Why aren’t JSE stocks getting excited about the gas find?
Although it is still early days, investors should at least be looking hard at the prospects for the likes of M&R
There has been a distressingly muted response from JSE-listed shares to the recent news of a gas find in deep water 175km south of Mossel Bay.
So far we’ve only been told the big picture stuff – it may generate the equivalent of about a billion barrels of oil but is in an area that is extremely difficult to work. Although it is still early days, SA really is desperate for any good news.
However, it’s evident the news so far has not been sufficiently encouraging to stop the slide in JSE-listed construction shares – not even in former construction share Murray & Roberts, which now refers to itself as a “global engineering group”.
M&R, which is in the middle of a long drawn out control tussle – between German-based Aton and the M&R board – would seem ideally placed to benefit from a gas/oil find off the SA coast.
As CEO Henry Laas told investors at a results presentation in 2018, the group is now a multinational engineering and construction group focused on the natural resources market sectors. He referred to huge opportunities in the oil and gas market, although he said conditions “remain challenging”.
And yet the M&R share price is down 5% since the Total announcement. At R13.82, it is also significantly below the R17 offered by Aton, which currently holds almost 44% of M&R. The buyout offer expires on March 31 but presumably could be extended.
The weakness in the M&R share price suggests investors are not as excited about the “game-changing” discovery as the media are.