Site Group (ASX: SIT), a global provider of critical training services, is a striking example of how Covid can decimate a thriving Australian business. Their revenue collapsed from almost $31 million in FY19 to around $7m in FY22, with the share price dropping by over 95% since February 2020 to a market cap of less than $4 million in March 2023.

However, such situations can offer an opportunity for investors to capitalise on a recovery, with the Site team forecasting over $25 million revenues in 2025 while the share price has remained near its all-time lows.

Developing nations are constantly battling the crucial problem of having large but unskilled workforces. When it comes to country-making infrastructure and commodity projects, there is often no alternative other than to upskill the local population, which is essential to launch and operate most of these projects that are critical to their economies.

Site is a trusted partner to the likes of ExxonMobil, Woodside, Saudi Aramco, GE and Shell because it is one of very few players who have the knowhow, experience and relationships to fast-track local workforces into productive employees operating to the highest safety standards.

What has interested some institutional investors on top of its main business, is Site’s 38.4% interest in a 30 hectare leasehold in Clark, the Philippines, which is currently attracting major investment in a drive to diversify the country’s infrastructure away from the capital Manila.

The Site team is now working on this rezoning as the key catalyst to realising value through development or a sale.

Burgeoning US$1 trillion Saudi Economy Provides Growth Opportunity for Site

There are many regions in the world that are experiencing significant economic growth, and must rapidly upskill their workforce to keep up with the labour demands of their crucial industries. Without the capabilities that Site provides, many of these critical projects operations would never go ahead – or could be stopped dead in their tracks.

Most importantly, there are some countries that are flush with cash to fund the training.

The Kingdom of Saudi Arabia (KSA) for instance is a case in point, recording an estimated real GDP growth of 8.7% and a budget surplus of US$27.68 billion in 2022. 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.

The Kingdom has made it clear that they want to reduce their dependence on oil, which has resulted in the implementation of structural economic and financial reforms that are fuelling the growth of other parts of their economy. They also want to reduce their dependence on expatriate labour, which ties in to a reduction of welfare payments for people to stay at home instead of working.

One significant growth opportunity for Site’s training business therefore lies in upskilling the workforce in Saudi Arabia, where it has been active for nearly ten years and is one of only a few international partners of Saudi Aramco, the oil giant who just recorded the largest corporate profit ever at A$240 billion.

Source: Site Group International

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 the Maharat Construction Training Centre (image above), a Colleges of Excellence and Aramco venture that is a major source of graduates for Aramco projects in the region.

Prior to the pandemic, the company’s operations in the Kingdom of Saudi Arabia (KSA) grew over 50% from FY18-19. This level of pace has picked up again, with Site’s KSA revenue growing over 100% from FY21-22. According to their forecasts, Site’s operations in the KSA have them on track to achieve revenue of over $25 million in 2025 when their current facilities hit capacity. This forecast does not include the opening of more training facilities in KSA, capacity increases for existing sites or further opportunities in the wider region such as Bahrain.

Backed by Commercial Real Estate

What has attracted the attention of institutional investors is Site’s stake in commercial land in Clark, the Philippines. The country recorded 7.6% of GDP growth in 2022 – more than double the global average of 3.2% and is investing heavily in growth, and has enacted significant policy shifts with the goal of attracting foreign investment. Pragmatic measures such as allowing full foreign ownership of its renewable energy sector, while also setting tangible goals like reducing emissions by 75% before 2030 and ensuring 35% of power is generated by renewables in the same timeframe.

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. If the company is able to increase the Floor Area Ratio (FAR) of the land 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 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 and 45 tourist attractions. The Filipino government announced on 8th March that it will build a dedicated heart hospital inside of the CRZ, which will significantly improve the health care of its population.

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 or partner up with a local 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.

Strong Institutional Support

Importantly, Site has enjoyed the ongoing support of key investors throughout a challenging period until today.

A recent placement was supported by EGP Capital, Lucerne Investment Partners, Altor Capital’s Alpha Fund and Site’s founder and International Operations Director Vernon Wills while former Macquarie CEO Tony Berg added to his investment last year.

The company is currently conducting a recapitalisation through a 1:1 entitlement offer to clean up its balance sheet, pursue the opportunities the team has identified and achieve profitability in the process.

Site’s management is confident that this recapitalisation is a key step in enabling the company to pursue its rich and diverse pipeline with the goal to return to and exceed its pre-Covid growth.

Join International Operations Director Vernon Wills for a live investor briefing on Thursday 30th March at 1pm (AEDT), where we discuss how Site enables the likes of ExxonMobil, Woodside, GE and Shell to run successful and safe operations in developing parts of the world by upskilling their local workforces. Click here to book your spot.

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