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Summary

  • Saunders International is a reputable, multi-disciplinary Australian company offering a range of services to industrial and infrastructure clients.
  • The Company uses in-house expertise to deliver a wide range of projects including design, manufacture, construction, installation, and maintenance services.
  • Saunders has successfully completed its transform strategy and is currently focussed on executing the growth strategy- growth into adjacent sectors and expansion of services in new geographies.
  • A record order book along with a new pipeline of opportunities reinforce the future growth of the Company.
  • Saunders continues to experience strong growth in its core businesses with increasing level of new contract business enquiries and requests for tenders.
  • Solid momentum within the business is likely to continue into FY21 and beyond.

With 69 years of experience, Saunders International Limited (ASX:SND) has positioned itself as a crucial catalyst for the development of Australian industries. Its wide range of reliable, innovative, and cost-effective solutions, with trouble-free project delivery is well trusted by its vast clientele.

Even in the ongoing challenging year, Saunders was successful in bagging $ 100 million in new contracts in FY20- H2 across all divisions. The Company continues to leverage client relationships across all of its sectors.

MUST READ: Saunders’ Earnings Growth & Strong Financial Performance

In this backdrop, let us skim through the Company’s growth opportunities and outlook-

Saunders Well Positioned For Growth

A record order book and a new pipeline of lucrative opportunities support the future growth of the Company. The below numbers justify the Saunders’ solid stance-

(Note: Amounts demonstrated below are as recorded in June 2020)

Growth Opportunities & Principal Drivers

The Company has been experiencing strong growth in its core businesses. Besides, there has been an increasing level of new contract business enquiries and requests for tenders. This growth is especially commendable as it has been consistent amid the coronavirus-inflicted market volatility.

Saunders believes that there are three key drivers behind its growth outlook-

Lucrative Sectors

The Company acknowledges and foresees a strong spend in infrastructure, industrial, oil and gas, minerals and defence sectors. The current infrastructure boom is likely to continue and garner support from both the Federal and State governments. For instance-

  • National bridge replacement programme has $ 640 million committed (2015-2023) with further commitment of $ 85 million per year thereafter.
  • For the defence sector, the Australian Government spend is forecast at 2 per cent of GDP by 2022.
  • National Fuel Storage will likely be expanded throughout Australia.

Besides, COVID-19 is likely to involve further economic stimulus.

Mechanical Infrastructure Market

A significant growth driver for Saunders is the booming mechanical infrastructure market. The competitive landscape in this space has improved tremendously in the recent few months. This seem to have been propelled by the financial constraints of several key competitors.

ALSO READ: Civil Infrastructure Opportunity

Increasing Barriers To Entry

Growing contract values and lower client risk appetite necessitates the market participants to fund project bonding and working capital requirements. In this regard, Saunders leverages from the below mentioned key metrics-

  • The Company has a transparent balance sheet, financial institutional support and access to public equity markets. Notably, all of these are attractive to prospective clients.
  • The Company has a robust financial capacity. This builds the confidence that it will be able to win larger and more complex projects in the days to come.

FY21 and beyond, Saunders seems to be well positioned to continue to win work at profitable margins.

On the stock performance end, SND traded at $ 0.59 on 30 September 2020. The stock has delivered YTD returns of 81.54 per cent.

 

 


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