Murray & Roberts, Aveng loose places on JSE Top 40

Posted On Friday, 12 December 2008 02:00 Published by Commercial Property News
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Top JSE-listed construction companies Aveng and Murray & Roberts were removed from the JSE Top 40 index of blue chip companies.

Roger Jardine AvengProperty company Growthpoint Properties and retailer Pick n Pay would now be included in the index, replacing Murray & Roberts and Aveng, which have moved to positions 46 and 49 respectively, the JSE said yesterday.

The removal of the two companies means that asset managers who track the Top 40 index will sell the shares they hold in the them and buy the replacement companies according to their weights in the index.

The benefit of being included in the Top 40 index — which contains the largest stocks by market capitalisation — is that it increases the visibility of the company to investors and also attracts large investments through funds that track the index.

“Overseas investors looking at emerging markets such as ours generally look at companies in the Top 40. Some international and even local fund managers were mandated to track only companies in the Top 40,” said an analyst who did now want to be named.

“This is a negative for Murray & Roberts and Aveng in that their market capitalisation has fallen. It is also an indication of what has been happening to construction stocks, which have been going down in the last three months or so,” he said. “Concerns about project cancellations as a result of the economic turmoil have not helped companies in this sector.”

Shares in the construction sector have fallen considerably in the last three months as the sector seemed to have been severely downgraded by the market on concerns of a recession and depleted future work opportunity.

Head of indices at the JSE Jannie Immelman said moving companies in and out of indices was part of the JSE’s quarterly review process.

“Every quarter we look at companies that are have become smaller in terms of their market capitalisation and replace them with companies whose market cap has become bigger,” Immelman said.

Last week Murray & Roberts and Aveng shares continued their three month decline after news that power utility Eskom had decided to scrap plans to build SA’s second nuclear power plant due to financial constraints.

Both companies had expected to benefit from the contract, which had been estimated to cost about R120bn. Aveng and Murray & Roberts were part of France’s Areva and the US’s Westinghouse consortiums, respectively, which had bid for the power plant.

Last month Murray & Roberts said it had been forced to delay, or suspend, some of its projects as some clients were experiencing cash flow problems in the global credit crunch.

This prompted the company to say it was restructuring its operations, and cutting costs across its businesses.

At the beginning of this month Murray & Roberts said some projects in Dubai had been suspended owing to the global market turmoil, which wiped R3,2bn from its order book.

The news yesterday came amid reports by union Solidarity that Murray & Roberts will cut 1400 jobs in its mining division as demand weakened amid an economic slowdown.

“The current economic conditions as well as limited growth and expansion of Murray & Roberts’ current contracts are the main reasons for the planned retrenchments,” Solidarity said.

Last modified on Monday, 24 June 2013 22:59

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