SXE - Southern Cross Electrical Engineering

[galumay]

Thats the sort of TH we like!

My bet is its NXT with a big contract.

 

[divs4ever]

the BAP TH wasn't so bad for me ( looking for a cheap entry )

 

[Dona Ferentes]

from a small cap broker on Livewire Markets

Southern Cross Electrical Engineering (ASX: SXE)​

Nick Sladen (BUY): We like Southern Cross Electrical Engineering. We think that given the amount of work going on in energy transition and renewables across commercial, industrial, and mining - there's a huge amount of work that is going on. They've been successful recently with contract wins in data centres. They've been successful with other work in infrastructure in Western Sydney Airport and other areas.

The valuation is compelling. It's currently got about 20% of its market cap sitting in cash, so we would potentially expect further industry consolidation. And they are very well-placed to participate. There's a lot of work that needs to be done in this space and they're as well positioned as anyone to participate in that market.

 

[galumay]

Bugger, another red flag for SXE! Might have to sell.

 

[divs4ever]

Profit guidance

• SCEE Group anticipates FY25 EBITDA of at least $48m
• Strong structural tailwinds support expectations of further earnings growth in FY26 and beyond

Profit guidance Southern Cross Electrical Engineering Limited (“SCEE Group”) is pleased to announce that it anticipates FY25 EBITDA of at least $48m.
SCEE Group also reaffirms its previous guidance that FY24 profitability will match FY23 EBITDA.

Comment

Commenting on the announcement, SCEE Group Managing Director Graeme Dunn said “We have foreshadowed all year that we are expecting growth in FY25 and beyond.

With today’s announcement of the Collie Battery Energy Storage System (“CBESS”) project we are now able to give firmer guidance of our expectations going forwards.
Whilst the CBESS project will have no material impact on the current financial year it will drive significant activity levels in FY25 and into the first half of FY26.
However, this is far from our only lever of growth – we are exposed to strong structural tailwinds in the data centre sector, Australian infrastructure particularly at Western Sydney Airport, and to decarbonisation and electrification works to enable Australia’s energy transition.
Our other markets, particularly including resources, commercial buildings, and our supermarket works are in a stable or steady growth environment too, which gives us confidence that this growth in FY25 is sustainable, and we have expectations of further earnings growth in FY26 and beyond.
I further note that, although the CBESS project is the largest initial award by value in SCEE’s history, through a combination of our strong balance sheet and advanced payment mechanisms within the contract we will be able to fund its working capital requirements from our own resources.”

Authorised for release by Graeme Dunn – SCEE Group Managing Director

i hold SXE

 

[galumay]

While I like the contract win, I am annoyed by the trading update referencing Bullsh*t Earnings (EBITDA), there is really no excuse for a business like SXE using this nonsense metric. Its also a bit opportunistic to use the update to make commentary on FY2025 predictions, should have just confirmed outlook for FY2024.

 

[divs4ever]

maybe they are worried share-holders/investors will see the large capital expenditure negatively

( and liable to limit access to other opportunities )

 

[divs4ever]

well the market reacted positively ( currently up 20% )

maybe selling ( some or all ) isn't that bad a call

 

[finicky]

As per usual gamumay has punctured the mood.. the thrill is gone.
Company offering visibility of EBITDA through FY25 and first half of FY26. Expecting better than 25% EBITDA growth for FY25. FY24 to be flat on FY23 but SXE is cranking.

Held and Holding

 

[peter2]

I'm back in the office and see that SXE opened at 1.50 !!!. Heck, That's what a good EBITDA can do for you.

Surely it won't get better than this.

 

[galumay]

As per usual gamumay has punctured the mood.. the thrill is gone.

Sorry, I will try to be more hypey and pumpy next time one of my holdings 3x's.

That's what a good EBITDA can do for you.

Don't you start, its bad enough having @finicky take the piss.

 

[Knobby22]

Decent jump.

 

[galumay]

SXE kicking goals, a decent looking acquisition announced this morning, looks fairly cheap at 2x FY25 EBIT. Already a subbie to SXE so a good fit, management staying on. Also upgraded guidance released, obviously no material impact on FY24, but will flow thru FY25.

 

[Knobby22]

SXE kicking goals, a decent looking acquisition announced this morning, looks fairly cheap at 2x FY25 EBIT. Already a subbie to SXE so a good fit, management staying on. Also upgraded guidance released, obviously no material impact on FY24, but will flow thru FY25.

View attachment 176772

Heyday do have a good name over here in the East states.

I also like the way the deal is structured,

Up to a total of $10.55m payable as follows:
1. Deal Completion Initial Cash Consideration $5.55m in cash at completion

2. Earn-out: Deferred Consideration a) $1.0m in cash if MDE’s EBIT result for FY24 is equal to or greater than $2.3m
b) $1.0m in cash if MDE’s EBIT result for FY25 is equal to or greater than $2.6m
c) $1.0m in cash if MDE’s EBIT result for FY26 is equal to or greater than $3.0m If the above respective EBIT targets are not achieved, the Deferred Consideration cash payment each year will reduce on a pro-rata basis in line with the actual EBIT achieved in that year, down to nil payment at a baseline EBIT level of $1.5m.

3. Earn-out: Outperformance Consideration a) 25% of MDE’s EBIT result for FY25 in excess of $2.6m, capped at $1.0m in cash (ie an FY25 EBIT of $6.6m will achieve the maximum FY25 Outperformance Consideration of $1.0m) b) 25% of MDE’s EBIT result for FY26 in excess of $3.0m, capped at $1.0m in cash (ie an FY26 EBIT of $7.0m will achieve the maximum FY26 Outperformance Consideration of $1.0m)

Their existing long term debt is minimal (about 8mil) but there are always a lot of other short term debts and cashflow issues when running this type of business. The debt will now increase to about $14 million which is comfortable, but any additional takeovers will have me concerned.

 

[galumay]

Hey @Knobby, good analysis! Just one question, where are you getting the debt from? SXE is debt free and has over $60m cash.

 

[Knobby22]

Hey @Knobby, good analysis! Just one question, where are you getting the debt from? SXE is debt free and has over $60m cash.

The balance sheet historical info. they have on the trading website, with dividends etc. Interesting if that is wrong. Need to check annual report but going to a night lighting audit so no time. It was shown as long term debt.

 

[galumay]

No debt for quite a few years now, basically $65m cash. About $6m in capital leases is the only debt like liability.

 

[divs4ever]

No debt for quite a few years now, basically $65m cash. About $6m in capital leases is the only debt like liability.

View attachment 176791

careful that data might be stale ( out of date )

this has been making some acquisitions lately , maybe the balance sheet will have some updates coming

 

[galumay]

No, thats the 2024 H1 results, no other acquisitions for years.

 

[divs4ever]

No, thats the 2024 H1 results, no other acquisitions for years.

we will see in time , those new projects/contracts might incur up front expenses

i hope it is running as declared in the reports , but i have been ( badly ) surprised before ( elsewhere ) so tend to keep my guard up now