Hi Keith,Like you I have been casting my eye over SRG.On my...

Hi Keith,

Like you I have been casting my eye over SRG.

On my estimates, net profit for 2023 should be up around 40% on FY 2022, but despite that, the share price in the last year has stayed in a narrow range with a max of 75c or so, which is pretty much what it was 12 months ago.

In my opinion the ALS acquisition should be a great buy and is moving the company more towards a mainly recurring income model, that is what they have stated they are trying to achieve. You would think that if the acquisition works as anticipated, there is an argument for a rerating of the company's PE to reflect the recurring nature of the services income rather the lumpy nature of a construction type business.

While we get bombarded with plenty of updates about new contracts, I think the market is waiting to see if they can profitably execute these contracts.
For example I had a quick look at the NWH 2023 result and I can see that there has been some EBITDA margin slippage there, I guess due to increasing costs not being able to be passed on.

The current guidance of $79-$80 million of EBITDA would indicate ( assuming turnover of around $800 mill) that there has been a continued improvement in EBITDA margin % ( 2022 was around 8.8% and 2021 was around 8.2%). Hopefully that is what we will see in black and white when the result is released in a few days time.

If that happens, you would think we would start to see some upward momentum in the share price, particularly when you start to apply this increased margin to possible income for FY 2024

As usual DYOR.