Aecon Group Inc (ARE.TO)

They reported a good number lately, but failed to go private. It's too energy-centric for him. It's fully valued now after failing to go private.

STANTEC vs. AECON - He's studying the infrastructure space closely. He has no criticism about Stantec, but he prefers Aecon for its balance sheet ($260 million in cash) and low debt. And its new CEO has global experience, which is a catalyst for Aecon and will help them go global. He hasn't bought ARE yet, but will.

There is great value in the company. Earnings are expected to grow 33% in 2019 and 25% in 2020. They announced an agreement to sell their contract mining business. They should be in a net cash positive position afterwards. It is a buying opportunity. (Analysts’ target: $20.50).

Have acquired significant infrastructure projects, so now have a record backlog. Sees growth at 35%. Balance sheet in good shape. Trades at discount to peers. Really good growth rate, nice dividend. Upside over next 12-24 months. Yield is 3.1%. (Analysts’ price target is $20.05.)

He buys on weakness. They have a record high backlog, and if they price it right, they’ll make good money. The Feds have allocated a lot of money to infrastructure, and Aecon should benefit. Valuation is temporarily cheap. He’ll be looking to sell in the high $20s. Yield is 3%. (Analysts’ price target is $19.81.)

Model price is $14, so it is below where it is trading at. It is at EBV plus 1, and we have not had a breakout. Wait for a buy signal. He thinks it will come back. There are better opportunities elsewhere.

He thinks that they had done a lot. Their backlog is at a record and capable of growing from here. He sees growth at 35%. Trades at 14.9 times 2019. Cheap. Balance sheet is OK. It is a better company now than when the Chinese company wanted to acquire it and was blocked by Ottawa.

After the failed takeover bid the stock dropped. He never really liked the construction business. He has IBG-T for exposure to this industry because it is more stable. Some of the promised government infrastructure spending has not come.

Will Ottawa fulfill promises of infrastructure spending? These stocks should be traded (not held). Remember these stocks are international, with building activities outside Canada. This sector will go, along with a lift in the market that he predicts.

They came back to the $15 after the sale was disapproved. There are the usual construction issues, such as the risks of overruns on fixed-price contracts on large projects. They have a stronger backlog. She doesn’t see a rush to buy the company. They are looking for a new CEO and not actively looking for a new buyer, so the share price will be driven by how well it performs in the future. (Analysts’ price target is $18.80)

He owns two engineering companies – SNC Lavalin (SNC-T) and Stantec (STN-T). He keeps waiting for the actual infrastructure spending incentives from the Federal government to ignite these holdings. Aecon’s senior management does not impress him. He would prefer to hold the other alternatives.

He is thankful this continues to be a Canadian company as there are fewer in the Canadian space left to invest in. He is watching it again, now that it is down 22% this year. He sees it as still being a little expensive at 19 times earnings. He would take an initial 1/3 position at these levels. Yield 3.25%.

It's been in a tight range for a very long time. It's now downward in a middle ground. Continue to hold it, but he'd like to see it rise above $18.

They had a price collapse. There is a vacuum. The backlog is the biggest its ever been at 4.6 billion. Visibility is improving. Growth is kicking in. Trading at a reasonable 12.2 times 2019 earnings. Benefiting from the nuclear refurbishment contracts. (Analysts’ price target is $18.80)