SXE - Southern Cross Electrical Engineering

[peter2]

@rnr Yes, SXE did appear in my HVBB scan recently.

This is a hard one to trade due to the low daily volume and thin MD. A trader must have some standards. (lol).
What I mean by this is when a stock is difficult to trade due to liquidity then I'll not chase price or buy break-outs. If the BO fails then there's generally not enough liquidity to sell into and I'm stuck in the trade.

My alternative entry tactic for these types of stocks is to buy the pull-back, when price starts to rally. Once price trades below the 50-62% pull-back zone then I think that the strength of demand has waned.

The SXE weekly chart is a good one to demonstrate what I mean.
I've shown the 50-62% pull-back "buy zones" that are based on the prior impulsive up swings. Buying as price rallied out of these zones has worked well. Note the classic HVBB (pocket pivot).
The latest corrective move (pull-back) has gone well below the pull-back buy zone. This indicates that the buying demand has waned so it's not a buy if/when it eventually does look like rallying. Currently I'd need to see a fully fledged reversal signal (including a HL) to become interested in buying SXE.

The recent daily pop (HVBB) may create a weekly HVBB. Price will need to close the week above 0.60 though. If it does then this would signal that the next impulsive swing may have started.

 

[divs4ever]

• Heyday awarded commercial contracts totalling circa $50m
Commercial Contracts
Southern Cross Electrical Engineering Limited (“SCEE Group”) is pleased to announce that its subsidiary
Heyday has received contract awards totalling circa $50m in the commercial sector in Sydney as follows:
• CPB Contractors Pty Ltd has awarded Heyday the electrical services design and construct contract for a
39-storey 47,800m2 premium-grade commercial tower which is to be built above the north entrance to
Sydney Metro’s Pitt Street Station. The tower, to be known as Parkline Place, is being developed by
Parkline Place consortium partners Oxford, MEA and Investa. As previously announced to the market on
10 March 2020 and 7 October 2021 respectively, Heyday is currently delivering the Pitt Street Metro
Station portion and the build-to-rent residential tower above the station’s southern entrance with CPB
Contractors. Work on Parkline Place will commence immediately and is scheduled to be completed in
late 2023.
• ASX-listed Shape Australia Corporation Limited has awarded Heyday the electrical and communications
fit-out works for the Commonwealth Bank Place Sydney North Building. The project involves the
complete tenancy re-fit for the lighting, lighting controls, power, communications cabling and
infrastructure, switchboards, and the provision of a new UPS power distribution system across the CBA’s
27,000m2, 9-level tenancy space. The project is due for commencement in May 2022 and expected
completion is in June 2023. The North Building works are the second stage of CBA’s tenancy re-fit across
its Darling Quarter campus. Heyday and Shape are in the final phase of completing the first stage of the
project at the South Building, which is of a similar scale to that of the North Building.

Comment

Commenting on the awards, SCEE Group Managing Director Graeme Dunn said “The commercial sector in
Sydney has been somewhat subdued over the last year or so and therefore I am pleased we are announcing
these significant wins. Tendering activity has also been much stronger in recent times and I am anticipating
a rebound for us in commercial construction in NSW in coming periods.
I also note that both of these awards are further projects in developments in which Heyday is already
involved which is testament to the high regard in which Heyday is held by its clients.”
Authorised for release by Graeme Dunn – SCEE Group Managing Director

================================================================================================

( DYOR )

i hold SXE

chugging along nicely ... but there are some troubled times liable to hit the nation before long

 

[galumay]

Its one of those businesses that just chugs along making money, paying divs, no or low debt, sensible capital allocation - and the market never pays any attention to it!! I guess that give you and I opportunities to further accumulate, @divs4ever ! One of the cheapest businesses on the ASX by my metrics.

 

[divs4ever]

i was expecting SXE to get a tailwind from the civil infrastructure cycle , but the mining investment cycle ( and plant upgrades ) has provided plenty of work , instead ,

and i don't really mind if the company gets little attention , as long as it keeps going along in a healthy manner

 

[divs4ever]

• Further record half of revenue in H2 FY22 anticipated
• Upgrading FY22 full year forecasts to revenues of circa $550m and EBITDA of over $34m
Market Update
The Board of Southern Cross Electrical Engineering Limited (“SCEE Group”) wishes to update the market in
relation to trading in FY22.
As discussed in our 13 April 2022 announcement to the ASX, the March quarter had seen a record level of
activity for the Group. However this current quarter is expected to exceed even that, which means we are
now forecasting FY22 full year revenues of circa $550m driven by our record Group workforce of around
2,000.
Accordingly the company wishes to upgrade its EBITDA guidance (given at the start of the financial year,
and reaffirmed at the half year results), from a range of $29-33m to now being confident that we will
deliver a record full year EBITDA of over $34m in FY22.
Starting with the resources sector in WA which has driven a significant part of this activity, each of our Rio
Tinto Gudai-Darri, MARBL Kemerton Lithium Plant and BHP Villages Security projects have been at peak
levels for us and are performing well. The reopening of the WA borders in early March has not led to any
significant coronavirus related disruptions for us, as was feared as potentially possible at that time, and in
fact the border reopening has enabled us to access further pools of labour from the East Coast.
This outperformance in WA has more than offset the subdued activity from earlier in the year in NSW and
the ACT resulting from the coronavirus impacts on the construction industry there and which took some
time to unwind. Notwithstanding, our Heyday business has continued to win significant commercial and
infrastructure projects in its geographic markets and is well set up to perform strongly over the next few
years.
In their first full financial year under our ownership all three of the Trivantage businesses are running ahead
of forecast and will exceed all of their FY22 earn-out targets.
SCEE is forecasting to end the year with over $45.0m of cash (30 June 2021: $51.0m) and no debt. This is
after funding a further $10.0m for the acquisition of Trivantage, paying $12.7m of dividends and providing
the working capital for the major resources projects being still at high activity levels. It should be noted
there can be greater volatility with cash forecasts given predicting the timings of receipts and payments.
The order book is still under evaluation but will exceed at least $500m at the start of FY23, a significant
component of which is our large-scale and long-term East Coast infrastructure projects.
Finally, the Board notes that the above results are still subject to final audit.
Southern Cross Electrical Engineering Limited ABN 92 009 307 046
Comment
Commenting on the above, SCEE Group Managing Director Graeme Dunn said “I am delighted by the
performance of our family of businesses in a year in which there have been significant challenges to some
of them. That the Group is able to absorb these impacts and still produce a record performance is the
demonstration of the resilient organisation we have now become.
Whilst there are macro issues to be aware of, looking across our markets there are many areas where the
outlook is strong. Last week our Board undertook a site visit to our Western Sydney International Airport
project which is only at a very early stage for us. The airport and the associated Aerotropolis around it has
already attracted tens of billions of dollars of public and private investment and is an area where SCEE is
well positioned to maximise activity in coming years and yet this is only one opportunity to which the
Group is exposed.”

i hold SXE ( av. SP 50.5 cents )

 

[galumay]

Long term hold for me, I had scuttlebutt from employees at the time and I realised the direction they were headed with their diversification. I have always liked the sector, my area expertise meant I could fairly easily identify the good businesses in a tough sector. Still one of the cheaper businesses out there.

 

[divs4ever]

Project and Industry Awards and Trading Update
• Awarded contracts totalling over $30m
• Upgrading FY22 full year EBITDA guidance to over $35m
• Cash at 30 June 2022 of $53.1m (30 June 2021: $51.0m) and no debt
Project Awards
Southern Cross Electrical Engineering Limited (“SCEE Group”) is pleased to announce that across the
group it has received contract awards totalling over $30m as follows:
• In Queensland, Arrow Energy Pty Ltd have awarded SCEE Electrical two multi-year agreements to
provide manufacturing and maintenance services in support of their operations in the Surat and
Bowen basins. Both agreements will commence in 2022 and provide SCEE Electrical with
continuity of works over several years.
• Also in regional Queensland, S.J. Electric has secured from Pensar Project Infrastructure Pty Ltd
the electrical design, manufacture, and installation works to support the installation of a new
irrigation water pipeline. The pipeline will allow Class A recycled water to be pumped from the
South Caboolture Sewage Treatment Plant to be used to support local farming activities in the
Wamuran area. S.J. Electric will supply and install two portable switch rooms, switchboards, PLC
panels, instrumentation and VSD panels, together with the electrical installation of eleven
outdoor enclosures housing electrical components that are critical in providing power to the
pumping stations supporting the pipeline. The switchboards will be manufactured by Trivantage
Manufacturing in its local Brisbane factory. These works will be completed during FY23 and form
part of Unity Waters’ 2050 sustainability goals of zero nutrients into waterways and 100% reuse
of recycled wastewater.
• S.J. Electric has been engaged by Woolworths Group Ltd to install new electrical metering
systems into approximately five hundred and fifty locations nationally in a program expected to
span across FY23. These works will be performed during night shift to ensure no disruption is
caused to operations.
• S.J. Electric has also been engaged by subsidiaries of BSA Limited to perform the installation of
their building management control systems in Aldi Supermarkets across Australia. S.J. Electric will
use its national presence to perform the works in over five hundred stores ranging from capital
cities to remote regional towns. The program will take approximately two years to complete and
covers New South Wales, Victoria, Queensland, South Australia, and Western Australia. Utilising
its expertise in the supermarket industry, S.J. Electric will perform the works in a manner that will
2
allow trading to continue at the supermarkets with minimal disruption to operations.
• Trivantage Manufacturing has been successful in securing a supply agreement with a subsidiary
of Hickory Group Holdings Limited to supply the low voltage switchboards and other power
distribution units for its new data centre in Melbourne. Trivantage Manufacturing will supply
twenty-nine main switchboards and thirty-two distribution boards over a condensed timeframe
of five months with supply to be completed by the end of 2022.
Industry Awards
At the recent National Electrical and Communications Association (“NECA”) Excellence Awards, SCEE
Group businesses were State Winners of:
• In WA, SCEE Electrical won the “Industrial Large Project Award 2022” for its work at Rio Tinto’s
Gudai-Darri Phase 1 Project.
• In NSW, Heyday’s apprentice Bailey Gronau was awarded “Apprentice of the Year for 2021”.
Trading Update
SCEE Group wishes to provide an update to the previous guidance on the full year results that was
announced to the ASX on 7 June 2022.
As forecast, the final quarter of FY22 did see a record level of activity and FY22 full year revenues are
now expected to exceed $550m. Accordingly the company wishes to upgrade its EBITDA guidance
given on 7 June 2022 of being over $34m to now being confident that we will deliver a record full
year EBITDA of over $35m in FY22.
In addition, cash collection in the month of June was even stronger than anticipated and the Group
ended FY22 with cash at 30 June 2022 of $53.1m and no debt (30 June 2021: $51.0m, and 7 June
2022 guidance was for over $45m).
It should be noted that the above results are still subject to final audit.
Comment
Commenting on the above, SCEE Group Managing Director Graeme Dunn said “We are always
delighted to be the recipient of industry awards because it is indicative of the regard in which we are
held amongst our peers.
I was particularly pleased by our cash at 30 June and the resulting strength of our balance sheet, as
this was after a year in which we funded a further $10.0m for the acquisition of Trivantage, paid
$12.7m of dividends, and we were at very high levels of activity in June with the resulting working
capital requirements supporting our projects.”
Authorised for release by Graeme Dunn – SCEE Group Managing Director
================================================================================================

( DYOR )

i hold SXE

 

[galumay]

The market has really missed the quality of this business and it's management team, IMO. Still priced way under my range of value. The benefit of being overlooked like this is the ongoing opportunity to slowly accumulate!

 

[divs4ever]

my 'accumulate ' target price is around 50 cents

sadly i didn't have more cash in April 2020 when i only grabbed a handful ( extra ) at 42.5 cents ( my av. SP is 50.3 cents )

 

[galumay]

Very similar, av SP is 49c, been accumulating since 2016.

 

[divs4ever]

February 2017 ( @ 54 cents ) for my first parcel

i was hoping to accumulate during the mining consolidation cycle ( investment downturn ) hoping SXE could stay afloat on civil construction income , but here we are in what appears to be a resources super-cycle ( or a mild depression .. mining looks great because currencies are collapsing ) , so the plan to accumulate has hit some headwinds ( but not completely ruined the plan )

happily the company is chugging along nicely ( even if the holding is smaller than i hoped for )

 

[peter2]

Pleased to see SXE continuing higher as the Combo portfolio holds a position. It's a tricky one to trade due to the constant pull-backs in price. It's a sloppy price chart. Perhaps the latest news will see investors revalue SXE at a (much) higher level before the evitable pull-back forms.

The Combo portfolio has sold half today near the high. This allows a wider trailing stop for the remainder, which is needed in such a sloppy chart. This trade is an example of a pull-back setup described in my earlier post where we buy at the HL with the iSL below the prior HL.

 

[galumay]

As we knew, very strong result for FY2022, only annoyance is the announcement of results posting bull**** earnings and no mention of actual earnings (which were up 10%.)

 

[divs4ever]

am not sure their acquisition ambitions are well timed

up more than 20 cents a share on these ( my av. is just over 50 cents )

please take care

 

[galumay]

Yes, A&M activity is always risky, so few businesses are able to execute well. SXE have shown reasonable execution so far IMO, but like you @divs4ever, I would urge caution!

 

[peter2]

SXE price has remained quite strong during the recent market selloffs. Price did drop due to the juicy 0.04 div paid recently. Since then price has remained solid and looks likely to go higher.

SXE is another stock in my watchlist of companies that are showing price resilience against the index.

 

[galumay]

SXE announce another $50m of contracts for its Heyday subsidiary. Remains very good value, great little business that has very sensibly expanded its operations over the last 5 or so years. Hodler.

 

[Knobby22]

My pick for the month.
Looks cheap to me. PE of 10, Dividend yield of 7.2%.

Also from a technical view looks a bit bullish. Could be a good result coming up this month.

 

[galumay]

It's seriously under priced, but it has been for a long time!

 

[galumay]

Another wonderful year for SXE, revenue dropped but NPAT up strongly, showing ability to grow gross margins. Probably also related to rolloff of large contracts where costs drop away. Cash conversion is particularly strong, roughly $45m of FCF compared to $20m NPAT. Yielding over 7%. Beyond me why this business is so cheap, no debt, wallowing in cash, plenty of work in hand, well diversified across sectors now and sensibly managed. Should probably shut up and buy some more!