Aveng Group Limited (JSE: AEG), a prominent infrastructure and resources conglomerate, has weathered back-to-back years of financial turbulence, grappling with a myriad of challenges that have reverberated through its stock performance.
Over the past two years, the company has witnessed a staggering 68% decline in its stock value, indicative of a significant loss in market confidence. The ongoing year has seen its shares plummet by 15.27%, underscoring persistent investor scepticism. These setbacks stem largely from pandemic-induced disruptions, which have inflicted project delays and operational losses. Notably, Aveng’s Australian arm, McConnell Dowell, encountered substantial hurdles with the Batangas LNG (BLNG) terminal endeavour, exacerbating financial strains as clients called upon project guarantees.
Despite a commendable 28% revenue surge to nearly R29 billion, Aveng’s plight persisted, with the BLNG project alone contributing R1.2 billion to its staggering operating loss of 2023. This financial turmoil culminated in a stark contrast from the previous year’s profitability, registering a net loss of R1.3 billion against R130 million profit. In the face of these challenges, Aveng Group has embarked on strategic restructuring endeavours, aiming to curtail debt, fortify its balance sheet, and chart a course toward sustainable profitability while actively pursuing new avenues for growth and stability in an ever-evolving economic landscape.
Technical
Aveng’s share price has been ensnared in a persistent downtrend, following a descending channel pattern and hovering slightly above the 100-day moving average.
Despite a brief resurgence of market confidence in mid-December 2023, evidenced by a surge in price from support at ZAR 6.60 per share, the momentum faltered amid overbought RSI conditions and declining upside volumes. Resistance formed at ZAR 8.59 per share, prompting a reversal and driving the price below the 61.80% Fibonacci Retracement Golden Ratio, indicative of sustained bearish sentiment.
Should bears continue to exert pressure, a retest of the ZAR 6.60 per share level appears likely. Conversely, bullish traders may target the 50% Fibonacci retracement level as a potential upside destination, contingent upon prevailing market sentiment.
Summary
Aveng Group faces formidable challenges amidst a significant stock value decline of 68% over two years. Despite revenue growth, operational losses from the BLNG project culminated in a net loss of R1.3 billion. With shares hovering near support at ZAR 6.60, its strategic restructuring aims to bolster profitability amid prevailing bearish sentiment.
Sources: Aveng Group Limited, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
With the hawkish comments from Jerome Powell triggering a pullback in the US equity market, the focus will turn to the NFP report on Friday to determine whether a trend reversal could occur. Resistance-turned-support at 38,075 could be worth watching in the upcoming sessions.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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