ASX:SGH
SGH Ltd
Investment Summary
The fund managers believe SGH Ltd has positioned itself strongly for future growth, particularly through its core business units, WesTrac and Coates, which contribute approximately two-thirds of Group earnings. They note the expectation of high-single-digit EBIT growth for FY24, driven by increasing investments in mining, construction, and infrastructure. Additionally, the fund managers highlight SGH's significant 72.6% shareholding in Boral, identifying the potential for Boral to double its earnings over the medium term under new leadership and improved operational practices. They commend SGH’s consistent disciplined capital allocation and operational excellence, which have been crucial for its performance. The recent acquisition of Boral is viewed as potentially the most value-accretive deal for SGH, with improvements in Boral's management now unlocking value, despite current market challenges. In their opinion, SGH's outlook remains positive as recovery in the construction market could fully realize these operational gains.
Commentary From The Managers
Blackwattle Investment Partners
30 Nov 2024
$49.13
- Seven Group (SGH) was the largest contributor to the fund’s performance in November.
- Main businesses include WesTrac, Coates, Energy, and Boral.
- Blackwattle Investment Partners continues to hold due to SGH’s impressive track record of disciplined capital allocation and operational excellence under CEO Ryan Stokes.
- WesTrac’s EBIT growth: $205 million in 2011 to $623 million in 2024.
- Coates’ EBIT increase: $200 million in 2019 to $326 million in 2024.
- Owner’s Mindset culture drives operational excellence, empowering and holding executives accountable.
- Belief that SGH’s acquisition of Boral could be its most value-accretive deal.
- Prior to acquisition, Boral was mismanaged with poor pricing discipline and capital allocation.
- Under CEO Vik Bansal, Boral shows improvements from disciplined pricing and a focus on operational excellence.
- Although the construction market is currently softening, anticipated improvements will become evident as the cycle rebounds.
L1 Capital
30 Sept 2023
$30.82
- Seven Group shares have risen by 26% following strong FY23 results.
- The company has provided a positive outlook for FY24, expecting high-single-digit EBIT growth.
- WesTrac and Coates have shown strong performance, positioning earnings for medium-term growth.
- Increased investment in mining, construction, and infrastructure sectors is expected to support this growth.
- Seven Group holds a 71.6% shareholding in Boral, a major player in building materials in Australia.
- Boral has faced challenges due to surging input costs and wet weather affecting earnings.
- Under new leadership, Boral has the potential to double earnings over the medium term from FY23 levels.
L1 Capital
30 Sept 2023
$30.82
- Seven Group Holdings (SGH Ltd) shares rose after reporting strong FY23 results in August.
- Positive outlook for FY24 period with high-single-digit EBIT growth expected.
- WesTrac and Coates performed strongly, with earnings positioned to grow due to increasing investment in mining, construction, and infrastructure.
- SGH holds a 71.6% stake in Boral, a major player in Australia's building and construction materials sector.
- Boral's earnings impacted by rising input costs and significant wet weather.
- Under new leadership and in a normalized trading environment, Boral has potential to double earnings over the medium term from FY23 levels.
L1 Capital
31 Aug 2023
$27.96
- Seven Group Holdings shares gained after reporting strong FY23 results.
- FY24 outlook is positive with high-single-digit EBIT growth expected.
- WesTrac and Coates are performing strongly, with medium-term earnings growth anticipated due to increased investment in mining, construction, and infrastructure.
- Seven Group Holdings holds a 71.6% shareholding in Boral, a major player in Australian construction materials.
- Boral's earnings faced challenges from surging input costs and significant wet weather delays.
- With new leadership and in a normalized trading environment, Boral could potentially double its earnings over the medium term.
L1 Capital
31 Dec 2022
$20.99
- L1 Capital updates its investment thesis on Seven Group Holdings (SGH), which has seen a +24% rise in shares.
- The strong trading update at the AGM in November highlighted double-digit earnings growth expectations for WesTrac and Coates business units for FY23.
- These business units together account for approximately two-thirds of Group earnings.
- They are well positioned for strong medium-term growth driven by increased investment in mining, construction, and infrastructure.
- Seven Group has a 72.6% shareholding in Boral, a major building and construction materials company in Australia.
- Boral’s earnings have faced challenges due to rising input costs and widespread wet weather delays.
- Under new leadership and in a normalized trading environment, Boral could potentially more than double its earnings in the medium term from current levels.
- L1 Capital continues to hold its position in SGH, based on these growth prospects.
L1 Capital
30 Nov 2022
$20.96
- Seven Group Holdings shares increased by 14% following a positive trading update during their AGM in November.
- Expectations of double-digit earnings growth for the WesTrac and Coates business units in FY23.
- WesTrac and Coates contribute approximately two-thirds of Group earnings and are poised for significant growth.
- Growth driven by the ongoing investment in mining, construction, and infrastructure.
- Seven Group Holdings holds a 72.6% stake in Boral, a major player in the building and construction materials sector in Australia.
- Boral has faced challenges from rising input costs and delays due to wet weather.
- With new leadership and a more stable trading environment, Boral could potentially double its earnings over the medium term.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.