AtkinsRéalis Group Inc. (ATRL.TO)

Has been in transition over the last couple of years. Feels all of the scandals they had, a couple of years ago are pretty much behind them. New CEO has done a very good job of weeding out that element of the company. Have been making great gains in getting contracts, particularly domestically. It is now priced at a point where it is probably close to 20X earnings and is selling at over 4X Book Value. On ROE, they are going to earn about $3 on a BV of $14, and this is a little bit rich.

Hit a rough patch awhile ago with a bribery scandal. Not a super risky company. They own a part of Highway 407, and they had really strong numbers from this. If you own, consider taking some profits.

New CEO has done a good job in cleaning house and bringing in new top level management and re-establishing trust. Management would like to re-shift the business from minority interest and infrastructure assets, to a pure E&C (energy and construction) business, and grow the oil/gas segment. If you back out the concession assets, the core E&C business trades at stub value of around 5.5X. It is going to take some time for this strategy to turn things around. He would prefer WSP Global (WSP-T) or Stantec (STN-T).

He has recommended it many times. Bought it after the corruption scandal. They brought in a new CEO who was clean and then some compliance people. They have important assets that the market is undervaluing. Likes their current acquisition. They may pay out a special dividend.

He would classify this as a Hold, but if there was a rise of 10%, he would be a Seller. They are doing relatively okay. He suspects we are not going to see the kind of margins that we have seen over the past decade. Not sure that all of the contracts that they had were completely legitimate.

(Market Call Minute.) Sold AltaLink electrical grid to Berkshire Hathaway, which is a big chunk of change for them. Have got over the bribery scandal they had. Quality company with exposure to high growth areas.

This name has been in the headlines, for all the wrong reasons, for the last couple of years. They have come a long ways to fixing this. Company has a core engineering and construction business and they also have infrastructure investments. Just sold one of them, AltaLink, to Berkshire Hathaway. Also, have a piece of Highway 407 and have a very good valuation for this, much higher than people thought. Looking at these assets, you are really not paying much for the core business. They are working through some problem contracts where they basically have zero margins and as these move through the backlog, you start to see margins expand.

Looking at the problems the company was having; every time bad news came out the stock would drop to $40 and then bounced higher. Just sold AltaLink for $3.2 billion. There are rumours the company will be taking that $3.2 billion and maybe make a return of capital to shareholders. Thinks a lot of the problems are behind them. A really good company in a really good sector.

There was a tremendous headline risk on this stock because of the scandals having to do with bribery in North Africa and there were write-offs involved with Libya. The earnings reported today had 2 interesting things. 1.) There was a loss recovery in Libya, which boosted earnings, but 2) to him the most important thing was that the engineering/construction sector actually lost money. In other words in their core competence, designing and building stuff, they are still losing money. Sold his holdings about a year ago because he saw decreasing margins in their core business. They have all this work, but he is not convinced they can make any money on it.

Still negotiating with the government to see the size of fines they might pay for past transgressions. Recently made a sale of over $3 billion, much more than people expected, which would easily cover any sort of fine. Have gotten their hands around management to straighten out procedures, and if anything, they are going to try to be cleaner than anyone else. Thinks this will stand them well. On a multiple basis, they stack up pretty well against competition. This is certainly one that he would look at today.

Sold her holdings because of the corruption scandals. Had a nice lift in the last week because they sold AltaLink to Warren Buffett. Now they have to do something with that money and reinvest in the business, which may take a while. She does like infrastructure build and there are a lot of energy projects out there globally. (See Top Picks.)

They are selling a non-core business to Warren Buffet and this has forced the price up. Now that they are monetizing some assets there is good value to be had here. He can’t see it going much above $60, however.

Bought after the bad news because it was a Canadian, world class company.

Still a turnaround story which is not her forte. She prefers growth stories. She is happy to trade it so if there is a horrible day, and it is down $2-$3, she would be happy buying it. She is comfortable management will turn the company around, but that could take 3 years.

(Market Call Minute.) Likes this very, very much. Headlines are still possibly negative. It’s all old stuff and new projects are coming. New management and everything going forward is positive.