How diversifying helped the stars align for this Aussie business

How diversifying helped the stars align for this Aussie business

Date of Report: Market close on Tuesday, 22nd February
ASX: SXEPrice: A$0.560

52 Week Range: $0.490 - 0.730

Market Cap: $142.94 million

Sector: Capital goods

Every second week we invite a leading fund manager to present at The Insider: Meet the Fund Manager. In August, Alex Waislitz, from Thorney Investment Group, selected Southern Cross Electrical Engineering as one of his three favourite stocks for the company’s favourable cash position and earnings-to-enterprise value proposition.

10 November, 2021

27 August, 2021

The Insider: Meet the Fund Manager sessions are a great way to hear directly from leading fund managers. They share their approach to investing, favourite companies and their market view for the year ahead.

The Insider: Meet the CEO sessions feature a selection of company leaders who provide a succinct overview of big things their companies are doing. 

An economy battered by COVID has forced Australian businesses to adapt – and for Southern Cross Electrical Engineering (ASX: SXE), this has meant diversifying its services.

In the past few years, SCEE has evolved into a group of electrical, instrumentation, communications and maintenance services companies operating through six main entities over three broad sectors: infrastructure, commercial and resources.

This reworked model has created new avenues of growth for the company, and in doing so caught the eye of Australian billionaire investor Alex Waislitz, who quoted it in August last year to Reach Markets as one of his favourite stocks.

“It’s really well positioned to win a lot of work into that thematic,” Mr Waislitz said, referring to the three sectors.

Following Mr Waislitz’s recommendation, CEO Graeme Dunn joined us on The Insider: Meet the CEOs to discuss SCEE’s reorganised company structure and its outlook for FY22 and beyond.

“SCEE electrical is the original operating business historically focused on resources and industrial, but more recently diversified into transport, infrastructure, defence, utilities and renewables,” he said.

The 40-year-old company has opened up further opportunities for itself through the acquisition of its six main entities to increase its leverage in the health, education, government, transport, retail, commercial and transport sectors.

SCEE has also had to adapt to the shifting market focus in FY21, which saw resources activity increase and the transport and infrastructure sectors decline from the previous year’s peak.

“Although revenue ($370 million) fell short of target, our second half was a record half of activity and was up 73.4% on the first half,” Mr Dunn said. “Our workforce doubled in the year to a record 1800 employees.”

The company’s FY21 numbers speak for itself with profits ahead of target at an EBITDA of $29.6 million (up 37%) and an NPAT of $13.8 million (up 26.6%) in the prior year. SCEE ended the year with $51 million in cash and zero debt.

Mr Dunn said he was confident SCEE would continue its growth trajectory, targeting ~$500 million in revenue and strategic acquisitions across the resources, commercial and infrastructure sectors.

Click here to view more videos from Alex Waislitz’s Meet the Fund Manager session, or click here to view the full The Insider: Meet the CEOs session.

The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.

Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.

Meet the Fund Manager

Upcoming Session

Ben HarrisonChief Investment OfficerAltor Capital

Friday, 25th February 12pm (AEDT)

This exclusive event gives investors unprecedented access to Australia’s leading fund managers to hear about their favourite companies, unique market insights, and the opportunity to ask questions.

This is an opportunity to hear from Peter Johns, managing director at Westferry Investment Group.

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The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.
Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.
The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.