SGH: The CRUX of it is...Initiate at Outperform

Research evidence excerpt

SGH: The CRUX of it is...Initiate at Outperform

es - WA

and NSW, a position it has held for 35 years. Boral owns one of just 5

vertically integrated cement facilities and supplies c. 60% of NSW's cement

whilst Coates' holds a dominant market position and network.

Crux: We believe SGH is likely to make an announcement on Crux, a gas

project that it has a 15.5% stake in (Shell owns the balance) that will begin

backfilling volumes in the Prelude Floating LNG terminal, which we believe

will act as a positive catalyst for the stock. We conservatively expect the

project to start producing gas in late (2H28), and have taken the view that

it will hit full production in FY30. At peak production, it would generate c.

$350–375m EBITDA to SGH annually — yet consensus forecasts show no

step-change in group earnings through the ramp period. We value the stake

at $1.2bn, or $3.20/share.

East Coast Construction: Concern around an East Coast infrastructure

slowdown is reasonable, however overdone in our view. Whilst VIC is

particularly weak and unlikely to change in the short to medium term,

NSW infrastructure is expected to be stable whilst QLD is growing (Exhibit

1). Using State Government Budgets, in the five years to 2025, $276bn

was spent on infrastructure in VIC/NSW/QLD; between FY26-29 $307m

budgeted. Whilst the infrastructure sector may be in an Airpocket, we do

not think the business will suffer from debilitating indigestion, such that

15.6 PE presents an attractive entry point….

...Valuation attractive on short & long term time horizons: SGH trades at a

discount to every peer group it can be benchmarked against — Cat dealers,

construction hire and building materials companies. PE & EV/EBIT (using

FY27 RBCe) multiples equate to 15.6x/11.5x; once a full year of Crux is