ASX:SXE
Southern Cross Electrical Engineer Ltd
Investment Summary
The fund managers believe Southern Cross Electrical Engineering Ltd (SXE) represents an attractive opportunity in the small-cap industrials space, supported by strong fundamentals and favourable industry dynamics. In their opinion, the company is well-positioned to benefit from a shift toward tighter labour markets and increasing demand for skilled electrical and engineering services, which is likely to support sustained margin expansion. This view is reinforced by recent financial results, which showed a notable 330 basis point improvement in gross profit margins year-over-year. The fund managers are also encouraged by SXE’s conservative balance sheet and compelling valuation metrics, with an undemanding EV/EBITDA multiple that underscores its value proposition. Furthermore, SXE has demonstrated strong operational execution, with one fund noting the company’s robust order book and healthy project pipeline heading into FY2025 as a key driver of continued growth. In their opinion, the stock has transitioned from value to momentum, reflecting broader market recognition of its improved financial and strategic position. With a substantial shareholding retained by at least one fund, the managers express confidence in the company's outlook and believe SXE is well-equipped to navigate the current macroeconomic environment while delivering long-term shareholder value.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Manager
Cerutty Macro Fund
Date
31 Aug 2023
Price
$0.80
Medium
Monthly Report
Commentary
Cerutty Macro Fund continues to hold Southern Cross Electrical Engineering Ltd (SXE), aligning the position with its broader thesis that the economy is transitioning from a period of abundance to one of relative scarcity. In this context, the fund sees potential for sustained margin expansion in skilled labour-intensive sectors such as electrical engineering. This view was supported by Southern Cross’ recent financial results, which showed a 330 basis point increase in gross profit margin compared to the prior year. Cerutty Macro Fund also highlighted SXE’s strong balance sheet and attractive valuation, noting its EV/EBITDA multiple of just 3x. Given the fund’s cautious positioning in a market environment marked by constrained liquidity, SXE continues to represent a compelling value-oriented holding within the portfolio.
Thorney
Date
30 Aug 2024
Price
$1.88
Medium
Annual Report
Commentary
Thorney Opportunities continues to hold its position in Southern Cross Electrical Engineering Limited (SXE) due to the company's strong operational performance and positive outlook for FY2025. SXE has maintained a solid order book and an impressive opportunity pipeline, contributing to its robust performance in FY2024. The fund remains optimistic about the company’s future prospects, supported by these favorable conditions and its ongoing operational strength. With a substantial shareholding in SXE, Thorney Opportunities sees continued potential for growth as the company heads into the new financial year.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.