SHARES in the construction sector have soared over the past two months, buoyed by foreign investor optimism on the prospects for SA’s infrastructure development.

Old Mutual Asset Managers analyst Feroz Basa said yesterday the infrastructure boom was expected to begin in earnest next year.

The past two months have seen construction companies releasing results that were slightly ahead of expectations. "As a result, the share prices have rallied significantly during the past two months," said Basa.

Though companies had not yet seen any profit from the anticipated infrastructure boom, they remained upbeat about future prospects.

Murray & Roberts and Aveng have seen steep share price increases of 33% and 24%, respectively. Over the same period, Wilson Bayley Holmes’ price rose almost 20%, and Group Five’s 15%.

Basa said: "Foreigners have been primary drivers, in some cases doubling their holdings in these companies."

Murray & Roberts’ offshore holding doubled in the past two quarters to 35%, from 14%. Aveng increased foreign shareholding to 15%, from 10%, earlier this year.

Basa said the boom could be affected by capacity constraints in the industry. "Foreigners are taking a long-term view and are piling into anything construction-related," he said. "My concern is that if things go wrong, foreigners may move out just as quickly."

Infrastructure projects for the 2010 Soccer World Cup are expected to begin next year. Strong capital expenditure growth in government and state-owned enterprises is expected to keep investment spending high over the medium term.

The public enterprises department, mainly through Transnet and Eskom, will invest more than R180bn in infrastructure projects over the next five years.

Basa said construction was full of inherent risks, and companies would have to convert work into profit. "Construction projects offer very thin margins, ranging between 3% and 5%, and thus there is little room to lose money on a project as a result of unanticipated problems."