Consensus community valuation
Scroll down - latest update is at the bottom:
Early August 2019: 14-month price target - by October 2020. I think they'll have a good FY20 and they'll continued to be positively re-rated by the market as more and more good news emerges.
05-Feb-2020: When I set that 77c PT six months ago, SRG had plenty of upward momentum. Not so much lately. More down to sideways. However, 77c is still doable by October 2020 (my original target date) if a few things go right for them. I'm sticking with the 77c price target, even though it's almost double their current SP. As an SRG shareholder I may be a little biased towards them, but I reckon they can do it. IF a few things go right for them.
08-Aug-2020: Okaly Dokaly. Here we are - another 6 months have passed, and SRG spent most of that time drifting further SE - getting down to as low as 18 cps in March, before a bit of a recovery, then dropping back down to 19 cps on July 1st. They did however rise through July to peak at 31 cps on the 28th. As I type this, they last traded at 29.5 cps.
In just the past month, starting from July 7th, they have made SIX separate new contract award announcements, including a NZ$25m Transport Infrastructure Maintenance Contract, a A$25m Specialist Facades Contract, a $25m 5-Year Access and Maintenance Services Contract with Yara Pilbara, another A$40m of Specialist Facades Contracts two days later, then A$30m of Water Infrastructure Projects with WaterCorp (WA), and another $NZ50m of New Work in NZ, plus that their NZ business had now fully returned to normal levels of operational activity following the easing of COVID-19-related restrictions there. On the back of that their SP rose +33.33% in July - from 21 cps to 28 cps, getting as high as 31 cents, and closing out last week at 29.5 cents.
However, we saw a similar flurry of new contract announcements in the first half of July last year, and a subsequent SP move up from about 50 cps to around 60 cps, but then the momentum reversed and they fell back down to that 18 cps low in March this year.
It COULD happen again...
However I'm still holding SRG, and still expecting them to get their act together at some point and convert all of this work into profits. But what are they worth? While I wouldn't pay 77 cps for them as they currently are, I think they can get back to those sort of levels within 2 years, so I'm happy to have a 12 month price target for SRG of 77c. They have some positive momentum currently - finally, but they have disappointed shareholders (including myself) since the "merger of equals" between the "old" SRG and GCS (Global Construction Services) to create SRG Global, and there is always the potential there for further disappointment.
I said last time that 77 cps still looked OK IF a few things went right for them. These recent contract wins are a good start. They're a small company - their market cap was only $94m at the end of June (when their SP was 21c), so these contracts, while they look pretty insignificant in terms of individual revenue value, actually ARE significant to a company like SRG Global. They need more to go right for them to reach the potential I'm looking for, but I think it can happen.
Sticking with a PT of 77 cps, but making it a 2-year Price Target, so 77 cents by August 2022.
06-Feb-2021: Have reviewed this once again, as it was marked as "Stale" yet again. The positive NE trajectory of their SP over the past 7 months has been encouraging, and I still feel they can make it up to 77c by August 2022, so no change to that 77c PT at this point. SRG continue to make semi-regular positive new contract and contract extension announcements, and I'm still backing their MD, David Macgeorge, to build this company back up to fulfil some of their vast potential. They should be beneficiaries of increased infrastructure spending in the region, particularly in Australia, and particularly on dam walls and large bridges, plus they have positioned themselves well for multi-storey building facade repair/replacement work (that I have discussed elsewhere). They have multiple strings to their bow. I still hold SRG shares.
09-Aug-2021: SRG have risen +205% since their 18 cps Covid-19 low on 24-Mar-2020 to the 55 cps they closed at on Friday. They retested that low in late June, with tax loss selling, and closed at 19 cps on July 1st last year, however they are back up to 55 cps now and I think they'll likely go higher when they report this month. I have given plenty of details of their history and what they do above and in various straws here. Bottom line (today) however is - I still think 77 cps is a good price target for SRG, and it looks a lot more achievable today than it did one year ago.
2024:
12-April-2024: SRG's SP has been heading northeast since late January (from 65 cps up to 82.5 cps recently (a new 12-month high for them), and they're still around 80 cps now. It's late, so I'll link to their latest presentation: Euroz Hartleys Rottnest Island Convention Presentation on 13-March-2024.
Don't be put off by that rediculous cover page, it gets better.
It's 22 slides long, but here for your viewing pleasure are the 5 slides I consider to be most important to the investment thesis. If you're not interested after these five, then you're likely wasting your time looking at the rest of them. This company is right up my alley, in my wheelhouse so to speak, so I'm certainly interested, but they won't be for everyone.
Debt free (now), cashed up, great cash conversion, growing at a good clip, profitable, albeit with rather ordinary margins (see bonus slide below) which is not altogether uncommon in their sectors, paying good fully franked dividends that have been increasing since 2020, have just upgraded FY24 EBITDA guidance, are successfully transitioning to annuity/recurring earnings type work, and they have management that have proven that they won't chase work unless it's profitable work that suits their skill set (this is from personal experience from talking with Tony Hansen who held SRG in his EGP CVF and talked to their MD David Macgeorge reasonably regularly - see page 8 of his August 2023 Report plus evidenced by SRG's lumpy revenue in prior years which backed up David Macgeorge's stated views on not chasing unprofitable or barely profitable work and that he would rather have a division doing nothing at all than losing money).
Also, the GCS people (from the SRG-GCS merger in 2018) appear to have either left the company or got with the program now after the very disappointing couple of years directly after that 2018 merger of Global Construction Services and SRG to create SRG Global and the company is clearly back on track.
There is plenty to like here.
I've added them back in to my Strawman.com portfolio and I'm looking to get back onboard SRG in one of my real money portfolios as well soonish - they're on a watchlist.
Website: https://www.srgglobal.com.au/
SRG Global - Construction, maintenance & mining services – SRG Global
About: https://www.srgglobal.com.au/who-we-are/
Investor Page: https://www.srgglobal.com.au/investors/
What We Do | SRG Global - SRG Global
Our History | Who We Are - SRG Global
Engineering & Construction Services | What We Do - SRG Global
Mining Services | What We Do - SRG Global
Asset Maintenance | What We Do - SRG Global
Asset Care NDT solutions - SRG Global
Engineered Products | What We Do - SRG Global
Access Solutions | Scaffold and rope access - SRG Global
(25) SRG Global: Overview | LinkedIn
SRG Global's MD, David Macgeorge.
Appendix-4D-1H-FY24-Half-Year-Report.pdf (srgglobal.com.au)
SRG Global FY24 Half Year Results Investor Briefing (youtube.com)
That'll do.
10-Sep-2024: Update (post FY24 results):
Not holding this one today, but they're doing well. The indigestion from the swallowing of GCS into SRG via that reverse takeover (where GCS - Global Construction Services - acquired SRG and then changed their name to SRG Global and everybody from GCS left the company and the management that ran the old SRG remained running the "new" SRG) seems to have passed now, and David Macgeorge (SRG's MD) has the company humming now.
I used to hold SRG IRL, as well as here on SM, and I got back in here briefly for a shorter term trade earlier this year, but then sold out and took profits after they rose a bit. Had better ideas. However, SRG would have been a good one to have kept here in my Strawman.com portfolio - they've been good to me over the years, mostly.
With their FY24 full year results released on August 20th, they also announced a CR to help pay for the acquisition of Diona Pty Ltd, who are (according to SRG) in a market leading position in program and asset management services in water security and energy transition with utilities / government agencies under long-term collaborative program and asset management agreements, complementing SRG Global’s current end-to-end full asset life cycle capability in water, defence, resources, transport and energy transition.
SRG have had a plan, and that plan has included increasing recurring revenue from MIS - Maintenance and Industrial Services - which is far less lumpy than their traditional E&C - Engineering and Construction - contracting and sales revenue - and in FY24, SRG's MIS division (mostly recurring revenue) represented 62% ($661.5m) of their $1.069.3 billion of revenue vs 38% for E&C ($407.8m) and what's more, that MIS income was far more profitable than the E&C income, with EBITDA and EBIT(A) for MIS being more than 3 x their corresponding EBITDA and EBIT(A) for E&C - see below:
Source (above slide and the 3 slides below): SRG FY24 Results and Diona Acquisition Announcement [20-Aug-2024]
The market reacted positively to both the results and the acquisition announcement:
SRG's margins are ordinary (single digit), however they are profitable, and growing everything except their margins, which are roughly stable; their margins are down a bee's whisker on FY23, but still above the previous two years (see slide above).
The market also liked the outlook statement, particularly the increased annuity / recurring income which they predict will represent circa 80% of their earnings in FY25 (the financial year we are in now) and beyond (see below):
Just on that Diona acquisition...
- Earnings Accretive? Tick!
- Margin Accretive? Tick!
- Complementary Businesses with significant cross-selling opportunities? Tick!
- Assists with that push into further annuity-style recurring revenue? Oh Yeah! Big Tick!
Source: FY24 Results and Diona Acquisition Announcement [20-Aug-2024]
See Also: FY24 Results and Diona Acquisition Presentation
And: Diona Acquisition Announcement
Those were all released on August 20th - and the day after (the 21st) they released this: SRG-Global-successfully-completes-$60m-equity-raising(21-Aug-2024).PDF
So, with all that, being continued progress and a positive acquisition that should provide some acceleration to their plan, I'm happy to raise my price target once again for SRG, this time to $1.18.
SRG's results presentation stated that their market capitilisation was was around $500m. It's now 20% higher at just over $600 million, and they're in the All Ords, but need to be bigger to get into the ASX300 index - with the smallest ASX300 companies having market caps of around $720 to $750 million.
This moves SRG one step closer, but more importantly is positive for the overall business on multiple fronts, including shareholder returns - due to increasing their margins and being EPS accretive - and increasing their annuity / recurring revenue - and making the company far less reliant on winning big E&C contracts.
All good. Not among my very favourite companies in the sector, due to their low margins, but there are also a lot of worse companies in the sector than this. SRG are certainly making the right moves, and they are moving in the right direction now.
I have not looked at the acquisition of Diona, but I have heard only things about that company
Capital raising at a minimal discount.
Share price up 8% on open
Random look at SRG and this demands further inspection
Nice three year growth in revenue and profit, sure low margins but there has also been margin expansion (though slight drop in FY24)
Share price is currently 86.5c so PE is just over 11, which I would take for a company that has more than doubled EPS over the past three years.
Plus the icing on the cake, the company issued an FY25 EBITDA upgrade
"FY25 EBITDA guidance increased to circa $125m"
Company also announced an acquisition and equity raising
A nice set of results for SRG today. The ability to pass on costs is evident in how well margins have held up over the last couple of years. The overarching story here is the transition to being primarily an asset maintenance business with some construction exposure. The AM business continues to grow nicely (segment result below). The EBITDA contribution of the Asset Care business was $5m in the FY segment contribution but, assuming no growth, will contribute $15m in FY24.
Decent revenue tailwind across the business, and a business that is reducing the earnings risk from mispricing construction projects has the potential to bring rising earnings and a rising multiple.
24-Aug-2021: SRG Global (SRG) reported their full year results this morning, and they have delivered increased profit, cash and doubled their dividend, and they are forecasting strong growth in FY22 .
Highlights
- Revenue Up 4% to $570m (from FY20)
- EBITDA Up 61% to $47.1m
- EBIT(A) Up 151% to $25.1m
- Strong operating cashflow (FY21 Net Cash of $12.2M from FY20 Net Debt of $8.4m)
- Well-funded for Growth - available funds of $88.2m + undrawn $27.7m equipment finance facility
- Final Fully Franked Dividend Doubled to 1 cent per share (total FY21 dividend of 2 cps)
- Record $1b Work in Hand, Up 41% (from 30 June 2020)
- Strong opportunity pipeline of $6b in diverse sectors and geographies
- Two Thirds Annuity Earnings Profile in FY21 and beyond (recurring revenue)
- Long term Strategy on track and well positioned for long term sustainable growth
- FY22 EBITDA expected to be ~15% higher than FY21 EBITDA result
"The FY21 results demonstrate the continued execution of the SRG Global strategy. 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 and positive exposure to a diverse range of sectors and geographies across the asset services, industrial and mining sectors and government stimulus programs in the infrastructure and construction sectors."
"SRG Global has significantly strengthened its financial position over the past twelve months, moving from net debt of $8.4m to a net cash position of $12.2m. It has also improved its liquidity to $88.2m of available funds, plus an additional undrawn $27.7m of equipment finance facility, with the Company well-placed to fund future growth."
I hold SRG Global (SRG) shares. They have been through a period since the merger with GCS (Global Construction Services) where they have certainly underwhelmed the market and have not lived up to their own or the market's expectations. However, I feel they are starting to live up to that potential now, starting with this positive FY21 result, and strong guidance for FY22 (FY22 EBITDA expected to be around 15% higher than FY21 EBITDA). They certainly have some tailwinds now, and the headwind of a tight labour market and skills shortages - particularly in WA - has not bothered them very much at all in FY21, which is a good sign for the future as well.
