ASX:SXE
Southern Cross Electrical Engineer Ltd
Investment Summary
The fund managers believe that Southern Cross Electrical Engineering Ltd (SXE) is well-positioned for growth, reflecting a transition from a period of abundance to one of relative scarcity in the electrical engineering sector. In their opinion, this shift supports an increase in profit margins, as evidenced by a gross profit margin expansion of 330bps in recent results. SXE maintains a healthy balance sheet with a favorable EV/EBITDA of 3x, making it a solid value investment. Fund managers highlight that SXE enjoyed strong operational performance in FY2024 with a robust order book and substantial growth in EBITDA by 59% and NPAT by 68% in the first half of FY2025. This performance is attributed to rising infrastructure activity and new opportunities in data centers and energy transition projects. Overall, the fund managers express optimism for SXE's growth potential, particularly with ongoing contract wins and a favorable market environment for electrification.
Commentary From The Managers
Clime
28 Feb 2025
$1.80
- SXE was a key contributor in the month, delivering standout 1H25 results.
- EBITDA rose 59% year-on-year to $27.1 million.
- Net Profit After Tax (NPAT) surged 68% to $16.2 million, well ahead of forecasts.
- SXE's strong performance was driven by accelerating infrastructure activity.
- A growing pipeline in data centres and energy transition projects supports continued growth.
- With a healthy cash position and ongoing contract wins, SXE remains well-placed for further growth.
- Structural tailwinds in electrification further bolster SXE's prospects.
Thorney
30 Aug 2024
$1.88
- Southern Cross Electrical Engineering Limited (ASX: SXE) reported strong operational and share price performance in FY2024.
- The company has maintained a robust order book and opportunity pipeline leading into FY2025.
- Thorney retains a substantial shareholding in SXE.
- There is optimism in the outlook for the company.
Cerutty Macro Fund
31 Aug 2023
$0.80
- Cerutty Macro Fund holds a position in Southern Cross Electrical, an electrical engineering company.
- The Fund aligns with the view of entering a period of relative scarcity over a previous period of abundance.
- This perspective suggests that margins on electrical and engineering labour are likely to grow and remain above trend.
- Recent results from Southern Cross show an expansion of gross profit margin by 330bps compared to the previous financial year.
- Cerutty Macro Fund continues with a conservative approach during periods of tight market liquidity.
- SXE is categorized in the value basket due to a healthy balance sheet and an undemanding EV/EBITDA of 3x.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.