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23-Feb-2021: 1H FY21 Half Year Results Announcement plus 1H FY21 Half Year Results Presentation and Appendix 4D & 1H FY21 Half Year Report
SRG Global delivers increased profit, cash and dividend, upgrades full year guidance
SRG Global Limited (ASX: SRG), an engineering-led global specialist asset services, mining services and construction group, has delivered its Half Year Financial Results for the six months ended 31 December 2020 (‘1H FY21’).
Highlights
The 1H FY21 results demonstrate the continued execution of SRG Global’s stated strategy for growth. The significant level of new contract wins and the record work in hand of $1b is underpinned by demand for the Company’s engineering led, end-to-end solutions, across the asset services, mining and construction sectors.
The Company is well positioned for long-term sustainable growth, with two thirds annuity-style earnings, exposure to the broader macro-economic growth drivers across the mining and asset services sectors, and COVID-19 Government stimulus programs in the Infrastructure and Construction sectors.
SRG Global has significantly strengthened its financial position over the past six months, moving from net debt of $8.4m to a net cash position of $5.3m. The Company has improved its liquidity to $82m of available funds, plus an additional undrawn $26.5m of equipment finance facility, with SRG Global well-placed to fund future growth.
SRG Global Managing Director, David Macgeorge, said: “SRG Global’s strategy of shifting towards a greater proportion of annuity / recurring earnings, with a disciplined focus on core business, core clients and core geographies, is delivering. The Company is in a strong position to continue the momentum in the second half of FY21 and deliver further growth in FY22 and beyond.
“We have upgraded our full year EBITDA guidance range to $45m - $47m, which is a significant increase on the previous year.
“The improved financial performance and guidance is underpinned by our recent contract wins, record work in hand position of $1b and a high level of annuity earnings. The outlook for SRG Global remains positive given the Company’s exposure to diverse sectors and geographies, quality commodities, a tier one client base and growing levels of infrastructure, construction and maintenance expenditure.
“The strength of result means SRG Global will pay shareholders a fully franked dividend of 1c per share, which is double the first half dividend paid in the previous corresponding period.”
--- End of excerpt - click on the links at the top for more ---
[I hold SRG shares, and they are also on my Strawman.com scorecard.]
SRG Global Awarded $150m Term Contract to Provide Multi-Disciplinary Services to Fortescue Metals
• SRG Global awarded a $150m, five-year term contract
• Master Agreement for Maintenance and Shutdown Services
• Servicing Fortescue’s mine, rail and port locations throughout Western Australia SRG Global Ltd (‘SRG Global’ or ‘the Company’)
(ASX: SRG) is pleased to announce it has been awarded a five-year term contract with Fortescue Metals Group (ASX: FMG).
The $150m term contract is a Master Agreement for Maintenance and Shutdown Services, initially to provide rope access and electrical maintenance requirements across FMG mine, rail and port locations throughout Western Australia.
Locations include Christmas Creek, Cloudbreak, Firetail, Kings Valley and Eliwana mine sites, along with its supporting rail and port infrastructure.
The contract will commence immediately for a period of five years.
SRG Global Managing Director, David Macgeorge, commented: “We are delighted to be selected as a key partner to FMG and to provide critical maintenance and shutdown services across their Pilbara operations for the next five years. This is another significant step forward in our strategy to build a portfolio of annuity earnings, with quality clients, to deliver long-term sustainable growth.”
04-Feb-2021: SRG Global secures two Term Contracts valued at $45m
Highlights:
SRG Global Ltd (ASX: SRG) is pleased to announce it has been awarded a new term contract with GFG Liberty OneSteel. The term contract is expected to commence immediately for a period of five years comprising an initial three-year term, with options for a further two years. The scope of works includes the provision of engineered access solutions at the Liberty Steelworks site in Whyalla, South Australia.
SRG Global has also been awarded a term contract with Pit N Portal Mining Services Pty Ltd (Pit N Portal). The term contract is expected to start immediately for an initial 12-month term. The contract scope includes the provision of specialist production drill and blast services and explosives supply at RED 5 Limited’s Great Western gold mine in Western Australia.
David Macgeorge, Managing Director commented “We are very pleased to have secured these two term contracts, adding to our recurring annuity earnings. Importantly, the GFG Liberty OneSteel contract is with a repeat customer, providing new services in addition to our existing refractory services term contract. The Pit N Portal contract was specifically targeted as it builds upon our Mining Services portfolio of high quality growth commodities whilst diversifying SRG Global’s customer base.”
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[I hold SRG shares.]
01-Dec-2020: Market Update and Revised Guidance Announcement plus Market Update and Revised Guidance Presentation and Market Update and Revised Guidance Investor Briefing (Today, Tuesday, 1 December 2020, 08.30am WST / 11.30am AEDT)
Highlights
--- click on the links above for the full announcements and presentation ---
[I hold SRG shares. They have halved since I started buying them, back before the merger (of SRG & GCS), but they're heading in the right direction again now.]
24-Nov-2020: $100m Specialist Facades and Structures Contracts Secured
Also - back on 17-Nov-2020 (one week ago): $55m Specialist Dam, Bridge & Tank Contracts Secured
Today's announcement ($100m is a big contract for a $145m company like SRG):
SRG Global Secures Specialist Facades and Structures Contracts Valued at ~$100m
Highlights:
SRG Global Ltd (ASX: SRG) is pleased to announce it has secured two new contracts totalling ~$100m.
The first contract is with Multiplex to complete Specialist Facades works at the Queens Wharf Residential Tower in Brisbane, QLD. The scope of works includes the design, supply and installation of engineered curtain wall facades. The project is expected to start immediately and conclude around March 2023.
The Queens Wharf Residences, Tower 4, is a 67-level residential tower. It is the first of the three residential towers to be constructed as part of the Queens Wharf precinct. Once fully developed, Queens Wharf Residences will be a mixed-use building which includes a Skydeck on Level 26 and recreational facilities on the lower floors.
The second contract, with D&C Corporation, is to complete Structures works at the Elizabeth Quay West development in the Perth CBD, WA. The project is expected to start immediately and end around June 2022. This will be the fourth major contract SRG Global has been awarded in the Elizabeth Quay Water Front Precinct.
David Macgeorge, Managing Director, commented: “We continue to secure significant contracts, on some of the most important developments across Australia, demonstrating the value of our long-term, trusted relationships with our key clients. These contract awards are also evidence of our strong technical expertise and 40-year track record of delivering specialist building projects.
“With $550 million of new contract wins since July, many of them long-term, SRG Global is in a period of significant momentum that we anticipate extending well into calendar 2021. Importantly, the contract wins are being achieved across a diversity of sectors and geographies, positioning SRG Global well for long-term, sustainable growth.”
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17-Nov-2020: $55m Specialist Dam, Bridge & Tank Contracts Secured
Highlights:
SRG Global Ltd (ASX: SRG) is pleased to announce that it has been awarded a contract variation with Transport for NSW as part of the previously announced New England Highway upgrade project at Bolivia Hill. The project is expected to complete in August 2021.
SRG Global has also secured an additional contract with Water Corporation to provide specialist design and construction of a 20ML water tank in Karratha, Western Australia. This project will commence immediately and is expected to finish towards the end of 2021. This further strengthens our relationship with Water Corporation being the third tank construction project we have been awarded in the last two months.
A further contract has been awarded to SRG Global by CPB Contractors to provide specialist dam remedial works at Paradise Dam for Sunwater. This continues our longstanding relationship with Sunwater, having recently successfully completed the Fairbairn Dam project. This is a return to Paradise Dam having previously been engaged on this dam in 2016. The project is expected to be completed by the end of the current financial year.
David Macgeorge, Managing Director, commented: “These contract awards highlight our diverse capability using specialist construction methods in our core markets of dams, bridges and tanks. We look forward to continuing our relationship with Transport for NSW, Water Corporation, Sunwater and CPB Contractors and building on our strong track record in these markets.”
[I hold SRG.]
8 Oct 20: SRG held its AGM today. There was nothing particularly new in the AGM.
I was disappointed though that no other shareholders asked any questions at the AGM.
I asked about their Free Cash Flow which was negative in FY20 and whether they expected it to turn positive in FY21. Operating cash flow should increase but the new contracts will require capital and they are in a growth stage so they were not prepared to point to it being FCF positive in FY21.
I asked whether their margins were being maintained with the large of new contracts. Yes, they are maintaining margins at around 11%.
I asked whether the company would consider a on market share buyback. The chairman's answer was that they are not considering a buyback.
The AGM slidedeck can be downloaded from this link.
https://www.asx.com.au/asxpdf/20201008/pdf/44nh5kwj7wsz4k.pdf
South 32 contract
SRG Global Secures Long-Term Refractory & Access Contracts with South32, valued at ~$125m
Highlights:
• New eight-year ~$100m contract with South32 for specialist Refractory Services
• Two-year ~$25m extension on existing six-year engineered Access Services contract
• Continuing to deliver on SRG Global strategy of transitioning business mix towards annuity/recurring earnings
SRG Global Ltd (‘SRG Global’ or ‘the Company’) (ASX: SRG) is pleased to announce it has secured a long-term ~$100m contract with South32 Worsley Alumina (‘South32’) to provide specialist Refractory Services, including gunning and casting and installation of refractory products and anchors. Works under the contract will commence in October 2020 with a duration of eight years.
South32 has also extended SRG Global’s existing engineered Access Services contract for a further two years. The contract extension is valued at ~$25m and will see SRG Global continue to provide access services at South32’s Worsley Alumina operations until mid-2027.
$65m Specialist Facades and Engineering Contracts Secured
Highlights:
• Specialist post-tensioning engineering and engineered products contract with John Holland for the Sydney Football Stadium Redevelopment at Moore Park in Sydney
• Specialist Facades and Structures contract for the Capital Square Development in Perth
• Specialist Facades contract with Lendlease for works at 150 Lonsdale Street in Melbourne as part of the Wesley Place precinct SRG Global Ltd (‘SRG Global’ or ‘the Company’) (ASX: SRG) is pleased to announce that it has secured a contract with John Holland to provide specialist post-tensioning engineering and engineered products for the Sydney Football Stadium Redevelopment at Moore Park in Sydney.
SRG Global has also been awarded a contract to complete Specialist Facades and Structures works at the Capital Square development in the Perth CBD. The scope of works includes the design, supply and installation of engineered curtain wall facades and structures work.
SRG Global has also secured a Specialist Facades contract to design, supply and install the specialist engineered curtain wall facades at 150 Lonsdale Street in Melbourne. This contract will be the third project undertaken by the Company for Lendlease, on behalf of Charter Hall in the Wesley Place precinct, having previously completed 130 Lonsdale Street and with 140 Lonsdale Street currently under construction.
10-Sep-2020: $65m Specialist Facades and Engineering Contracts Secured
[I hold SRG shares. When SRG reported on August 25th, they said that there were more new contracts to be announced shortly. Every time they have said that in the past, they have delivered. And they have this time as well. I expect that these three new contracts (detailed in this announcement) are not all of them either. In July, they had 5 different announcements of new work, and then another one in early August.]
SRG Global Secures Specialist Facades and Engineering Contracts Valued at ~$65m
Highlights:
SRG Global Ltd (ASX: SRG) is pleased to announce that it has secured a contract with John Holland to provide specialist post-tensioning engineering and engineered products for the Sydney Football Stadium Redevelopment at Moore Park in Sydney.
SRG Global has also been awarded a contract to complete Specialist Facades and Structures works at the Capital Square development in the Perth CBD. The scope of works includes the design, supply and installation of engineered curtain wall facades and structures work.
SRG Global has also secured a Specialist Facades contract to design, supply and install the specialist engineered curtain wall facades at 150 Lonsdale Street in Melbourne. This contract will be the third project undertaken by the Company for Lendlease, on behalf of Charter Hall in the Wesley Place precinct, having previously completed 130 Lonsdale Street and with 140 Lonsdale Street currently under construction.
David Macgeorge, Managing Director, commented: “We are pleased to be involved with these significant landmark developments at Sydney Football Stadium at Moore Park in Sydney, Capital Square Development in Perth and the Wesley Place precinct in Melbourne. These contract awards are evidence of our engineering-led specialist capability with repeat tier one clients”
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02-July-2020: Market Update & Interim Dividend Payment Brought Forward
This was some positive news from SRG Global at long last. In fact, I remember that the last time David Macgeorge said that some new contract awards were imminent, he was correct, and we got a steady flow of new contract award announcements over the next few weeks. That was too long ago however. The market had all but written SRG off before this morning. They closed at 19c yesterday, -68% below their 60c year-high almost 12 months ago. While they're up around +30% today on this update, it's clearly off a low base and they've got a lot more work to do. However, it's a start, and it will hopefully be a positive turning point.
Market Update & 1H Dividend payment brought forward
SRG Global Ltd (ASX: SRG) provides the following market update, including the impact of COVID-19 during which the Company implemented a number of actions to ensure the safety and wellbeing of its people, continued delivery of services to customers and cost mitigation initiatives to ensure the Company remains in a robust financial position. These actions have resulted in a more simplified business with a reduced fixed cost base and a focus on core business, core clients and core geographies.
Pleasingly, the Company has withstood the short-term challenging market conditions and is now well positioned for long-term sustainable growth, with high levels of annuity earnings, strong exposure to growth industry sectors and the fast tracking of Government stimulus in Infrastructure Construction.
Highlights
COVID-19 Impact
Business Outlook
Note 1 (*1): Pre-adoption of AASB 16 and before restructuring costs & COVID-19 related credit loss provisions (all subject to audit)
Strategy
David Macgeorge, Managing Director said, “SRG Global’s focus has and will remain the safety and wellbeing of our people and accordingly we proactively implemented a range of safety, supply chain and cost mitigation measures to manage the company through the uncertainty caused by COVID-19.
“SRG Global’s strategy has been to shift towards a greater proportion of annuity / recurring earnings versus project-based earnings. COVID-19 came at a very challenging time as we were starting to build strategic momentum in the business. The uncertainty caused by COVID-19 made us reflect on what we needed to focus on in the future. We have now simplified the business, changed the way that we operate and reduced the fixed cost base, fast tracked what we were not going to do moving forward and focused on core business, core clients and core geographies.
“With the actions we have now taken, we expect FY21 EBITDA growth to be circa 50% from underlying FY20. We have a strong pipeline of opportunities in excess of $6b, with positive exposure to Government backed Infrastructure investment, high quality commodities, diverse industries and a tier one client base. This has us well positioned for long-term sustainable growth.”
Corporate
SRG Global has implemented a number of cost mitigation initiatives to ensure the Company remains in a robust financial position through the uncertainty of the COVID-19 pandemic. The outcome is a more simplified business moving forward with a reduced fixed cost base. This has resulted in the implementation of significant restructuring initiatives including:
SRG Global is in a strong liquidity position with available funds of $73m, banking facilities not due for renewal until early FY22 and access to additional equipment finance facilities. The Company continued to invest in growth capital in 2H FY20 including the commencement of five-year contracts with both Alcoa and Saracen Minerals, the latter requiring new drill rig purchases of $6m (funded through equipment finance debt). Despite the above investment, the Company’s net debt position improved in the second half to $8m (inclusive of $26m of equipment finance debt).
On 31 March 2020 the Company announced a deferral of its 1H FY20 interim dividend of 0.5 cents per share to 29 October 2020 which was part of a prudent approach to cash management due to the uncertainty of COVID-19. However, with a positive outlook and a strong liquidity position, the Board has resolved to bring forward the payment of the interim dividend to 30 July 2020.
As part of the annual reporting and audit process SRG Global will undertake a review of its intangible asset base in the Construction Segment. As part of this review and in relation to a scaled back approach to the Building division, a non-cash impairment of goodwill may be recognised.
Segment Update
SRG Global provides the following update on the business activities and conditions across the company’s operating segments.
Asset Services Segment
Mining Services Segment
Construction Segment – Specialist Building
Construction Segment – Specialist Civil and Engineering
Work in Hand
The Company has work in hand of $707m as at 30 June 2020 with approximately two thirds of work in hand annuity / recurring in nature. SRG Global has a strong pipeline of opportunities in excess of $6b, with positive exposure to Government backed Infrastructure investment, high quality commodities, diverse industries and a tier one client base.
Outlook
SRG Global is very well positioned for sustainable growth in FY21 and beyond underpinned by a solid work in hand position, a strong opportunity pipeline with a number of imminent and near term contract wins expected and a future earnings profile of two thirds annuity / recurring in nature and one third project based.
SRG Global expects FY21 EBITDA growth to be ~50% from FY20 EBITDA of $20m - $21m.
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Disclosure: I hold SRG Global shares. I've been very patient with them, and I'm hoping that patience is now going to be repaid. There are a lot of positives in this update, however words are cheap, and it's actual results that matter. I'm hopeful now (based on available information of course, not just based on hope) that the results that myself and other shareholders have been waiting for are now on the way. I think SRG is well positioned and well managed and I particularly like their recurring (annuity-style) revenue focus for two thirds of their revenue, allowing them to be very selective with the work they take on in shorter-term construction projects. In the conference call today, David Macgeorge made it clear that they don't need to take on high-risk or low-margin construction work, and they won't be doing that. That's what I wanted to hear. That one-third-of-revenue construction segment work might be lumpy but it WILL be profitable. That's the story they're telling today, and I'm inclined to believe them.
09-Mar-2019: Post 1HFY19 Results, the 4 broking houses / analysts that cover SRG Global have updated their advice to clients and produced updates that include new price targets.
All 4 reports can be reached from here: http://srgglobal.com.au/investors/broker-reports/
SRG closed at 36c/share yesterday (Friday 08-Mar-19).
Euroz have maintained their "Buy" call and their new price target (PT) is 49c (downgraded from 87c).
"On balance, despite 1h 2019 disappointment, with $16.8m net cash, the stock is worth more than $0.37 fundamentally. That said, it may trade sideways for a period pending outlook clarity."
Next, Hartleys have retained their "Speculative Buy" call, with a valuation of 47c and a 12-month PT of 48c. Their valuations have barely changed.
"At the current share price, SRG appears good value. It is going to take some near term good contract wins for a re-rating, or else it will probably take time for market to have earnings confidence. The management team have a long track record turning around businesses, and are motivated and capable to dramatically improve SRG. We retain our Speculative Buy though. We need some near term evidence and comfort that earnings risk is well behind us."
Next, Baillieu Research (formerly Baillieu Holst) have retained their "Buy" call and changed their PT to 50c (from 68c).
"We believe the digestion of the GCS/SRG merger has been the key driver of divisional underperformance in 1H19, and this has now been washed through our forecasts. As a specialist services provider, SRG’s pipeline remains (along both the east and west coasts of Australia). Looking through the aberrations of FY19, we believe SRG’s valuation remains attractive, trading on a FY20f EV/EBITDA of 3.6x."
Finally, Argonaut maintain their "Buy" rating with a new 60c valuation (down from 70c).
"...we expect the benefits of the SRG-GCS tie-up, and FY19’s deferred revenue, to become more apparent in FY20, where we have EBIT climbing to $34.0m. Next year’s metrics look appealing and on this basis we maintain a BUY call, although acknowledge sentiment will weigh in the near term."
Disclosure: I hold SRG shares.
It's going to take time - the market doesn't like SRG right now, but they will get positively re-rated in future years - There's value there, and limited downside from here. IMHO.
31-Jan-2019: New Contract Win for SRG Global - see here.
SRG Global secures $41.6m transport infrastructure project in JV with WBHO
Highlights:
Project scope includes:
SRG Global Ltd (ASX: SRG) is pleased to announce that it has been awarded the large-scale Wanneroo Road and Ocean Reef Road Interchange project. SRG Global will enter into a joint venture on an equal basis with WBHO Infrastructure Pty Ltd (‘WBHO’) to deliver the $41.6 million contract (SRG Global share: $20.8 million). The project is funded by the Commonwealth and State Government as part of a $2.3 billion investment in road and rail infrastructure. This project will alleviate congestion at one of the busiest intersections in Perth’s North Metropolitan area, improving journey times and safety for road users and pedestrians. Specialist engineering and project planning works are expected to commence in early 2019 with a total project duration of approximately 18 months.
29-Jan-2020: $90.0m Multi-disciplinary Asset Services with Alcoa Executed
Highlights:
SRG Global Limited (SRG) announced in December 2019 that the Company had been awarded preferred tenderer status for a new $90.0 million multi-disciplinary asset services contract with Alcoa. SRG is pleased to advise that the contract has now been executed.
The services will be provided at Alcoa’s Kwinana Alumina Refinery in Western Australia with a contract duration of five years. Site mobilisation is well advanced with contract services to commence in February 2020.
SRG Global Managing Director, David Macgeorge said, “We are very pleased to have now executed this contract. This is a very significant contract award for SRG Global in our Asset Services division and showcases our ability to deliver multi-disciplinary integrated solutions for tier one customers. We look forward to building a long-term partnership with Alcoa to deliver value-engineered maintenance and access services that drives value for their operations.”
Disclosure: I hold SRG shares.