ASX small cap SRG Global secures new NZ$25 million contract

The SRG Global Ltd (ASX: SRG) share price was on the move yesterday after announcing the award of a multi-year contract. Here’s a closer look at the contract details.

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Construction, labour, maintenance

The SRG Global Ltd (ASX: SRG) share price rose as much as 3.9% yesterday before closing the day flat at 26 cents per share. The recent SRG Global share price movement came after the company announced it had been awarded a major new maintenance contract.

SRG Global is an engineering-led specialist construction, maintenance and mining services group with a global portfolio of work including Emirates Tower in Dubai.

What moved the SRG Global share price yesterday?

Yesterday morning, SRG Global announced it has secured an 8-year contract for the the provision of inspection and specialist maintenance services on the Auckland Harbour Bridge. The contract is with the Auckland System Management Maintenance Alliance, and the ultimate client is the Waka Kotahi New Zealand Transport Agency.

Works under the contract have commenced and will conclude in 2028. In total, the estimated revenues under the contact are approximately NZ$25 million, notwithstanding any additional capital works.

This helps to provide the company with annuity style revenue streams. Accordingly, the company has a strategy of increasing recurring revenues versus project based earnings. This change in strategy has been largely driven by the impacts of the COVID-19 lockdowns. 

In the announcement, SRG Global managing director David Macgeorge commented:

This is a significant award for SRG Global and our New Zealand operations. The Auckland Harbour Bridge is an iconic piece of New Zealand transport infrastructure and we are pleased to extend our long-term relationship with Waka Kotahi New Zealand Transport Agency under this new agreement with the Alliance.

SRG Global share price

The company expects to generate an underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $20 million–$21 million in FY20. Additionally, it forecasts a growth of 50% EBITDA for FY21. The growth expectations are due largely to a forward order book of $707 million and an opportunity pipeline valued at $6.2 billion. 

The SRG Global share price has opened today’s trade up 1.96% at the time of writing. This values the company at $113 million with a price to earnings ratio of 18.64. At this price, the company has a trailing 12 month dividend yield of 3.85%.

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