Business as usual at RA International

If you are going to set up an operation way out in the wild in Africa, or even the Middle East, then RA is who you would call to help you, writes Mark Watson-Mitchell. 

Several quoted companies are heeding the FCA orders and are delaying the publication of their corporate results.

One such company that did so yesterday was RA International (LON:RAI).

I took a good look at the company and I have to say that I really do like the look of what it is doing and its current year prospects.

If you are going to set up an operation way out in the wild in Africa, or even the Middle East, then RA is who you would call immediately to help you.

Based in Dubai and employing over 1,600 people, the company is a leading provider of remote construction and support services, having handled projects in over 10 countries on the African continent.

It really is the ‘go to’ operator, specialising as it does in five different services: construction; integrated facilities management; operation and maintenance; accommodation; and supply chain logistics.

The company provides comprehensive, flexible, mission critical support to its clients enabling them to focus on the delivery of their respective businesses and services.

The very solid customer base includes a number of United Nations agencies, such as UNICEF and the UNHCR, operating in both conflict and post-conflict regions.

In addition, it works for several western governments, including the French Government, the UK Ministry of Defence, the EU, the African Union and the US State Department.

Its commercial customers include a host of global corporations involved in the mining, oil and gas industries.

The group was set up by Soraya Narfeldt and Lars Narfeldt in 2004, after having witnessed large organisations being unable to provide a comprehensive range of services or manage and complete projects effectively when operating in remote locations, resulting in inefficiencies hindering the progress of peacekeeping, humanitarian and commercial projects.

The wife and husband team – Soraya is a UK citizen who was raised in Sierra Leone by a Scottish father and a Lebanese/African mother, while Lars is a Swedish citizen – identified a number of companies that could help them provide a full-service offering, and RA International was the result.

The company went public at the end of June 2018 after placing 33.6m new shares @ 56p each, raising £18.8m gross for the company.

The group has almost 174m shares in issue, of which Soraya Narfeldt (CEO) owns 55.2%, and her husband Lars Narfeldt (COO) has 24.2%. Jupiter Asset Management, with 5.8%, and River & Mercantile, with 2.9%, are the two largest institutional holders of the equity.

Over the 2019 trading year the group secured a mass of new contracts, several of them lasting three to five years in term. The order book by the end of last year stood around $148m, with some $55m due for 2020.

Brokers Cenkos Securities are looking for a 10% increase in revenue to $60.2m for 2019, and then going for $66.2m for the current year.

They estimate that pre-tax profits will have risen to $13.9m last year and they go for $15.5m this year, giving 8 cents in 2019 and 8.7 cents in earnings per share respectively.

A strong feature of this group is that it is highly cash generative – with the brokers looking for net cash of $37m in 2020, compared with its current $75m market capitalisation (£64m).

At just 37p the shares of RA International look to me to be an absolutely stonking purchase, especially as no meaningful disruption is anticipated in its activities.

I set an end-2020 target price of 50p.