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SRG - SRG Global

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Picked for my August 2019 tipping.
As previously explained by @galumay the SP dropped significantly at the midyear announcement in Feb. There has since been numerous contract awards, and I expect the already recovering price will continue and maybe kick with a report in August. (I assume the FY report will be in August).
 
I have built my position further in SRG, its one of my highest conviction positions and I believe that the results for the FY will cause a significant re-rate of the business.
 

Contract awards are one thing but margins are another thing entirely. I wouldn't describe the SP as already recovering. Going to new 5 year lows a number of times this year certainly doesn't suggest so.
 
Well that turned into a train wreck, one I got entirely wrong, the merger with SRG has completely destroyed the value in what was a good business in GCS. Profit gone, FCF turned negative. Going back to see where I got it so wrong, first feeling is that I knew GCS pretty intimately and given what a good little business it was, I assumed the merger would create some scale and actually make a better business. Instead the opposite happened and there has been significant destruction of value.
 
Yes at one point dropped 8.5 cents (from 47c close yesterday). Only 3c down at near close.
I think maybe hold tight, mergers are not easy and they say optimisation is complete and are now into growth phase. Well lets see what happens!
 

Hi@galumay

The chart below showed so much promise that evaporated so quickly, I feel your pain - thank god I was only in the ride for 6 weeks.

Skate.

 
jbocker said:
Well lets see what happens!
Click to expand...

Thats my inclination for now, I try not to rush decisions. I am annoyed that I misunderstood what was going on and my conviction in the business was borne out of my knowledge of the financials of the GCS business and I was using that as the basis for my valuation. Rooky error.

I will spend some more time on the details and see where my conviction lays after that!
 
It's a few months later and the chart looks much better. However price has not yet broken the two year sloping resistance line. Technically price remains in the downtrend. This indicates that SRG needs more time as the longer term insto investors haven't accumulated a significant amount of the supply that's available every time price rallies a little. I've placed SRG in by reversal watch list for now.



Edit: This might be one to consider for the 2020 CY comp.
 
Still holding a little of this one from its old Structural Systems Limited days (STS) Pre GCS and now known as SRG. It took me a while to track the old ticker code STS.
Still a few hundred dollars in front from my purchase and sell but it has been trickling many little dividends over the years. Been involved in many big projects over its 50 year history.
 
SRG - is my top pick for the CY 2020 comp. I view this as a turnaround opportunity. The success will depend on the management team of whom I know nothing.
The price chart has not changed since the last time I posted.
 
The price of SRG continues to fall back to March 2020 lows (corona virus selloff). This indicates that longer term investors have given up on the company and have been selling. However last weeks trading volume has increased significantly indicating another batch of SRG hopefuls have started buying. It's not getting my money, but it's good enough for a monthly selection.

 
Whilst not a falling knife, to put it bluntly the market has no interest in this company. That makes it interesting.
 
Noted that this is just a monthly pick.
The management of this company is an avoid for me. They lavished themselves with an unusually large amount of performance rights when Global Construction Services and SRG were separate companies. I think from memory these represented around 10% of the total equity issued in SRG. Most were of an opinion that GCS was the superior company of the two, better ROE, cash in bank for starters, but issuance of SRG shares to GCS shareholders was on a 1:1 basis as consideration in the merger. Worse, it was the managers of SRG who assumed the leadership of the merged company. Worse, the unusually large swag of aforementioned performance rights that the SRG managers held premerger were either paid out or converted to ordinary shares upon merger, can't remember which, think it was conversion.

Recently, unsurprisingly, the management were awarded 5.7m performance rights in the new SRG (26/11/2019). Why stop now?
 
SRG becomes more interesting. I noted the increase in volume last week as I selected SRG for the monthly comp. This weeks volume is even higher. Something is going on, as the demand kicked price significantly higher today (1st Blue bar off low). No news, but there are definitely others sniffing at this bottom.

 

@peter2 another post worthy of a second & third look. The Ducati Daily Blue Bar Strategy confirms there is interest. As they say, "a picture paints a thousand words".

SRG Daily Chart



Skate.
 
The big reveal for me will be the AR, will SRG have been able to convert extra revenue into FCF this year? Its a tough business and it needs razor sharp management to extract profitable margins from it.
 
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