Hi David,
Thanks for feedback and renewing, it’s the support that puts a smile on our face even when the market can challenge at times.
Two high performing and interesting mid-cap electrical/services names, both benefiting from strong spend in mining, infrastructure and data centres.
Southern Cross Electrical Engineering (SXE) is a national electrical and multi-services contractor, delivering electrical, communications, fire, security and manufacturing solutions across large-scale projects. It’s very diversified – historically leveraged to resources, the business has evolved meaningfully and is now far more exposed to commercial construction, infrastructure and technology-led projects like data centres than it once was. For context, between FY19-23 they did about $20m of Data centre work. In FY25, they did $120m (out of $800m revenue) – and they expect similar in FY26. That said, they are still primarily exposed to resources and infrastructure, and the key attraction here is the quality of the customer base and the recurring nature of the work, with long-dated maintenance contracts tied to majors like BHP, Rio and Fortescue helping smooth earnings versus the typical “project-to-project” contractor model.
- We’ve had this one on the Hitlist for the Emerging Companies Portfolio for a while – looking for better prices to buy it. We should have just paid up. We remain bullish towards SXE and although it’s far from cheap ~$4 the next 10-20% still looks to be on the upside.
SKS Technologies (SKS) is far more geared to data centres. In FY25, SKS did ~$140m of data-centre revenue out of total sales revenue of ~$261m. They’re less diversified and have a high concentration of key customers. Their focus is around integrated electrotechnology: electrical systems, communications, structured cabling, AV, smart buildings, UPS, backup systems and related infrastructure. i.e. it’s more like a specialist contractor focusing on the hyperscale build-out, particularly in Melbourne and now Sydney following the Delta Elcom acquisition.
SKS = higher beta data-centre exposure; SXE = diversified electrical contractor with a growing data-centre business.
- We are bullish towards SKS and although it’s far from cheap ~$8, the next 10-20% also looks to be on the upside.
Putting price to one side, we like the breadth of the SXE business more.
