Is Southern Cross Electrical a growth stock to keep on radar?

Southern Cross Electrical (ASX: SXE) was up around 1.65% at noon following revelations that the engineering company’s subsidiary Heyday has received two contract awards totalling circa $50m in the commercial sector in Sydney.

What’s noteworthy is the size of these two contracts relative to the company’s market cap ($157m).

The two awards include:

• CPB Contractors Pty Ltd has awarded Heyday the electrical services design and construct contract for a 39-storey 47,800m2 premium-grade commercial tower which is to be built above the north entrance to Sydney Metro’s Pitt Street Station.

• ASX-listed Shape Australia Corporation (ASX: SHA) has awarded Heyday the electrical and communications fit-out works for the Commonwealth Bank Place Sydney North Building.

Commenting on the awards, Southern Cross managing Director Graeme Dunn noted:

“The commercial sector in Sydney has been somewhat subdued over the last year or so and therefore I am pleased we are announcing these significant wins. Tendering activity has also been much stronger in recent times.”

Construction rebound

To the uninitiated, Southern Cross Electrical is an electrical, instrumentation, communication and maintenance services company supplying large-scale electrical , control and instrumentation services for major projects.

Management is also anticipating a rebound in commercial construction in NSW in coming periods.

Today’s announcements follows a range of resources and infrastructure contracts totalling $20m the company received early November 2021.

While consensus does not cover this smallcap, Argonaut Securities has a Strong buy on the stock, which remains one of the fund manager’s top five picks.

With a P/E ratio of ratio of 11.85x, the company has been trading slightly below its industry peers’ ratio of 15.77x.

Based on Morningstar’s fair value of $0.86, the stock appears to be undervalued.

Southern Cross Electrical: A three month share price snapshot