|
Consolidated Infrastructure Group (CIL) will be the stock in focus: (Price at time of writing: 25.79 as 1 October 2016)
|
Related Topics |
Background and overview of Consolidated Infrastructure Group (CIL)
CIL is one of the lesser known shares listed on the JSE. Perhaps most Peregrine (PGR) shareholders will know CIL as PGR owned a large chunk in CIL that it later unbundled to shareholders. The group is active in various market segments. This includes, building materials, rail, oil and gas and lastly power and electricity.
According to their website: Established in 2007, though our oldest subsidiary has been operating since 1982, we have grown into a well-diversified infrastructure group operating in four divisions, leveraging our expertise and entrepreneurial drive:
So why invest in CIL? The following reasons are supplied on their website as to why CIL makes for a compelling investment case:
An investment in CIG is an investment in Africa’s explosive growth potential through a company with the track record and expertise to succeed:
According to their website: Established in 2007, though our oldest subsidiary has been operating since 1982, we have grown into a well-diversified infrastructure group operating in four divisions, leveraging our expertise and entrepreneurial drive:
- Power & Electricity
- Building Materials
- Oil & Gas
- Rail
So why invest in CIL? The following reasons are supplied on their website as to why CIL makes for a compelling investment case:
An investment in CIG is an investment in Africa’s explosive growth potential through a company with the track record and expertise to succeed:
- Proven investor value
- Sound Pan-African strategy
- Established track record in South Africa in renewable energy
- Exposure to the infrastructure sector with tremendous tailwinds
- Geographic diversification across 21 African countries and Middle East
- Sectoral diversification in Power, Building Materials, Oil & Gas and Rail
- Innovative organic growth of new business streams
Scroll over or click on the funnel chart to get more details of CIL's latest financial results.
Financial review:
CIL acheived a healthy net profit margin of just 9.92%. Net profit amounted to R208million on revenue of just over R2billion. Thus fairly decent net profit margins achieved by the group.
Earnings per share for the full year came in at R1.36 a share, placing CIL on a relatively low PE ratio of 9.5. No dividend was declared for their interm results ending February 2016 and their policy is to review the dividend policy at the end of the full year financial results.
A concern for CIL is the fact that more cash is utilised in the operating activities than what is generated. Leading to net cash outflows out of the business, that needs to be financed some how. In their cash flow statement it shows that cashflow from financing activities had a R357mil positive amount. Possibly debt taken on as part of their R1billion note program and additional shares issued to finance their activities. While taking on debt is not always a good thing. CIL has a very strong balance sheet and their financial ratios that we will look at later shows this.
Earnings per share for the full year came in at R1.36 a share, placing CIL on a relatively low PE ratio of 9.5. No dividend was declared for their interm results ending February 2016 and their policy is to review the dividend policy at the end of the full year financial results.
A concern for CIL is the fact that more cash is utilised in the operating activities than what is generated. Leading to net cash outflows out of the business, that needs to be financed some how. In their cash flow statement it shows that cashflow from financing activities had a R357mil positive amount. Possibly debt taken on as part of their R1billion note program and additional shares issued to finance their activities. While taking on debt is not always a good thing. CIL has a very strong balance sheet and their financial ratios that we will look at later shows this.
The graphic below shows the contribution of CIL's major divisions to their revenue and contributions to post tax profits.
The pie charts should be dealt with with caution. As CIL does not report revenue for their Oil-Gas division but they do report profits for it. This the first pie chart reflecting contribution to revenue is a little skewed when compared to the second pie chart showing profits after taxes.
All their divisions contribute to their after tax profits, with rail being the smallest (bringing in roughly 5% of profit after taxes), while their power division brings in over half of their after tax profits (55.1%). Oil-Gas contributes almost 33% of their after taxes profits to the group and building materials around 7%
Margins across divisions that reported both revenue and after tax profits seem extremely healthy, as the lowest net margin reported was 5.9% from their power division, and the highest being over 8% for their rail division with building materials around 6.5%
All their divisions contribute to their after tax profits, with rail being the smallest (bringing in roughly 5% of profit after taxes), while their power division brings in over half of their after tax profits (55.1%). Oil-Gas contributes almost 33% of their after taxes profits to the group and building materials around 7%
Margins across divisions that reported both revenue and after tax profits seem extremely healthy, as the lowest net margin reported was 5.9% from their power division, and the highest being over 8% for their rail division with building materials around 6.5%
A few financial ratios to mull over for CIL (calculated using our Financial Ratios Calculator):
- Debt to Equity Ratio: 0.85 (more than 2 shows high levels of financial leverage).
- Current Ratio: 2.17 (A measure of liquidity. Less than one signals possible trouble in paying off current liabilities).
- Quick Ratio: 2.11 (Another liquidity measure. Shows how much in liquid assets is available to cover current liabilities or short term debt).
- Return on Assets (ROA): 3.54%
- Return on Equity (ROE): 6.73%
- Net Profit Margin: 9.92%
- Dividend Yield: 0.0%
Valuation:
Based on CILs current financial results we value them at between R32.54 and R32.80. The valuation does come with a disclaimer though. Investors should keep a close eye on their cash generation. As the business cant continue to spend more money than what they are generating, as all this will lead to is taking on further debt, or issuing more shares to finance their activities
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.