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PRANCING HORSE

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THRESHOLD
Super Contributor
Do you still follow construction? (You mentioned you had a connection with Stefanutti at one point?) AEG is moving into the "irresistibly cheap" category...
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11 REPLIES 11
partridge
Super Contributor
Ignoring the past - what will cause this to turn around - is it a management failure to adopt to the environment?
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THRESHOLD
Super Contributor
They are quite big in Australasia - I have a lot of confidence in growth in Oz as we emerge from the current malaise. There has been no meaningful mine development for 7 years now. World weather patterns may force a revision of dam placement. They may even lead to wholesale migration. The Oz population will expand on the Euro troubles - this should serve to drive her economy. The "printing money" solution is at an end - the next phase will have to be public works programmes or some such. The rising green tide will accelerate the rollout of clean power stations. There is a worldwide shortage of these types of engineers. She has a net tangible asset value of nearly R30 per share. Management has been exposed by circumstances - but when things turn - even poor management makes money. Funny how people pay up for these companies at the top of the cycle R80 for this one. Down here - there is a lot of potential upside - The biggest risk is the pending litigation on Oz. "You pays your money and you takes your chances."
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THRESHOLD
Super Contributor
I don't think there is any "adapting" to this environment. That is the lot of the construction company
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prancing_horse
Super Contributor
@ THRESHOLD, yes Gino S has been a personal friend from the mid 70s when we used to meet at site meetings when I had my own civil engineering construction company, also having done a JV together in the late 80s. Unfortunately he is currently battling with
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SimonPB
Valued Contributor
question is if they can survive till the good times, they burning cash and scrambling to raise, including selling HO etc.
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THRESHOLD
Super Contributor
This whole discussion is encapsulated in the "Don't catch a falling knife" injunction. But perhaps one is better off buying a selection of these - just a little at a time - rather than chasing the momentum in a 7 year old bull market.
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CHATTYCHAT
Super Contributor
They burning cash is a good one... The magnitude of their business allover amplifies that construction has to be well managed to be successful. Also, the larger the project, the best chances to lose big time are when risk factors are not identified and addressed immediately. They suffer seriously from penalties and to prove claims where they failed to deliver. Maybe they will now clean up at their top echelon in the ivory towers and deploy skills where the action is. Having said that - a huge financial burden in business in general arises from overheads "to comply" to this and that and everything. To run a head office (or several regional head offices) is to accept the toll of an costly no value-add.
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prancing_horse
Super Contributor
Having worked in that sector most of my business career, construction is feast or famine and nothing in between.
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partridge
Super Contributor
Jaaah but as to the following : 1.the question is/remains knowing what is known of the environment and the company and its management - is it a buy - and priced with a margin of safety? Yes or no. 2. Nav and all that jazz is simply part of the assessment one does to answer the first question. I don't care what people paid for it or what it was "worth" - that like the third cricket test is in the past - and I don't put money into things hoping for a miracle - they do happen - but outsiders also win races.
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THRESHOLD
Super Contributor
The point was never that the past price should determine the current price - quite the opposite in fact. I was marvelling at how every fund, pundit... was willing to pay R70/80 at one point - for possibly an even higher risk profile. Now - at R2,50 - it is considered too risky. It's laughable really. Now is the time to take a risk - I would far rather write off R2,5 than R80 a share. But watch - when the cycle turns - (and if AEG survives) they will pay 15x earnings for theses things; with no growth outlook for the "wonderful" story the sector's pundits sell. That said - at least one can make a case for this company (thin though it might be;) South African platinum miners on the other hand... they were always going to end up in this position.
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kwagga
Super Contributor
I can't agree more. However, you're going to have to pick a selection because some are bound to fail. Also pick the best (not cheapest) of the lot to start off with. They will be the first to recover.
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