In Brief: SKS Technologies, Banks & QPM Energy

Weekly Reports | 10:00 AM

This week's quote comes from Macquarie:

Jesse Livermore famously said, "Markets are never wrong, only opinions are". Maybe the market wasn't crazy to re-rate stocks. Maybe it's how we thought about PEs that was wrong.

SKS Technologies transitions to the 21-Century GenAI megatrend

With a forty-year track record, SKS Technologies Group ((SKS)), with over a $200m market capitalisation, rotated into Wilsons' orbit this week, with the broker initiating coverage on the stock.

SKS offers technology infrastructure solutions across Australia, including audio-visual, electrical, communications, and security systems across a suite of sectors from commercial, retail, healthcare, education, defence, government, and data centres.

The latter is the central growth pillar for the group, with Wilsons restating the upside growth potential for the sector in Australia. Notably, the analyst states, "data centre demand was non-linear before GenAI demand, and it will be equally (possibly more) non-linear after factoring in GenAI demand".

SKS' data centre and technology segment has accelerated to over 60% of the group's pipeline of work in 1H25 from low single digits, its importance has expanded tenfold to $270m in May 2025 from $29m in May 2023.

The pipeline was $335m in February, but SKS announced a $100m data centre contract. The numbers suggests another circa $35m was added to the group's pipeline.

More importantly, the pipeline is translating into work-in-hand, which has grown to $220m in May 2025 from $26m in 2H21 and from $174m in 1H25.

Breaking down the sectors, data centre and technologies now sits at 55% of the pipeline and 72% of work-in-hand, corporate at 14% and 8% respectively, and government and defence at 10% and 7% respectively.

Wilsons believes the four-decade depth of experience positions the company to "lean into" the opportunity of the new megatrend of cloud and GenAI, with its Victorian presence highlighted due to the demand and development of data centres in that state, including good relationships with NextDC ((NXT)), Stack Infrastructure, and AirTrunk. End customers like hyperscalers Amazon and Microsoft are also well known to the group.

"SKS successfully delivered AirTrunk's MEL01 hyperscale data centre infrastructure, encompassing the full suite of critical systems. The scope included high-voltage installations, transformers, backup generators, static bypass units (SBUs), uninterruptible power supplies (UPSs), and fully integrated data rack solutions."

An Overweight rating and $2.36 target price are underpinned by forecast FY25 revenue growth of 91% to $260m, followed by 15% growth in FY26. The valuation, currently ascribed around 10 times EV/EBITDA, is at the top end of its trading range but viewed as justified.

Stockbroker Morgans has an Add rating with a $2.30 target price.

Just who owns Australia's banks?

While CommBank ((CBA)) has been the focus of much debate and teeth-gnashing over the relentless rise in share price, Jarden's latest dive into ownership of banks shines a light on who exactly has been pushing the "buy" button.

CommBank's change in share registry is most notable, with institutional ownership in the seven quarters since September 2023 having risen to 54% from 48%. The rise has been emphasised due to "inelasticity", in other words: demand is not weakening as the price rises.

The latest statistics on bank ownership reveal domestic institutions prefer National Australia Bank ((NAB)) and Westpac ((WBC)) over CommBank and ANZ Bank ((ANZ)), but retail investors have different ideas. They have been selling on higher share prices.

Offshore investors have been net buyers of the banks, and can thus be held responsible for the firm support of share prices, in stark contrast to shorting the banks for those readers who recall the widow maker trade between 2015 and 2017.

In the June quarter, offshore ownership of banks rose between 10 and 80bps, with CommBank most preferred, up 77bps on the previous quarter and 172bps on a year earlier to a record high of 25.5%.

Jarden suggests anecdotal feedback indicates an ongoing rise in offshore support for Australia's largest banks and number one index weight, underpinned by further non-fundamental or passive flows.

ANZ has the highest offshore ownership at 31.3%.

In contrast, retail ownership continued to decline for a sixth consecutive quarter for all the major banks except ANZ. CommBank's retail ownership slipped -74bps, followed by NAB at -70bps and Westpac down -50bps, with new retail ownership lows at 46.6%, 38.9%, and 45.4% respectively.

Jarden believes the trend reflects growth in ownership by super funds and ageing demographics, i.e. older shareholders selling.

Short interest declined -10bps on the prior month, with short positions targeting CommBank, NAB, and Westpac down between -4 and -30bps, while ANZ's rose by 4bps.

Macquarie also pointed to offshore institutions investing over $2.7bn in banks over the June quarter, the highest since March 2020, with CommBank receiving $2.2bn alone. Macquarie believes these flows could reverse as super funds are increasingly turning investment flows outside of Australia.

Jarden has an Overweight (Buy-equivalent) rating on ANZ and $30 target, CommBank is Sell-rated with a $110 target, NAB and Westpac are Underweight-rated with respectively $29 and $30 target prices.