Pinned straw:
Discl: Held IRL 1.35%
I stumbled across a write up on SKS Technolgies (ASX: SKS) which gave me the immediate impression that it was a competitor to SXE in the Data Centre space, and in electical contracting work. This was a bit troubling, so put some questions through to my buddy, Chat, to peel this a bit more. After a lot of rationalising and distilling, the inputs were quite insightful and increases my conviction on SXE.
I do not have much understanding on SKS - would be great if someone following SKS more closely could validate/challenge.
SUMMARY
- On the surface SKS does look like an SXE-lite
- SKS is a partial and indirect competitor to SXE — but not a full-stack competitor.
- They overlap in specific verticals (mainly commercial electrical + data centres), but SXE is broader, deeper, and structurally different.
- Competition is not SXE vs SKS directly — it is “who gets which package inside the same project” - They often co-exist on the same site
- The real competition happens at the subcontractor selection level, not end-client level.
- SXE’s highest-quality revenue (recurring + industrial) has zero competition from SKS
- SXE and SKS are not fighting for customers — they are fighting for scope within the same customers
This means (1) both can grow simultaneously and (2) Market growth matters more than competition
F. KEY INSIGHTS
1. SKS confirms the attractiveness of SXE’s markets
SKS is growing fast, winning data centre work, expanding margins
The overlap between SXE and SKS is actually a bullish signal, not a bearish one because it confirms (1) strong demand in data centres (2) multiple contractors can win work (3) projects are large enough to support multiple players
2. SKS is a “Specialist Competitor”, not a Platform Competitor
SKS competes within slices
SXE competes across the whole value chain
3. Data Centre Margins
Because both are present, pricing pressure exists and margins may compress
4. Expansion into each other’s territory
If SKS moves into: (1) heavy electrical infrastructure (2) substations (3) grid - THREAT increases materially
If SXE expands further into (1) AV (2) smart systems → competes more directly with SKS
You should think of SKS as “A strong vertical competitor inside data centres and commercial buildings — but not a full-platform threat to SXE.”
5. Investment Implications
The risk is not that SKS replaces SXE.
The risk is in data centres, SXE does NOT have a monopoly — and SKS proves pricing pressure exists
Bottom Line
Are they competing for the same customers?
✔️ Yes — but only in the specific data centres and commercial builds segments
Are they competing in the same business?
❌ No — SXE is significantly broader
I think that's largely the correct framing of SXE versus SKS @jcmleng
Although it probably leads us to different conclusions, which may just reflect risk tolerance or something similar. I like SXE but ultimately the data center attributes (long term DC expansion, higher margins etc.) nudge me towards SKS. But I acknowledge that concentration is both an opportunity and a risk. One of the things that alleviates that risk for me is having seen how deliberately management made the decision to focus on the DC segment, communicated that in advance with shareholders and then delivered on the promise. They didn't just fall arse backwards into it!
However, there is certainly a great case for SXE in that they are bigger and more diversified, have semi-recurring revenue through mining contracts and are potentially less fragile. There is a decent case for owning both and the main reason I don't is probably because I bought SKS first and given how well it has performed I've got hubris bias.
One thing I'd love to see is a technical analysis of SKS from you. They feel like they're getting pretty toppy but I'm loathe to lock in too many more cap gains before 30 June. I suspect the chart might reflect SXEs pretty closely and so the answer, for now, is lock in, but maybe you'll view it differently.