Aveng Limited (JSE: AEG) Research Update

Highlights:

• Arrowhead is updating its coverage on Aveng Limited (“Aveng” or “the Company”) with a fair value bracket of ZAR 29.30 – ZAR 35.81 (Share Price on November15, 2023: ZAR 6.14) based on Discounted Cash Flow Valuation and Comparable Company Valuation.
• Aveng is a diversified business group providing infrastructure development and resources and contract mining solutions, through its subsidiaries – McConnell Dowell and Moolmans. The Group is headquartered in South Africa and its projects are primarily in Australasia, South-East Asia, and Africa. The Company is listed on the Johannesburg Stock Exchange – (JSE: AEG).
• Until 2018, Aveng had several business units providing manufacturing, construction & engineering, and steel beneficiation services across several countries. However, the large number of businesses led to inefficiencies and the Group faced significant challenges in its operations and was unprofitable from FY’14 to FY’20.
• To achieve profitability and deleverage its balance sheet, the Group devised a comprehensive plan in 2018, whereby it decided to focus exclusively on its key operating units and dispose of its unprofitable business verticals. Since the implementation of this plan, the Group has started emerging from the significant challenges that it faced in recent years.
• The Group has completed the restructuring plan initiated in 2018 to dispose of the unprofitable units and reduce debt on its balance sheet. To continue being profitable and focus on its potentially viable and profitable business units, the Group will be focusing exclusively on McConnell Dowell and Moolmans. Pursuant to its strategy to narrow down its focus, on October 4, 2022, the Group announced that it entered an agreement to sell Trident Steel and completed its disposal on April 28, 2023.
• The proceeds from the disposal of Trident Steel were partially used to settle the South African legacy debt of ZAR 478 million (which was at ZAR 3.3 billion at its all-time high and now completely extinguished) and the Trident Steel short-term trade finance facility of ZAR 450 million