WBHO stands out like a sore thumb in the strongly performing BizNews Share portfolio: it is the only stock that currently trades below our entry level. The price fell sharply again this week on news Australia’s government blocked a proposed acquisition of WBHO’s Aus subsidiary Probuild “on grounds of national security”.
Our original purchase of WBHO for the portfolio was based on the classic business principle of excess profits accruing to the last man standing when a previously hammered industry rebounds. The implosion of SA’s construction sector is well documented. Outside of WBHO, there’s now little left to talk of.
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The purchase of WBHO shares was also based on SA president Cyril Ramaphosa’s promise to make infrastructure invesment his driver to resuscitate the sluggish economy. After destruction wrought by Covid-19 – and unemployment now around 50% – this has become even more of an imperative.
Also read: Alec Hogg: Drawing inspiration from those around us
The Australian government’s reaction to a Chinese bid for Probuild, however, has given even WBHO’s biggest supporters pause. Whispers about the on-off status of a proposed deal (first disclosed in November) caused a share price whipsaw evident above. As Probuild delivers more than half WBHO’s revenues, the deal was transformative. For long-term investors, however, the appeal of a WBHO share price in the R80s is obvious. We aren’t selling. Neither should you.
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