Monday, December 30, 2013

Seeking Alpha: PPC - African Infrastructure Growth, But Not So Much Value

Africa is not only big, but bigger than most Americans can probably easily imagine. China, the U.S., India, and Western Europe would fit within Africa's borders with some room left to spare. It's also a very underdeveloped area, as the best-ranked country in terms of roads is Namibia at #35 and much of the bottom quartile of the rankings is made up of African countries. As a leading cement producer, this means opportunity for South Africa's PPC Limited (OTCPK:PPCYY).

Poor infrastructure has emerged as a key issue in maximizing the value of Africa's mineral and resource exports, to say nothing of facilitating better food production and trade. It remains to be seen whether African countries will invest the needed resources in infrastructure development, but PPC has big plans to benefit not only from improving conditions in South Africa, but underserved markets throughout Africa.

The only fly in the ointment is valuation. Down more than 10% over the past year and about midway between the 52-week high and low, investors are nervous about the company's ability to withstand increasing supply and low utilization in South Africa and continue to invest in the capex needed to expand into other African countries. The shares are not necessarily overpriced today, but they don't appear to offer that extra margin of safety I prefer in emerging market infrastructure plays.

Click the link to read more:
PPC - African Infrastructure Growth, But Not So Much Value

No comments: