[IMG] Andrew Smith from investment firm Perennial Value...

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Andrew Smith from investment firm Perennial Value Management.
Money Talks: Why infrastructure is set to be as hot as mining once was
Experts
2 hours ago | Angela East


Money Talks is *’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to see what’s hot, their top picks and what they’re looking out for. Today, we hear from Andrew Smith, head of smaller companies & micro caps/head of research for investment firm Perennial Value Management.

What’s hot right now?

Perennial’s strategy is not to look at what’s hot right now, but to look at what is going to be hot and get in early.
The firm did this quite successfully with the mining boom and now thinks infrastructure is looking a lot like that did before it took off.
So why is infrastructure not a hot sector at the moment?
“Because in the first half, and actually more recently, a lot of the companies exposed to this sector have seen delays and weather impacts, but all that’s done has pushed the work into next financial year,” Smith told *.
“The work hasn’t gone away; the actual pipeline has got bigger. There’s unprecedented work.”
This is thanks to a government-funded East Coast infrastructure boom that is expected to run for the next four years at least.
“It feels a lot like the start of the mining boom did in 2009 and I think we’re here now in the infrastructure space,” Smith explained.
See for yourself:
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Smith said Perennial made a “lot of money” from the mining boom, being sure to exit before the 2012 peak.

Top picks



Smith’s last pick is structural engineering firm SRG Global (ASX:SRG), which has a market value of $154m at a share price of 37.5c.
SRG is also involved in formwork through an acquisition the company did last year.
Smith said SRG has net cash on its balance sheet and a growing order book.
“They’ve had work deferred into FY20 and if you look back over the last probably month or month and a half, you’ve seen a string of news flow from new contracts coming through for them,” he said.
“So it’s started to recover as that’s happened and they’re getting a really big order book building up for FY20.
“Most importantly though it’s not an FY20 story, it’s an FY20/21 and 23 story. It probably peaks FY24/25. So you’ve got a long runway for these stocks. We think there could be a multi P/E expansion and earnings expansion for this sector.”


Perennial owns shares in all three stocks mentioned.