AtkinsRéalis Group Inc. (ATRL.TO)

We knew at some point there would be a fine although we didn’t know how it would all play out. We knew they would be in trouble and it is now come home to roost. There are infrastructure assets there, which possibly could be spun out. Highway 407 is amazing. If it falls a few more dollars, he may get back into this one.

Clarity is still needed on some of the issues surrounding this company. This is a great company. Until there is clarity, it is hard to do anything on the stock right now. (See Top Picks.)

(A Top Pick Feb 21/14. Down 5.8%.) Still thinks this is suffering under a cloud, basically because of the bribery scandal. Thinks this is all past history. Good assets, including Highway 407. If you take those away, you have 2000 engineers that you are getting next to nothing. Yield of 2.2%.

This company has had 3 bad things happen to it in the last few years. 1) There has been the bribery corruption scandal in North Africa. 2.) Inability to make money on a lot of their construction contracts. They came into the post recession period with a huge order backlog that they couldn’t converted into profits, which made him believe that they had underbid on the lot of their contracts. 3.) Now they are exposed to a lot of energy projects, which don’t look like they are going to get built, or if they do it is going to be very difficult for them to make their margins. New management is doing a pretty good job, but they have a lot of headwinds and he is not tempted to go into this.

This is a way to dip your toe into the energy sector without having to be in it directly. Has an asset value in the low $60’s. Thinks there is a transaction coming on the sale of the toll Highway 407 in the next 2-3 months where they will get something like $20 a share in cash. Energy exposure is about 15% of their business, through Kentz which they acquired last summer. The Kentz business has a huge backlog, which they are not seeing any decline in because they are long life, five-year projects. Yield of 2.31%.

Revamped their whole senior management team and their governance structure, which was necessary given their challenges. They are a huge powerhouse in engineering, construction and infrastructure investing. A bit of a concern would be their exposure to energy and mining. They also have infrastructure investments that are meaningful in giving them a source of funds to use back in engineering/construction project. Had wondered about this for a Top Pick.

Sold her holdings when they were having problems and wanted to wait for the dust to clear. As it turned out, some of their senior executives have been dismissed and/or charged with inappropriate activity. Have new management in place now. Recently made an acquisition to expand their end markets. She is still not ready to buy. Feels energy prices are going to impact some of their markets. Prefers Fluor (FLR-N) which is more global.

Doesn’t own this because they have been so caught up in the International scandal situation. Mr. Card has done a tremendous job of repositioning the company and cleaning it up, but there are still a number of people with charges outstanding. It is just a wildcard in the group. The 407 is a valuable property, and if they wanted to monetize that it could be a tremendous benefit. However, if the ruling comes forward that because of the bribery scandals, they couldn’t apply for any government contracts, it would almost be a company breaker. He would prefer some of the other companies in that sector.

One of his bigger exposures. A long running Canadian institution and very strong in engineering/construction globally. Last year it got hit by the scandal of bribery in Libya. Have new management and have done a big acquisition that will be changing the business mix, so the future looks much brighter. At this stage, they have to overcome a little bit of oil price induced weaker businesses. With their assets, they can monetize and generate a lot of returns for shareholders.

Has been doing the same thing as the engineering group recently. They completed the purchase of a British engineering firm in oil and gas. A well run company. But in the mean time they are behaving like the rest of the group.

Doesn’t want to go to energy right now because he is still a little uncertain about price. Acquired an E&C energy related company this summer, so they are now about 15%-20% energy related, but it is infrastructure. These are big long construction projects to be built out as new development in energy. He thinks you can make the argument that asset value is still in the $60’s and probably in the spring they announce the sale of the #407 for something like $3.2 billion, which is $20 a share in cash. Yield of 2.34%.

Under a lot of pressure now because it has made a $2 billion acquisition in the oil/gas sector. He can't see this turning around all of a sudden.

This has had unique problems, including corruption and related lawsuits. There has been a lot of management turmoil that is possibly not over yet. Have huge contracts in a lot of places where some strange types of business dealings go on and are being more closely monitored. Corporate governance has not been great. There are better places to put your money.

The company immediately got rid of people who were behind the scandal. At the same time they brought in a lot of new business. Bought a British oil stock and the recent oil price drop caused the stock to come down needlessly.

Looking at the infrastructure space, 66% of this company’s revenues are coming from Canada. He would rather look at an industrial name that is going to have more revenues from other parts of the world that are growing a bit faster.