Ashraf Mohamed from Cornerpiece Capital said Murray & Roberts would struggle to turn the corner and should not be listed.
On Thursday, Murray & Roberts said it is selling its stake in the Gautrain operator, Bombela Concession Company, for R1.38 billion.
The money will be used to reduce South African debt and assist the engineering group in addressing its working capital needs.
The news follows an announcement in November that Murray & Roberts was selling its stake in Australian-based Clough.
Clough comprised a substantial part of Murray & Roberts’ energy, resource, and infrastructure platform.
In an investor note on Monday, 05 December 2022, Murray & Roberts announced that the deal to sell Clough has collapsed.
“The parties have mutually and unconditionally agreed to terminate the deal with immediate effect,” it said.
Commenting on the disposals, before the announcement on Monday, Mohamed said Murray & Roberts is selling its best assets, which will make a turnaround difficult.
He highlighted that Australia’s infrastructure spending is significantly higher than South Africa’s, raising questions about its Clough sale.
Bombela is also performing well, making it a company you would like to have in your portfolio.
“If you are selling off your best assets, you are left with a shell with a few underperforming assets,” Mohamed said.
He added that it is not clear whether the assets Murray & Roberts is left with will perform when infrastructure spending returns.
“Murray & Roberts has to reinvent itself through its mining contracting business as the main profit driver for the company,” he said.
“There is growth in mining spending in South Africa, but it is not sure whether it will be enough for a turnaround.”
“Construction is a low-margin business and fairly unattractive. Murray & Roberts really should not be listed,” he said.