Summary
The fund managers believe that Saunders International Ltd (SND) is navigating a complex landscape of opportunities and challenges. They highlight the significance of SND's recent acquisitions, including Automation IT and Piping Solutions, which are expected to enhance its capabilities and market positioning in sectors like defence and renewable energy. In their opinion, the termination of the $165 million Project Caymus contract, while initially perceived negatively, indicates SND's prudent risk management, as it was not due to performance issues. Despite facing cash flow challenges, SND's order book has shown resilience, with a commendable growth trajectory reflected in a 36% CAGR in revenue over recent years. The fund managers acknowledge the importance of securing large contracts to sustain growth, particularly in the defence and water sectors, where SND has made significant investments. They express confidence in SND's strategic direction and its potential to achieve a revenue target of over $350 million in the coming years, despite recent earnings downgrades and market volatility.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Source: Trading View
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Commentary From The Managers
Naos Asset Management
30 June 2025
$0.74
Summary
- Naos Asset Management continues to hold Saunders International Ltd (ASX: SND) as a core investment in their portfolio.
- SND has significantly expanded its workforce from ~50 to ~500 employees and increased revenue from ~$50 million to over $200 million.
- The company's strategy focuses on securing high-value contracts as a self-performing contractor, leveraging in-house expertise.
- Key clients include the Department of Defence, tier-1 resource companies, and utilities like Sydney Water.
- Notable project successes include contracts exceeding $40 million at Western Sydney Airport and RAAF Base Tindal.
- In FY25, earnings downgrades occurred due to project timing uncertainties influenced by a federal election, budget shifts, and volatile commodity prices.
- The resignation of SND’s CEO adds to the challenges faced by the company in balancing long-term growth with short-term performance.
- Despite increased fixed costs from long-term investments, SND has demonstrated consistent year-on-year EPS growth.
- SND aims to exceed $350 million in revenue within 2-3 years, with over $1.5 billion in tenders currently under evaluation.
- Comparable firms indicate that reaching a scale inflection point can create substantial shareholder value in capital-light contracting businesses.
- In July 2025, SND announced the acquisition of Aqua Metro, enhancing their capabilities in addressing ageing water infrastructure.
- The acquisition aligns with SND’s strategic goals, adding scale with Aqua Metro’s annual revenue exceeding $100 million.
- Naos Asset Management anticipates discussing potential synergies from the Aqua Metro acquisition in the upcoming Q1 FY26 Quarterly Investment Report.
- Clarity is sought on SND’s project pipeline, particularly regarding delays in defence and resource-related projects.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
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Commentary From The Managers
Naos Asset Management
30 June 2025
$0.74
Summary
- Naos Asset Management continues to hold Saunders International Ltd (ASX: SND) as a core investment in their portfolio.
- SND has significantly expanded its workforce from ~50 to ~500 employees and increased revenue from ~$50 million to over $200 million.
- The company's strategy focuses on securing high-value contracts as a self-performing contractor, leveraging in-house expertise.
- Key clients include the Department of Defence, tier-1 resource companies, and utilities like Sydney Water.
- Notable project successes include contracts exceeding $40 million at Western Sydney Airport and RAAF Base Tindal.
- In FY25, earnings downgrades occurred due to project timing uncertainties influenced by a federal election, budget shifts, and volatile commodity prices.
- The resignation of SND’s CEO adds to the challenges faced by the company in balancing long-term growth with short-term performance.
- Despite increased fixed costs from long-term investments, SND has demonstrated consistent year-on-year EPS growth.
- SND aims to exceed $350 million in revenue within 2-3 years, with over $1.5 billion in tenders currently under evaluation.
- Comparable firms indicate that reaching a scale inflection point can create substantial shareholder value in capital-light contracting businesses.
- In July 2025, SND announced the acquisition of Aqua Metro, enhancing their capabilities in addressing ageing water infrastructure.
- The acquisition aligns with SND’s strategic goals, adding scale with Aqua Metro’s annual revenue exceeding $100 million.
- Naos Asset Management anticipates discussing potential synergies from the Aqua Metro acquisition in the upcoming Q1 FY26 Quarterly Investment Report.
- Clarity is sought on SND’s project pipeline, particularly regarding delays in defence and resource-related projects.
Naos Asset Management
31 Mar 2025
$0.86
Summary
- Half Year Results: SND released a strong HY25 result, achieving record revenue, EBIT, and NPAT.
- Decline in Margins: Despite growth, EPS and EBIT margins fell YoY due to increased costs and share issuance for acquisitions.
- Downgraded Guidance: FY25 guidance downgraded, with revenue expectations adjusted between -5% & +5%, and EBITDA down approximately -20% due to a higher cost base.
- Record Pipeline: The business pipeline now stands at $2.3 billion, with approximately $1.2 billion in tendered work.
- Industry Diversification: Four segments, including Water and Defence, are crucial for SND’s growth potential.
- Contract Delays: Delays have impacted FY25 guidance; however, management remains optimistic about future growth.
- Defence Contracts: Expectation for SND to secure major Defence contracts given past investments; urgency to demonstrate progress.
- Market Trends: Consistent themes of delays across the contracting sector, influenced by commodity price volatility and inflation.
Naos Asset Management
31 Dec 2024
$1.01
Summary
- Naos Asset Management notes that SND has experienced a share price decline of ~30% over the past two years despite achieving record financial results.
- SND's market cap is around $100 million, contributing to share illiquidity and reduced interest from institutional investors.
- Recent substantial shareholder, Ahrens Group, a family-owned contracting business in South Australia, indicates potential long-term value in SND.
- Ahrens Group operates in similar sectors and has a robust financial standing, including a debt-free balance sheet and significant cash reserves.
- Ahrens has made acquisitions in related segments, which may complement SND’s operations and growth prospects.
- Naos believes the involvement of Ahrens highlights the long-term value in SND and provides options for future collaboration.
- SND reaffirmed guidance for revenue growth during their Q2 FY25 AGM, indicating ongoing positive momentum.
Naos Asset Management
31 Mar 2024
$0.93
Summary
- Naos Asset Management emphasizes the importance of maintaining perspective when analyzing results, notably for Saunders International Ltd (SND).
- There has been significant growth from $30 million in revenue and $1.4 million in EBITDA at 1H FY20 to $104 million in revenue and $9.8 million in EBITDA at 1H FY24, reflecting a CAGR of 36%.
- SND has achieved this growth without raising capital, currently having over $30 million in cash and no bank debt.
- The order book currently exceeds $220 million despite completing its largest contract worth approximately $160 million.
- SND is effectively managing its order book, burning through approximately $100 million each half.
- The outlook for SND is robust due to its self-performing model, reducing dependency on sub-contractors.
- Site visits, such as to the Nancy Bird Walton Western Sydney Airport, highlight SND's capabilities in delivering extensive infrastructure projects.
- SND's unique offerings position it well to secure large design and construction projects focused on various liquids, including water and fuels.
- While maintaining past growth rates is challenging, Naos Asset Management believes SND has the potential to double its revenue base in the next four years.
- Successful project execution and securing additional large projects with tier-1 clients will be critical for SND's future growth.
Naos Asset Management
31 Dec 2023
$0.93
Summary
- Naos Asset Management notes the acquisition of Piping Solutions (PS) by SND for an initial payment of $13 million plus earn-out, reflecting strong vendor confidence in SND's strategy.
- PS is a complementary offering that expands SND's service capabilities, enabling them to offer clients complete solutions including both tanks and piping elements.
- PS has experience with major contracts, including work for the Western Sydney Airport, aligning with SND's goal to internalize specialized skills.
- Significant exposure to Defence contracts accounts for approximately 40% of PS’ revenue, bolstering SND’s credentials in defense opportunities.
- The acquisition enhances SND's multi-year strategy to gain tendering expertise in large defense projects.
- Expansion into new energy markets, such as Hydrogen and Biofuels, is accelerated by PS's capabilities and client collaborations.
- PS strengthens SND’s position in evolving renewable energy sectors with recent partnerships and projects.
- SND continues to rebuild its order book after completing significant projects, moving from a tank maintenance focus to a multidisciplinary contracting business.
- Overall, Naos Asset Management continues to hold SND as it evolves to offer unique solutions directly to Tier-1 clients.
Naos Asset Management
30 Sept 2023
$0.99
Summary
- FY23 was a critical year for Saunders International Ltd (SND), characterized by a high level of execution risk due to significant business growth.
- Market scrutiny was particularly focused on SND’s handling of the $165 million Project Caymus, which was terminated in April.
- Key investor concerns included SND’s margin management, cash flow post-termination, and maintenance of the orderbook.
- SND achieved a commendable EBIT margin of 7.2%, positioning it in the top quartile relative to peers.
- Notably, the Civilbuild business generated approximately $30 million of revenue without contributing to profitability.
- Excluding Civilbuild, the overall group margin would rise to 8.50% based on delivered EBIT.
- A major point of concern was cash flow conversion, showing a reduction of roughly $24 million due to increased contract assets.
- As of October 10, 2023, SND's cash balance rose to $39 million, improved from $13 million in June.
- Despite project completions affecting the orderbook, SND saw a $7 million YOY growth in its orderbook.
- SND successfully won significant contracts, including a $44 million contract with Quantem Energy.
- The year marked a pivotal transition for SND, focusing on scaling and diversifying into new markets.
- Industry conditions remain favorable, positioning SND for potential growth in the near to medium term.
- With over 400 employees, SND has enhanced its internal capabilities significantly.
- Peer comparisons highlight Monadelphous (MND) as a successful contractor, showcasing potential pathways for SND's growth.
- SND's management is foreseen as capable of achieving substantial organic and inorganic growth opportunities.
Naos Asset Management
30 June 2023
$1.12
Summary
- Q4 FY23 Events: Update on Project Caymus, Acquisition of Automation IT & BP Bio Fuels Contract Win at Kwinana
- Notable Termination: SND was "terminated by convenience" by Crowley on a $165 million contract for fuel storage tanks in Darwin, NT
- Implications of Termination: Naos Asset Management believes this suggests issues not associated with SND or their work completed
- Order Book Impact: Despite a gap from the terminated contract, Naos Asset Management feels SND is positioned to close the contract on original terms
- Acquisition of Automation IT: SND acquired Automation IT for $5.50 million, enhancing their automation division's scale and resources
- Competitive Positioning: This acquisition enables SND to compete for larger tenders against established players like Sage Automation
- Contract Win: SND successfully tendered for the $42 million BP Kwinana Renewables Project, filling part of the gap left by Project Caymus
- Renewables Focus: The project will enhance SND's credibility in the renewable fuels space, aligning with their growth strategy
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Frequently Asked Questions
Who has invested in Saunders International Ltd (ASX:SND)?
Fund managers including Naos Asset Management have invested in Saunders International Ltd (ASX:SND).
Why have investment managers invested in Saunders International Ltd (ASX:SND)?
Fund managers are investing in Saunders International Ltd (SND) due to its strategic growth trajectory and diversification into high-value contracts across multiple sectors, including energy, water, and defence. Despite experiencing challenges like the termination of a major contract, SND has demonstrated resilience by successfully acquiring complementary businesses, such as Automation IT and Piping Solutions, which enhance its capabilities and market positioning. The company has shown consistent revenue growth, achieving over $200 million in revenue while maintaining strong EBIT margins relative to peers. With a robust order book exceeding $220 million and a substantial tender pipeline of $2.3 billion, SND is well-positioned for future growth. Additionally, its focus on self-performing contracts reduces reliance on subcontractors, allowing for greater control over project execution. The entry of new strategic shareholders further underscores the long-term value potential seen in SND, making it an attractive investment for fund managers.
What happened to Saunders International Ltd (ASX:SND)?
In its June 2025 Quarterly Report, Naos Asset Management discussed Saunders International Ltd (ASX: SND), highlighting the company's strategic growth despite recent challenges, including FY25 earnings downgrades and the resignation of its CEO. SND has expanded significantly, growing its workforce from 50 to 500 employees and increasing revenue from $50 million to over $200 million, while securing high-value contracts in sectors such as defence and utilities. Although project timing uncertainties arose due to external factors, SND's long-term vision remains strong, supported by major tenders exceeding $1.5 billion and the recent acquisition of Aqua Metro, which aims to enhance its capabilities in addressing ageing water infrastructure. With aspirations to exceed $350 million in revenue within the next few years, SND is well-positioned for future growth, reflecting the potential for substantial shareholder value akin to comparable firms like Monadelphous Group Ltd and Lycopodium Ltd.