SKS Technologies has undergone a remarkable transformation, evolving from a traditional electrical contractor to a specialized data center infrastructure provider while maintaining strong growth across traditional sectors. The company's strategic pivot coincided perfectly with Australia's emergence as a preferred location for hyperscale data facilities, creating extraordinary growth opportunities that leverage SKS's electrical and communications expertise.

Financial performance has been exceptional, with revenue expanding at a compound annual growth rate of 50.5% over the past four years. The first half of FY2025 delivered $115.9 million in revenue, representing 116.1% growth and nearly matching the entire FY2024 result. Profitability has improved dramatically, with operating margins expanding from 0.6% in FY2023 to 7.2% in 1H2025, demonstrating increasing economies of scale.

The company has simultaneously strengthened its financial position, eliminating all debt while building substantial cash reserves and expanding working capital from just $104,000 in FY2023 to $9.85 million by December 2024. This financial strength, combined with a record work-on-hand position and substantial tender pipeline, positions SKS for continued growth while providing downside protection through diversification across defense, corporate, and government sectors.

SKS Technologies Group Limited (ASX: SKS) is a specialist provider of integrated electrical, audiovisual, and communications networking solutions across Australia. Founded by Peter and Greg Jinks in 1981 as KLM Group, the company has evolved significantly over its history, celebrating its ten-year anniversary as SKS Technologies in 2024. The company operates nationwide with offices across all Australian states and territories.

The business generates revenue through the design, installation, and maintenance of technical systems across multiple industries. Service offerings include audio-visual implementations, communications networking, electrical installations, and smart building technologies. SKS operates on both a project basis for new installations and ongoing maintenance contracts, with 79% of total business coming from repeat customers, demonstrating strong client relationships.

Leadership includes Executive Chairman Peter Jinks and Executive Director Greg Jinks, who co-founded the original business, along with CEO Matthew Jinks (appointed February 2021) and CFO Gary Beaton. The company has expanded its workforce from 305 to 739 employees while maintaining its position as an "employer of choice" in the sector, though recruitment is becoming more challenging amid rapid growth.

SKS Technologies delivered exceptional results in 1H2025, with revenue of $115.94 million nearly matching the entire FY2024 revenue of $136.31 million. This extraordinary 116.1% year-on-year growth was primarily driven by strategic penetration into the data center market, where the company secured multiple large contracts including a $90 million project with AirTrunk in Melbourne.

Profitability metrics improved dramatically, with EBITDA increasing 235.6% to $10.04 million and operating margins expanding from 3.4% to 7.2%. The company demonstrated exceptional cash conversion, generating $18.99 million in operating cash flow (a 400% increase) while maintaining strong working capital management. This performance enabled SKS to declare its first interim dividend of 1.0 cent fully franked.

The company's forward indicators remain strong, with work on hand increasing 102.3% to $174 million and open tenders growing 61% to $570 million. Management maintains confidence in achieving their $260 million revenue target for FY2025, supported by the substantial project pipeline and continued strong demand across all sectors. The combination of exceptional current performance and robust forward indicators positions SKS for continued growth while demonstrating the quality of earnings through strong cash conversion.

Our financial forecasts project SKS achieving management's $260 million revenue target for FY2025, representing 90.7% growth over FY2024. Growth rates are expected to moderate but remain substantial, with revenue reaching $358 million by FY2026 (37.7% growth) and $442 million by FY2027 (23.5% growth). This trajectory reflects continued strong demand in the data center sector balanced against operational capacity constraints and natural market maturation.

EBITDA margins are projected to stabilize at 6.5% from FY2025 onward, below the 8.7% achieved in 1H2025 but consistent with management's target of sustainable 6.0% margins. This conservative approach acknowledges operational complexities of rapid scaling and potential margin pressure from labor constraints. Free cash flow conversion is expected to remain strong at 93-95% of NOPAT by the forecast period end, reflecting improving operational efficiency and working capital management.

Our DCF base case yields a fair value of $1.49 per share, derived from an enterprise value of $147.0 million plus net cash of $19.6 million. The valuation incorporates a WACC of 15.3%, reflecting the company's risk profile, small-cap status, and exposure to the high-growth data center sector. Our terminal value assumes a long-term growth rate of 3.5%, representing a premium to long-term Australian GDP growth that reflects structural tailwinds in SKS's key markets.

The valuation range of $1.45-$2.25 reflects significant uncertainty in SKS's growth trajectory and operational execution. Multiple-based approaches yield higher valuations than our DCF base case, reflecting the market's willingness to pay premium multiples for companies demonstrating exceptional growth trajectories. The substantial valuation gap between scenarios highlights the importance of successful operational execution in determining value creation potential.

The primary risks center on SKS's ability to successfully scale operations during explosive growth while maintaining quality and efficiency. The company's increasing dependence on data center projects creates concentration risk, though the robust pipeline and Australia's favorable positioning provide near-term protection. Labor constraints represent a potential growth ceiling independent of market demand, requiring continued focus on workforce development and retention strategies.