Another Step-Change In Growth For SRG Global

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Infrastructure services company SRG Global has announced another step-change in growth with the acquisition of a marine infrastructure services business.

-SRG Global has acquired TAMS, a marine services company
-Acquisition supports FY26 EBITDA around $35m with upside from construction work
-Management and analysts laud attractive deal economics
-Step-jumps in valuation follow, with ongoing upside potential

By Greg Peel

SRG Global ((SRG)) provides comprehensive infrastructure services, encompassing Maintenance & Industrial Services and Engineering & Construction.

According to the company’s website, SRG “…engages early with clients, offering consulting and engineering expertise to ensure efficient and cost-effective solutions. Our diverse capabilities cover a wide range of industries and applications, supported by innovative technology and a highly skilled workforce”.

A year ago SRG acquired Diona. According, again, to the website, “Diona’s market-leading position in program and asset management services in water security and energy transition with utilities/government agencies under long-term collaborative program and asset management agreements, complements SRG Global’s current end-to-end full asset life cycle capability in water, defence, resources, transport and energy transition”.

Last week SRG announced the 100% acquisition of Total AMS Pty Ltd (TAMS). TAMS is an end-to-end diversified marine infrastructure services partner with a 25-plus year history and full self-perform capability (all trades in-house), with expertise in design, engineering, construction, maintenance and remediation services.

The company has a strategic geographic footprint with exposure to Resources, Energy, Transport, Water & Defence sectors.

TAMS has a workforce of 500-plus highly skilled technical specialists accompanied by a highly regarded management team, Moelis notes.

Attractive Price

SRG will fund the acquisition through $45m in debt, $28m in SRG shares (issued at $1.99 and subject to a two-year escrow), and $12m in cash. The earn-out structure provides for 100% of earnings (EBITDA) between $30-40m and 50% above $40m.

On a pro forma FY26 basis, TAMS is forecast to deliver $200m in revenue, $35m of EBITDA and $30m of EBIT, for an EBITDA margin of 17.5% and EBIT margin of 15.0%. Bell Potter previously had SRG Global on margins of 9.6% and 6.3% respectively.

On the investment case of TAMS delivering $35m of EBITA in FY26-27, Bell Potter calculates the deal is priced at 2.7x FY26 EBITDA and 3.2x EBIT.

Bell Potter previously had SRG on a valuation of 13.9x EBIT. Earnings per share accretion is expected to be 25%, with upside should TAMS outperform its investment case.

Shaw and Partners points out SRG now offers an FY26 EBITDA multiple broadly in line with peer Monadelphous ((MND)), though it has a market cap circa -$800m lower and trades at a circa -8-point FY26 PE discount.

The Opportunity

TAMS adds a highly complementary capability to SRG’s existing business, Shaw suggests, with a sole-source, end-to-end marine infrastructure service offering.

The acquisition is consistent with SRG’s strategy of driving step-change growth in recurring earnings underpinned by long-term collaborative maintenance and asset lifecycle agreements.

TAMS offers full lifecycle services across marine infrastructure, including design, engineering, construction and maintenance.

The acquisition adds scale, recurring revenue, and strategic exposure to markets with structural tailwinds, Ord Minnett notes, such as ageing port infrastructure and increased government investment in marine assets, including potential entry into the Defence sector.

Similar to SRG’s Diona acquisition, Shaw expects the combined group to be able to chase larger opportunities that may not have been available on a standalone basis. The maritime defence sector is one such sector.

The Australian Defence Force has allocated 38% of its $330bn Integrated Investment Program budget to maritime expenditure over the next decade.

The Australian Government defence budget also includes $435bn to cover areas such as maintenance, sustainment and operational funding. Shaw expects the combined group to target wins in these categories from the second half FY26.

The TAMS acquisition rationale is to combine two highly complementary businesses that provide cross-selling opportunities with existing and new clients.

TAMS has a long history with strategic geographical footprint (including Pilbara, Fremantle, Gladstone) and blue chip clients, Moelis points out, along with an attractive 80%-plus recurring/annuity style earnings profile, and will add $600m of work in hand and a $3bn-plus opportunity pipeline.

In the last 4-6 weeks, TAMS delivered a large construction project (Broome floating wharf) which took up the entirety of the company’s construction focus.

This means all the work at present is maintenance/annuity style work on term contracts. This underpins the $35m of EBITDA and $30m of EBIT.

However, management confirmed on the conference call TAMS had delivered up to $50m EBITDA and $45m EBIT previously, which reveals considerable upside when construction work resurfaces.

Additionally, management talked up the construction pipeline.

Valuation Step-Change

Suffice to say, brokers have materially upgraded their earnings forecasts for SRG Global. This has translated into sharp target price increases.

Shaw has lifted to $2.75 from $2.00, Moelis to $2.81 from $2.00, Bell Potter to $3.00 from $1.95 and Ord Minnett to $3.15 from $2.00. All four retain Buy ratings.

Morgans has lifted its target to $3.00 from $2.10, but downgraded to Accumulate from Buy. This broker does not qualify its move, but there is likely a clue in the 20% upside share price response to SRG’s acquisition announcement.

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