SRG Global has delivered exceptional performance in 1H FY25, with revenue increasing 21% to $619.7 million and underlying EBITDA growing 31% to $59.0 million. This strong momentum has prompted management to upgrade FY25 guidance to an EBITDA range of $125-128 million, reflecting continued confidence in both organic growth and the successful integration of Diona.

The company's strategic transformation toward a diversified infrastructure services model with approximately 80% recurring revenue has created a more resilient business positioned for sustainable growth. The Maintenance and Industrial Services segment continues to be the core earnings generator, delivering robust growth with revenue increasing 19.4% and EBITDA rising 24.7% while maintaining an impressive 14.6% EBITDA margin.

The successful $121.7 million acquisition of Diona has substantially expanded SRG Global's capabilities in water security and energy transition sectors. Despite this major acquisition, the company demonstrated exceptional cash management, transitioning from a proforma net debt position of $38.2 million post-acquisition to a net cash position of $9.1 million by period end through strong operational cash generation with 120% EBITDA to cash conversion.

SRG Global Limited (ASX: SRG) is a diversified infrastructure services company that provides critical engineering, construction, and maintenance services across the entire asset lifecycle. The company operates primarily in Australia and New Zealand, delivering specialized solutions across water, defense, resources, transport, and energy sectors.

Originally formed through the merger of SRG Limited and Global Construction Services in 2018, the company has strategically transformed from a construction-focused business to a more diversified infrastructure services provider with a significant portion of recurring revenue. SRG Global employs over 4,500 people and has successfully positioned itself as a key player in critical infrastructure development and maintenance.

The company serves a blue-chip client base that includes major government agencies, utility companies, and resource corporations. Their business model has evolved to focus on securing long-term maintenance contracts that provide stable, recurring revenue streams while maintaining exposure to high-growth infrastructure sectors.

SRG Global delivered a record first-half performance for FY25, with revenue increasing 21% to $619.7 million and underlying EBITDA (excluding $5 million in acquisition costs) rising 31% to $59.0 million. This strong performance reflects the successful execution of the company's strategic transformation into a diversified infrastructure services business, with both operating segments showing robust growth.

The Maintenance and Industrial Services segment, which contributes approximately 62% of revenue, grew by 19.4% to $388.0 million, while the Engineering and Construction segment showed even stronger growth of 24.8% to $231.7 million with a significant 53.1% increase in EBITDA to $16.5 million. The segment's EBITDA margin improved substantially from 5.8% to 7.1%, demonstrating enhanced operational efficiency.

The successful acquisition and integration of Diona has been a significant milestone, contributing $65.9 million in revenue and $6.9 million in profit before tax since its acquisition in September 2024. Looking forward, SRG Global is well-positioned for continued growth with record Work in Hand of $3.4 billion and an Opportunity Pipeline of $8.5 billion across diverse sectors.

Our financial forecast projects revenue growing from $1,279 million in FY25 to $1,940 million in FY29, representing a 12.5% CAGR. This growth trajectory is heavily supported by the record $3.4 billion work in hand and the expanded $8.5 billion opportunity pipeline with historically strong conversion rates.

The forecast projects EBITDA growing from $126 million in FY25 to $219 million in FY29, with margins expanding from 9.9% to 11.3% over the period. This margin expansion reflects the increasing proportion of higher-margin Maintenance segment revenue, operational efficiencies from scale, and the full realization of synergies from the Diona acquisition.

The forecast generates strong free cash flow throughout the period, starting at $79 million in FY25 and growing to $124 million by FY29, supported by the company's excellent cash conversion and disciplined capital expenditure at approximately 2.0% of revenue.

Our valuation analysis employs multiple methodologies to triangulate SRG Global's intrinsic value, with primary emphasis on the DCF approach given the company's predictable cash flow profile and significant ongoing business transformation. The base case DCF valuation of $2.30 per share represents our central estimate, based on a 5-year explicit forecast period with assumptions anchored to management's upgraded FY25 EBITDA guidance.

The market-based valuation approaches yield more conservative estimates ranging from $1.12 (P/E multiple) to $1.90 (precedent transactions), likely reflecting the market's incomplete recognition of SRG Global's business transformation and growth potential. The current share price of $1.50 appears to significantly undervalue the company's intrinsic worth, particularly given the strong visibility provided by the record work in hand.

Our scenario analysis reveals that EBITDA margin is the most critical value driver, with a 100 basis point change in terminal margin impacting the valuation by approximately $0.25 per share. The bull case valuation of $3.40 per share assumes exceptional Diona integration with significant cross-selling wins and accelerated margin expansion.

While SRG Global faces several key risks, the company has demonstrated strong mitigation strategies. The shift to 80% recurring revenue provides significant buffer against cyclicality, while the record $3.4 billion work in hand offers near-term visibility. Management's track record of successful execution and rapid deleveraging post-acquisition demonstrates effective risk management capabilities.