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AVENG LIMITED

AEG JSE Listed
Market Cap
~R906 Million

Investment Analysis: Aveng Limited (JSE: AEG)

Date: 12 January 2026 Analyst: Gemini (Senior Equity Analyst)

Step 1: Data Gathering & Source Verification

Reporting Periods Used:

Recent Key SENS Activity:

  • 05 Dec 2025: Trading Update & Strategy Update (Retaining McConnell Dowell; Moolmans sale talks continuing).
  • 31 Oct 2025: Changes to the Board and Board Committees.
  • 18 Aug 2025: Release of FY25 Audited Results (Reporting a Headline Loss).

Step 2: Metric Extraction

  • Market Cap: ~R906 Million.

  • Calculation: Share Price (~R6.92) x Shares in Issue (~131 million).

  • Dividend Yield (L12M): N/A (0%).

  • Context: No dividend declared. The company reported a significant loss for FY25 and is prioritizing liquidity and balance sheet stability over distributions.

  • Liquidity Check: High Risk / Illiquid.

  • Data: Average daily volume (3-month) is approximately 114,000 shares (~R790,000 daily value).

  • Flag: This stock is thinly traded. Entering or exiting a large position without moving the price will be difficult.

  • P/E Ratio: N/A (Loss Making).

  • Context: Reported a Headline Loss per Share of 744 cents (ZAR) for FY25.

  • Net Asset Value (NAV): Deep Discount.

  • Metric: The Group reported a net cash position of ~R2.5 billion (A$211m) as of June 2025.
  • Analysis: With a market cap of only R906m, the stock is trading at roughly 0.36x its Net Cash. This is a classic "deep value" distress signal, implying the market expects significant cash burn from remaining legacy projects.

Step 3: Operational & Strategic Analysis

Business Overview: Aveng is an infrastructure and resources group operating two primary pillars:

  1. McConnell Dowell: An engineering and construction group focused on Australia, New Zealand, and Southeast Asia (major revenue driver).
  2. Moolmans: A Tier-1 contract mining business in South Africa (currently earmarked for sale).

Performance Trend:

  • Contraction & Losses: FY25 was a setback. Revenue contracted 13.9% to R31.0 billion.
  • Legacy Pain: The group swung from a profit in FY24 to a Headline Loss of R975 million in FY25. This was driven almost entirely by two "problem children" projects: the Jurong Region Line (J108) in Singapore and the Kidston Pumped Storage project in Australia. These projects faced cost blowouts and weather disruptions, effectively wiping out the profits from the healthy parts of the business (like Built Environs, which doubled its earnings).
  • Strategic Shift: The previously mooted separate listing of McConnell Dowell on the ASX has been shelved due to the recent losses. The strategy is now to retain and fix McConnell Dowell while continuing negotiations to sell Moolmans.

Sector Context (Macro Factor): Infrastructure Cost Escalation (Australia): While there is demand for infrastructure in Australia, the sector is plagued by "profitless prosperity." Fixed-price contracts signed years ago are now being executed in an environment of high inflation and labor shortages. Companies like Aveng are finding that the cost to complete these legacy projects is far higher than the revenue agreed upon, leading to "onerous contract" provisions.

Step 4: The Verdict

Bull Case (Buy Rationale): The "Net Net" Play: You are buying R2.50 of cash for every R0.70 you invest (trading at ~35% of Net Cash). If management can simply finish the Kidston and Jurong projects without burning the entire cash pile, the remaining business (McConnell Dowell's profitable core + Built Environs) is effectively free. The downside is theoretically capped by the cash on the balance sheet, assuming no new catastrophic projects emerge.

Bear Case (Sell Rationale): The "Forever" Turnaround: Aveng has been "turning around" for a decade. Just when the business looks clean, a new legacy project blows up (first locally, now in Australia). The lack of liquidity (R800k daily trade) is dangerous; if the Moolmans sale fails or another project goes wrong, there is no easy exit door for investors. The market's pricing (trading well below cash) indicates a total lack of trust in management's ability to stop the cash bleed.

Fair Value Estimate: R12.00 – R15.00.

  • Rationale: This is highly speculative. If valued purely on a conservative discount to NAV (excluding the loss-making projects), the share should be double its current price. However, until the "cash burn" stops, the market will apply a massive distress discount.

Final Rating: SPECULATIVE BUY

  • Justification: This is not an investment for the faint-hearted. It is a mathematical wager that the cash pile is real and won't be fully incinerated by the final two bad projects. For a diversified, high-risk portfolio, the asymmetry (upside to R15.00 vs downside to R4.00) is attractive, but it requires patience and a high tolerance for volatility.
AI Generated Analysis Last Updated: 2026-01-14