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Aveng ( AEG ) - An excellent long term stock

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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.
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12 REPLIES 12
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Yep I also read that one,..bought 2 days ago ..down 15%
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I will buy some. Will be good in the long term.
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Super Contributor
May be so, but it will be an even better buy at R21 - whence to it is on well its way... Fundamentals mean nothing in this market...
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Regular Contributor
excellent is relative..look at ACL the PE is 2.6, when last have we seen valuations such asthese on blue chips....or should it be brown stuff
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AVI and LJ, I feel your pain too,2 days ago AEG was the only top 40 with good T.A's that I could see.There is no logic to this market,Co's with fair to good reports go down and those reporting poor numbers go up, , go figure.Still, at this point just about anything is a good long term prospect, must just have the cash and the patience to wait.
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Contributor
Hi Guys - I'm also waiting for this share but IMO TA's are, & have been since September, saying either stay out or go short. I agree that a couple of days ago it looked like it had turned. Sure all indicators are showing oversold but remember the "trend is your friend". Whether you look at (for example) 10/20, 7/14 or 7/28 ema crossovers for trend direction - they all crossed over & pointed south in Sept. & haven't crossed back since. Even the 200day sma is starting to point negatively and has recently been crossed by the 50day sma. VPT is sharply down and DX+ way above DX- etc. The 2-month downtrend has all been at higher than avg volumes. All above is OMO. Good luck & I hope that it turns soon!
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Frequent Contributor
I don't think I would pay more than 2200cps for this share. It's still dropping and in this market, I think it's possible that it will reach that level. I'm basing this price on a simple discounted dividend model. Assumptions: 20% expected return and 13% average growth in dividends over 50 years. If you think the expected return is unreasonable, there are other companies in the top 40 which have dropped to levels where the expected return was higher with a lower growth assumption, but then again, I haven't really researched Aveng as well as you guys have (hence I would add in a risk premium and only pay a lower price).
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Super Contributor
20% growth and 13% dividend growth for 50yrs, if you can choose a share in the current market that can achieve this (5-10yrs)on future earnings, the key future earnings please let us know?
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Frequent Contributor
@ Shaun. I'm not sure I understand your question. Are you asking if I can pick a share that can achieve 13% dividend growth in the next 5-10 years? (I'm sure you realise that 13% growth right now is a generous assumption and it is unlikely that any compan
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Super Contributor
Exactly so why buy it at R22? Just trying to understand your principle are there better options - pls provide some examples?
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