Site Group International (ASX: SIT) is a classic tale of the damage Covid has done to a globally significant Australian business, and the opportunity that can arise out of its return to growth.

The company offers critical training services to blue chip clients in the resources, construction and industrial sectors across the globe, counting the likes of Woodside, GE and Shell among its clients. The business grew at a 63.84% compound annual growth rate (CAGR) for nine years to record almost $31 million revenue in FY19 before Covid put a sudden stop to their operations, almost ending the company. 

Now the Site team have embarked on a recapitalisation raise supported by existing and new institutional investors with the goal to capitalise on three distinct growth opportunities which they are hoping will turn their story around.

Australian roots

First, in their home market, the $40 billion international student education industry in Australia, Site Institute offers vocational ​​programs, specialised English language courses, and partners with Pearson to deliver English Testing for study, work and visas. Their flagship offering is the Dual Diploma of Engineering Technical and Civil Construction Design – of which they are the only provider in Australia. They also offer a variety of other qualifications aligned to occupations  that are suffering skills shortages, in areas such as carpentry, cabinet making and drafting.

The Australian tertiary segment of the business, which delivered almost $3.6 million of revenue in FY20 until Covid put an end to the inflow of international students, leverages its education agent network to enrol and train students in premium technical courses that provide career opportunities and permanent residency pathways. The company is actively working with ~45 education agents, while expanding its network by 4-5 agents per month who bring in an average of 5 students.

Expanding in Saudi Arabia

The second growth opportunity for its training business lies in upskilling the workforce in Saudi Arabia, where it has a long-standing track record and is favoured by the likes of oil behemoth Saudi Aramco for their top notch global safety standards. According to their forecasts, Site’s operations in the Kingdom of Saudi Arabia (KSA) have them on track to achieve revenue of over US$17 million (~A$25 million) in 2025 when their facilities hit capacity

The KSA government’s ‘Vision 2030’ initiative aims to build a thriving and diversified economy, decrease unemployment rates and increase the participation of women in the workforce. There is significant funding attributed to these goals. Given the majority state-owned Aramco recorded US$161 billion in earnings for 2022 – the largest profit ever reported by a publicly listed company – there is no shortage of funding for the vision.

Site’s unique position as a world class provider of crane and rigging, scaffolding, heavy equipment, construction, fire and safety training affords them the luxury of being in the position of having KSA provide the infrastructure and capital expenditure, while SIT provides the trainers. Site operates Maharat Construction Training Centre, a Colleges of Excellence and Aramco venture, and they are a major source of graduates for Aramco projects in the region.

Backed by a real asset

The third interesting area of the business lies in property development. Site owns a 38.4% stake in a 30 hectare leasehold in the Clark Freeport Zone (CFZ), a venture that has been funded by the Filipino government and the Asian Development Bank with the goal of creating a prosperous region that decentralises the country’s economic activity away from the capital, Manila. 

The Zone has attracted some of the biggest hotel brand names in the world, including the Marriott, Hilton and Swissotel – who have all set up hotels in Clark. As at the end of 2021, the CFZ is now home to a 121k strong workforce, 3,641 hotel rooms, 126 dining facilities, 45 tourist attractions and a host of high end casinos, including both the Widus and Royce Hotels and Casinos.

Around 10% of the 30 hectares is designated as a training development area, and include a GE owned turbine (worth ~$US70 million) as well as an OceanaGold underground mine simulation environment – both for training purposes. Site is currently running a six month program involving the assessment and deployment of 400 qualified scaffolders and riggers for the Snowy River Scheme. 

However, while the training business onsite has a positive growth outlook, Site believes the real value is in rezoning the land from education and training to commercial development – exactly what was done to most of the land in the CFZ where many 5 star hotels stand right now – and then sell that land to a local developer. If the company is able to increase the Floor Area Ratio (FAR) from 1.25 to 6, it will permit the construction of buildings that are much taller and ultimately make the project more valuable to a developer.

The largest shareholder in the land holding at 44.6% is Site’s Chairman Nicasio Alcantara, a recognised and well-respected businessman in the Philippines who has a long history of successful industrial, mining and property development ventures in the country. 

Overall, the company is executing a growth strategy in their training businesses that they have proven capable of implementing before, and are developing a piece of land in a pragmatic manner that has worked for many others in the region.

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