of pressure with commodity prices under pressure. Aveng chairperson Angus Band did indicate that Aveng's customers may find it more difficult and more expensive to fund projects which may, if the current conditions continue. With all the cash that Aveng is sitting on, they are well placed to take advantage of acquisition opportunities. We would think that Aveng should still be able to achieve double digit growth for 2009 and 2010 and would therefore now recommend the company as a BUY.