Top analyst backs R12-billion South African industrial giant
Nitrogen Fund Managers CIO, Rowan Williams, believes Reunert has strong medium- to long-term prospects that offer opportunities for South African investors.
Reunert is a South African industrial electrical and electronics group that was founded in 1888 and listed on the JSE in 1948. It was approved for a secondary listing on A2X in 2023.
Its corporate headquarters are in Woodmead, Sandton, and it has international offices in Australia, India, Lesotho, Mauritius, the United States, and Zambia.
It has a market cap of R11.75 billion, and it operates across three main segments: Electrical Engineering, ICT, and Applied Electronics.
Reunert’s main business is its Electrical Engineering segment, which manufactures and sells power cables and low-voltage circuit breakers.
Its ICT segment provides office automation, business communication, digital integration, and rental-based finance solutions and services.
The Applied Electronics segment develops, supplies and maintains high-precision electronic products for defence and mining, commercial applications and renewable energy solutions.
The company’s latest interim results showed that revenue increased marginally and operating profit decreased by 23%.
It attributed the slight revenue increase to strong circuit breaker export volumes in its Electrical Engineering segment, which grew by 2%.
However, the same segment experienced a significant 40% decrease in operating profit — from R229 million to R138 million over the same period.
It attributed this to decreased demand for infrastructure investment in South Africa and Zambia, the appreciation of the Zambian Kwacha against the US dollar, and record-high raw-material commodity prices.
The ICT segment experienced a decline in revenue, which Reunert attributed to a continued subdued South African macroeconomic environment and longer client decision cycles.
On the other hand, the group’s Defence Cluster, which falls under the Applied Electronics segment, performed well.
It saw double-digit growth, contributing 16% to the Applied Electronics segment’s revenue and 19% to its operating profit.
Overall, the Applied Electronics segment experienced a 41% increase in operating profit, but this was negated by declines in the other two segments.
A nice entry point, says analyst
Ahead of these results, Nitrogen Fund Managers CIO Rowan Williams said he viewed Reunert as a buying opportunity, not a reason to panic. He shared these views in an interview on BusinessDayTV.
“I think in the medium term we are going to see continued rollout of electrification in South Africa and the rest of Africa,” said Williams.
This will directly benefit Reunert’s electrical infrastructure and cable operations. Williams is also optimistic about Reunert’s Defence Cluster.
“They have quite strong exposure to the Middle East, and clearly with the conflict there’s going to be increased spending on defence.”
The ICT business is ticking along, too, he said. “Overall, I think there are good prospects beyond sort of the short-term trading, and so it’s a nice entry point.”
Williams argued that Reunert’s solid medium-term growth prospects make it a good investment opportunity.
Reunert share price over the past year
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