Fund Manager Summary
The fund managers believe that the outlook for Southern Cross Electrical Engineer Ltd presents a significant opportunity for investors. In their opinion, the company is well-positioned to benefit from a shift towards increased margins in electrical and engineering labor, as evidenced by a recent 330bps expansion in gross profit margin compared to the previous financial year. The fund managers also note that Southern Cross fits into a value investment strategy, particularly during periods of tight market liquidity. With a healthy balance sheet and an undemanding EV/EBITDA of 3x, they believe SXE represents a compelling investment opportunity in the current economic climate.
Source: Trading View
Commentary From The Managers
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Clime Investment Management
30 Apr 2025
$1.87
Summary
- Southern Cross Electrical contributed positively to performance in April.
- Investors are recognizing the company's strong earnings momentum.
- Positioned in structural growth areas.
- The Collie battery project is on track.
- Early signs from the newly acquired Force Fire business are promising.
- Tender activity in data centres and battery storage projects remains active, indicating potential near-term upside.
- Holds a debt-free balance sheet.
- Features visible recurring revenue and a conservative earnings base.
- Overall, SXE remains well placed in a sector trading below long-term multiples.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
Clime Investment Management
30 Apr 2025
$1.87
- Southern Cross Electrical contributed positively to performance in April.
- Investors are recognizing the company's strong earnings momentum.
- Positioned in structural growth areas.
- The Collie battery project is on track.
- Early signs from the newly acquired Force Fire business are promising.
- Tender activity in data centres and battery storage projects remains active, indicating potential near-term upside.
- Holds a debt-free balance sheet.
- Features visible recurring revenue and a conservative earnings base.
- Overall, SXE remains well placed in a sector trading below long-term multiples.
Summary
Clime Investment Management
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.
Summary
Monash Investors
30 Sept 2024
$1.84
- Southern Cross is a leading subcontractor of electricians in Australia.
- Direct beneficiary of the drive to electrify the economy.
- Advantage from significant infrastructure spending by Governments and Corporates.
- Involved in the development of Data Centres, Solar/Wind, and Battery projects.
- Monash Investors invested in Southern Cross earlier in 2024, believing the company is well-positioned for growth.
- Full year results support the investment thesis with continued revenue and earnings growth.
- Growth in order book indicates momentum will continue into FY2025 and beyond.
- Strong net cash balance sheet allows fulfilling contracted operational requirements and supports potential acquisitions.
Summary
Ellerston Capital
31 Aug 2024
$1.82
- SXE demonstrated strong performance with a 6% increase in August, achieving all-time highs.
- Revenues increased by 19% year-over-year, exceeding EBITDA guidance by 5% to reach a record A$40m.
- The main growth driver was the Infrastructure division, with significant projects in Western Sydney Airport, Sydney Metro, and data centers.
- Recurring revenues grew to 17% of total revenue, enhancing the stability of cash flows.
- SXE continues to generate free cash flow, boasting $84.1m in cash and no debt, positioning it with one of the strongest balance sheets among peers.
- Ellerston Capital maintains a high conviction in SXE as part of their portfolio, anticipating further contract wins and potential upside from inorganic growth.
Summary
Thorney Investment Group
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.
Summary
Monash Investors
31 May 2024
$1.63
- Southern Cross Electrical (ASX: SXE) is experiencing strong demand in the electrical contracting sector.
- Recently awarded a $160m contract value for the Collie battery project.
- Made a bolt-on acquisition of a Sydney-based electrical company to enhance growth.
- Updated profit guidance reflects positive market conditions and operational strength.
- Monash Investors continues to hold because of the firm’s strategic developments and growth potential.
Summary
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.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"As we navigate a tightening market, it appears Southern Cross Electrical is poised to capitalize on rising margins, suggesting a compelling value play. With a robust balance sheet and a modest EV/EBITDA of 3x, the potential for growth seems significant."
Last Updated: 30 Apr 2025
Query The Data
Frequently Asked Questions
Who is investing in Southern Cross Electrical Engineer Ltd (ASX:SXE)?
Fund managers including Cerutty Macro Fund, Thorney Investment Group, Clime Investment Management, Monash Investors and Ellerston Capital have invested in Southern Cross Electrical Engineer Ltd (ASX:SXE).
Why do fund managers invest in Southern Cross Electrical Engineer Ltd?
Fund managers are investing in Southern Cross Electrical Engineer Ltd due to its strong financial performance, evidenced by a significant increase in gross profit margin. The company's healthy balance sheet and attractive valuation, highlighted by an EV/EBITDA ratio of 3x, align with a conservative investment strategy in a tightening market. Additionally, the expectation of rising margins in the electrical engineering sector supports the decision to include this small-cap company in their portfolios.
What happened to Southern Cross Electrical Engineer Ltd (ASX:SXE)?
There have been no recent updates from fund managers regarding Southern Cross Electrical Engineer Ltd although fund managers including Cerutty Macro Fund, Thorney Investment Group, Clime Investment Management, Monash Investors and Ellerston Capital have previously commented.