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<h3 class="head">SKS Technologies Group Ltd (SKS.AX)</h3>
<p><em>Mar 1, 2022</em></p>
<p>SKS is an integrator of audio video (AV), IT, communication and electrical solutions in Australia. The company was founded by two brothers and went through numerous directional changes which was reflected in company’s frequent name changes (three changes - Enevis, Stokes, SKS –since 2018 only). They bought lighting business, sold lighting business, divested street column business, bought fiber networking and communications business, announced their intention to buy IT services business but then changed their mind. I view postponing acquisition of the IT company as a plus. Instead of jumping into new businesses it could be beneficial to organize the ones you have at hand.</p>
<p>Peter and Gregory Jinks are the founders of the business and each roughly owns 16%. SKS looks like a private business that just happened to be listed on ASX. Normally large insider ownership is a big plus but, in this case, not so much (at least until now). Company seems to have been switching directions all the time without creating much value for shareholders. The history of acquisitions and divestments serves as a proof to that.</p>
<p>Matthew Jinks was appointed as a new CEO in 2021. All three Jinks used to work at KLM – commercial electrical contracting company that was founded by the same two brothers. Younger Matthew might have a new vision for the company and demonstrate operational excellence, but it is too early to judge. Covid has imposed certain requirements for AV/IT installations in the buildings and SKS might benefit from it.</p>
<p>Most of the time the company does not have a direct contact with an end customer and they are trying to change it. I don’t know whether they will succeed. SKS operates in a tough industry where relationships matter a lot. SKS did win an award from PSNI (global alliance of integrators) as a best place to work which is great because execution matters as much as relationships in the integration business (repeat business and maintenance contracts will not follow through if there were troubles with installation).</p>
<p>Market cap is around $20 million, revenue run rate by June 2022 is expected to be $80 million and company recorded NPAT of $1.35 million for HY2022. The company recently turned profitable (I believe mostly thanks to fiber networking business acquisition) and work in hand increased drastically (+450%) compared to FY2021. These could be signals of a successful turnaround of otherwise boring low-margin integration business that keeps switching gears from one thing to another.</p>
<p>It will be interesting to watch how this story unfolds. Key things to keep an eye on here are conversion of work in hand into actual contracts/revenue and operating margins as SKS keeps hiring people to do the work. All the best to the Jinks.</p>
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