Thoughts on CSR and GNG please

Hi Tony,

Happy New Year and sorry for the delayed response to this question, with regard to CSR in particular given its phenomenal run.

CSR: The building products business delivered upbeat commentary for the 2H when reporting early in November (Sep year end) and that’s prompted ~10% upgrades to analyst earnings expectations for the FY. Given the cyclicality of these sorts of businesses, earnings momentum is important i.e. one upgrade is rare, more than one is likely. That’s clearly being priced into the stock and it’s hard to argue with that trend. We’re neutral from a valuation perspective but would not be  surprised to see the share price keep running, just as James Hardie (JHX) has also done, a stock we ultimately sold too early.

G8 Engineering (GNG): We’ve never owned GNG, but acknowledge it is a solid stock. Engineering businesses rely heavily on people/skills, winning work, delivering it profitability, and repeating the process. People and skills are the key ingredient and we’ve been cautious around the availability of these skills in recent years. In short,  the economics of these sorts of businesses are not as compelling as others, hence the lower multiple they generally trade on. At the moment, GNG is on 14.3x, about 17% above its historical average (12.2x) and while not exactly like for like, we prefer and hold SRG Global (SRG) which trades on ~9x.

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CSR Ltd (CSR)

LAST UPDATED 22/01/2024 11:50

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CSR Ltd (CSR)

LAST UPDATED 22/01/2024 11:50