Buy Reunert for telecoms bonanza
Thursday, 27 December 2001
By: Belinda Anderson
Posted: 2001/12/27 Thu 11:00 | - 1997-2002
Investors looking for a less risky exposure to the telecoms sector than a direct route such as M-Cell should consider industrial electronics group Reunert as a possible investment. The share price has risen by more than 40% over the past year, compared with a 20% return from the overall market and against a poor performance from the telecoms sector. The share price of M-Cell, the most significant component in the telecoms sector, almost halved during the year.
Reunert grew headline earnings a share by 25% to 176c a share during 2001 and with recently awarded contracts in the bag, the group's good performance looks set to continue into the New Year. To make the share more attractive, Reunert also pays regular dividends to shareholders (up 20% to 91c in 2001), unlike most pure telecoms and technology companies that retain all of their cash for growth.
Reunert's telecoms brands include Siemens Telecommunications (Sietel) and Nashua Mobile, both operations in which it has recently increased its stake. In late November, it upped its stake in Siemens Telecommunications (Sietel) from 27,5% to 49%, paying R279,5m to Marconi Communications for its 21,5%. Earlier in the month, it bought Nedcor's stake in Nashua Mobile for R225m and now owns 95,3% of the business, with Metropolitan as the minority holder.
In both cases, Reunert said the deals were in response to the significant growth opportunities in the sector.
Reunert's telecoms interests contributed about one fifth of its operating profits during 2001, a 20% increase on the year - the single fastest growing division in the group in terms of profits at an operating level. If Siemens Ltd exercises its option to buy back 9% of Sietel, then Reunert will have 40% stake at the 2002 year-end, up from 27,5% at the 2001 year-end.
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