Investment Advice: Purchase Raubex shares, sell Sasol stocks
In the dynamic world of South African business, two prominent companies - Raubex Group and Sasol - are making headlines for different reasons.
Raubex Group: A Cautious Bull
Raubex Group, a specialist in infrastructure development and construction materials supply, has experienced a delay in releasing its financial results due to investigations into a whistleblower's report. Despite this temporary setback, the investment outlook for Raubex remains cautiously bullish.
The company's strong sector performance in infrastructure development, coupled with stable macroeconomic conditions, supports this optimistic view. Raubex, with a market cap around R8.74 billion and a P/E ratio of 8.02, presents a potential undervaluation. Its relatively attractive dividend yield of 4.12% makes it appealing for income-focused investors.
Moreover, Raubex secured a notable first Green Guarantee from Standard Bank, signalling a commitment to sustainable infrastructure projects. However, the South African civil tender market faced a 32% decline year-on-year in estimated tender values in H1 2025, indicating some sector challenges that could impact opportunities for companies like Raubex.
Sasol: A Complex Operation
Sasol, a major South African integrated energy and chemical company, is no longer solely a fuel from coal business. Its earnings are exposed to multiple currencies and commodity prices, making it a complex operation.
Given the lack of concrete 2025 insights, cautious due diligence would be recommended for potential investors. It is crucial to check Sasol's latest financials, commodity price exposure, and any strategic shifts, especially as the energy sector faces challenges and opportunities related to global energy transition trends.
A Comparative Perspective
For investors, Raubex presents a mid-cap infrastructure opportunity with decent income potential and ESG progress, while Sasol requires more current data to clarify near-term investment prospects. The improved outlook for Raubex is not yet reflected in its current share price, offering a potential buying opportunity for those who believe in its long-term growth prospects.
On the other hand, the chrome price slump in 2024 affected the profitability of Raubex's Bauba mining operations, turning them into a loss. However, the recent recovery in chrome prices, along with management's cost-saving interventions, indicate a significantly improved outlook for the company. Raubex also boasts a strong balance sheet and a record order book, with the composition of the order book shifting towards higher-margin work.
In contrast, Sasol's share price is down two-thirds from about R340 at the end of July 2022. Its questionable capital allocation track record and recent management changes cast doubt on its investment case. Sasol is a carbon-intensive business, facing challenges on the ESG front, which may deter some investors.
In conclusion, while Raubex offers a promising mid-cap opportunity with sustainability initiatives, Sasol requires more scrutiny due to its complex operations, questionable capital allocation, and ESG concerns. As always, it's essential for investors to conduct thorough research and consider their risk tolerance before making investment decisions.
Investing in Raubex Group, despite a temporary delay in financial results, remains a cautiously bullish venture, given its strong sector performance and relative undervaluation. The company's commitment to sustainable infrastructure, attractive dividend yield, and potential recovery of Bauba mining operations further enhance its appeal.
Sasol, a major South African integrated energy and chemical company, offers a complex operation with earnings exposed to multiple currencies and commodity prices. Given the lack of concrete 2025 insights and challenges in the energy sector, potential investors are advised to conduct cautious due diligence, checking recent financials, commodity price exposure, and strategic shifts.
In the comparison between Raubex and Sasol, Raubex presents a mid-cap infrastructure opportunity with decent income potential, ESG progress, and a potential buying opportunity for those who believe in its long-term growth prospects. In contrast, Sasol's share price decline, questionable capital allocation, and ESG concerns may deter some investors.
