AFRIMAT LIMITED (JSE:AFT)

Afrimat Limited is an open pit mining company that supplies materialsand contracting services to the industrial minerals, building,construction, road building, railroad and mining sectors. The Companyoperates through three segments: construction materials, bulkcommodities and industrial minerals. The industrial minerals divisionsupplies the steel industry with metallurgical dolomite, theconstruction industry with a variety of aggregate products and theagricultural industry with agricultural lime. The construction materialssegment is engaged in the mining and processing of aggregateproducts, concrete brick and block manufacturing, ready mix concretebatching, and offers products including building blocks, bricks andpavers. Afrimat created a bulk commodities segment through theacquisition of the Demaneng iron ore and manganese mine in the 2018financial year.

FUNDAMENTAL AND TECHNICAL OVERVIEW

In the group’s latest financial results for the half-year ended 31 August2018, Afrimat reported revenue growth of 28.6%, profit fromoperations increased by 4.3%, diluted headline earnings per sharedeclined by 8.1% and a gross interim dividend of 19 cents (2017: 20cents per share) per share was declared. The construction materialsegment contributed 56.6% to operating profit, bulk commodities24.7%, while the industrial minerals contributed the remaining 18.7%.

The construction materials and industrial materials segmentexperienced a significant decline in operating profit margins due to thechallenging economic environment. Factors that had a negative effecton the performance of the construction and industrial mineralssegment include policy uncertainty, especially regarding the possibilityof land expropriation without compensation, the drought in theWestern Cape, which placed a damper on building construction activityand a significant reduction in the volume of work brought out to tenderby the SANRAL (South African National Roads Agency).

The Demaneng mine, which was loss making in the prior period, madea meaningful contribution to operating profit as the mine reached itsdesign capacity of one million tons per annum at the beginning of thereporting period. Management expects the growth from its iron oreoperations to continue to perform well as the business will now be in aposition to sell its full monthly production.

As at the time of writing Afrimat was trading on a price earnings ratio of16 and historic dividend yield of 2.22%. Despite the subdued tradingconditions, Afrimat managed to grow its cash flow from operatingactivities and decrease its net debt levels. The group will continue tofocus on their competitive advantages, which includes their structuralcost advantage, geographic footprint and unique metallurgy.

Research contributors

Schalk Louw, Pieter-Jan van Niekerk

CONTACT US

Reception

Dealing Desk

Website

Blog

+27 (11) 202 2712

+27 (11) 202 2716

www.psg.co.za/oldoak

www.oldoak.co.za

Old Oak

EQUITY REPORT

PSG WEALTH OLD OAK | Ground Floor, White Oak Terraces, Old Oak Office Park, Edmar Street, Bellville, 7530 | PO Box 4527, Tygervalley, 7536 | Tel: +27 (21) 202 2712 | Fax: +27 (21) 914 6239 | Schalk.Louw @psg.co.za | www.psg.co.za/oldoak

___________________________________________________________________________________________________________________________________________________________________________________________________________________________________

PSG Wealth Financial Planning (Pty) Ltd is an authorised financial services provider. FSP 728.

** Data provided by Thomson Reuters

SHARE PRICE PERFORMANCE**

25 JANUARY 2019

SHARE INFORMATION

Share Code AFT

Industry Construction Materia ls

Sector Materia ls

Market Capita l (ZAR m) 3 900

Current Price (ZAR) 27.52

Consensus 1yr Target Price ** 29.10

Price - 52 Week High: 32.00

Price - 52 Week Low: 22.27

Dividend Yield 2.22%

Beta 5 Year (JSE Al l Share) -0.05

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R34

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VALUATION RATIOS **

Period P/E P/SALES EV/EBIT

Last 12 Months 16.0x 1.4x 12.5x

Current Year Est 12.9x 1.4x 9.7x

Expected 9.9x 1.2x 7.7x

Old Oak

EQUITY REPORT 25 JANUARY 2019

PSG WEALTH OLD OAK | Ground Floor, White Oak Terraces, Old Oak Office Park, Edmar Street, Bellville, 7530 | PO Box 4527, Tygervalley, 7536 | Tel: +27 (21) 202 2712 | Fax: +27 (21) 914 6239 | Schalk.Louw @psg.co.za | www.psg.co.za/oldoak

___________________________________________________________________________________________________________________________________________________________________________________________________________________________________

PSG Wealth Financial Planning (Pty) Ltd is an authorised financial services provider. FSP 728.

** Data provided by Thomson Reuters

The company’s P/B is at 2.91, which is close to one standarddeviation below the long-term average of 3.21.

Their historic dividend yield is at 2.21%, which is close to onestandard deviation below than the long-term average of 2.36%.

The return on equity was above 20% in FY 2018.The total debt to equity increased in 2018 FY as a result of theacquisition of the Demaneng iron ore mine.

The company’s historic PE is trading at 15.96, which is slightlyabove more the long-term average of 15.42.

The gross dividend per share declined in 2018 FY due to theeconomic slow-down.

Old Oak

EQUITY REPORT

PSG WEALTH OLD OAK | Ground Floor, White Oak Terraces, Old Oak Office Park, Edmar Street, Bellville, 7530 | PO Box 4527, Tygervalley, 7536 | Tel: +27 (21) 202 2712 | Fax: +27 (21) 914 6239 | Schalk.Louw @psg.co.za | www.psg.co.za/oldoak

___________________________________________________________________________________________________________________________________________________________________________________________________________________________________

PSG Wealth Financial Planning (Pty) Ltd is an authorised financial services provider. FSP 728.

25 JANUARY 2019

Disclaimer:

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This publication does not attempt to identify the nature of the specific market or other risks associated with an investment. Leveraged /Geared positions in securities have the ability to accentuate the

profit/loss made on investments. Geared /Leveraged positions are not recommended based on the information contained in this publication. Securities, financial instruments or strategies mentioned herein

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The employees responsible for the production of this report may from time to time own securities mentioned herein.

Analyst Certification:

The research analyst who prepared this report certifies that the view expressed herein accurately reflect the research analyst’s personal views about the subject security and issuer and that no part of his compensation was, is or will be directly or indirectly related to specific recommendations or views contained in this report.

Afrimat’s share price has been in a uptrend since the 3rd quarter of 2018. The 200-day moving average at R27.16 could act as a short-term support level. Resistance can be expected around R30 a share.

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52 Week Total ReturnValue

MomentumQuality

Good Poor Actual

Daily AFTJ.J 2017/10/26 - 2019/02/14 (JHB)

Cndl, AFTJ.J, Trade Price, 2019/01/23, 2 751, 2 753, 2 751, 2 752, N/A, N/A, SMA, AFTJ.J, Trade Price(Last), 50, 2019/01/23, 2 773,

SMA, AFTJ.J, Trade Price(Last), 200, 2019/01/23, 2 716 Price

ZAc

Auto

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2 7522 773

2 716

RSI, AFTJ.J, Trade Price(Last), 14, Wilder Smoothing, 2019/01/23, 46,738

Value

ZAc

Auto

46,738

StochF, AFTJ.J, Trade Price, 5, 3, 3, Simple, 2019/01/23, 25,137, 25,262

Value

ZAc

Auto25,13725,262

01 16 01 18 02 16 01 16 01 16 03 16 02 16 01 18 02 16 01 16 03 17 01 16 01 16 03 18 02 16 01Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019