Black empowered RARE Holding’s listing on AltX, the Johannesburg Stock Exchange’s Alternative Exchange represents an attractive opportunity for investors to participate in South Africa’s estimated R409 billion infrastructure spending boom.

A specialist in fluid conveyance, the company provides an integrated service to the energy, water and chemical industries, combining value-added services with the sourcing and manufacture of innovative valves, pipes and fittings.

Commenting on the listing, David Scheepers, chief executive, said that the 30-year-old company was well positioned to capitalise on South Africa’s exponential growth in infrastructure spend.

‘We have a long and well-established track record in this field with a loyal client base. The capital raised by this listing will enable us to meet changing working capital requirements and enable the expansion of our divisions. It will also allow us to foster additional innovation and entrepreneurship and invest in a wider range of products,” he said.

The company generated R216.3 million in revenue for the year ended June 2006, yielding a taxed profit of R10.6 million. Forecast turnover growth for 2007 is up 49.8% to R324 million with profit after tax forecast at R16 million.

Forward PE ratios of 9.5 and 7.4 have been forecast for 2007 and 2008 respectively. This compares to the group’s historic price earnings ratio of 11.4

The listing is expected to raise R37.5 million through a private placement at an issue price of 200 cents per share, resulting in an expected market capitalisation of R177.7 million on listing at the issue price.

Following the private placement, RARE’s black owners Sunshine Street, headed by Don Ncube, will dilute their shareholding from 51% to 28,77%. Agreements have been put in place to ensure BEE ownership will comply with DTI codes of good practice. As an active and valued member of the board, Mr Ncube will remain on as chairman. Management’s shareholding after the private placing will stand at 26.8%.

In recognition of their contribution to the success of the company, Rare’s 255-strong workforce have each been made shareholders of the company with an allocation of 1000 shares per staff member. The value of the allocation is estimated at approximately R510 000.

Announcing this, Don Ncube, chairman, said that it was important for all company employees to participate in its successes.

“Our success as a business remains dependent on the loyalty and dedication of our employees. This allocation of shares is in part a reward for hard work and in part an alignment of the interests of shareholders and staff. Through this we will be providing our employees the opportunity to participate in the company’s future successes,” he said.

RARE Energy, one of the Group’s four divisions, is currently the major supplier of pipes and fittings to the South African energy and mining sector. Growth in these sectors is expected to exceed R133 billion within the next three years.

The RARE Water and RARE Chemical divisions are equally well poised for expanded participation in the increase in infrastructure spend. Future market activity in water infrastructure is estimated at R8 billion and Biofuels at R6 billion.

RARE’s business model is not purely project driven. An important source of annuity income comes from maintenance and after-sales service. It has been estimated that the lifecycle maintenance of most infrastructure based projects is five times that of original capital expenditure.

A further business division is that of RARE International. With a foothold already established in the Angolan and Zambian mining and energy sectors, the division’s longer-term strategy is to become the preferred fluid conveyance solutions provider in Africa.