Opinions
Alexander Lane, B Comm, C
Bird Construction Income Fund
BDT-T
PAST TOP PICK
Sep 21, 2009
Stock price when the opinion was issued
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BDT is a $450.6M company with a strong dividend yield of 5.1%, and has been paying down debts recently. Sales growth has been decent, its profit margins are somewhat thin, but it has a nice cash balance of $115.8M, and generates decent cash flows. Its valuation is at a good level, with a forward sales multiple of 0.2X and a forward P/E of 7.6X. Analyst expectations are for decent sales and earnings growth in the coming years. We would be comfortable with a position here, given its low valuation and good yield, although we might not expect much in the way of capital appreciation.
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We think BDT is very interesting at current levels. The focus on electrification projects and recent acquisition of NorCan plays very well into current green trends and BDT wants to become the partner of choice in this space. BDT does not primarily benefit from the residential housing shortage because its focus is more on the infrastructure and institutional side of things. It has some exposure in multifamily residential and high rises, but not houses. Financials are strong with the factors listed in addition to a nice yield and cheap valuation. We think there is a lot to like in BDT coming off a strong 2023. The bear case would be that growth slows, and BDT becomes an income name.
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Private and public funds are going into the infrastructure space. The demand for electricity is going up and we will need more than just renewables to meet the demand. Nuclear energy is needed and the nuclear build is real. She owns Aecon for infrastructure which has a higher dividend yield and lots of nuclear exposure.
Trades at only 12-13x PE and pays a 2.4% dividend. They just bought Jacob Construction, which will boost their infrastructure business from 13% to 21% and a bigger foothold in western Canada which sees more infrastructure growth. There's more spending and demand to come in this sector. Shares are reasonable.
North of 200% return over the past year, astounding. Doesn't care for the construction component or fixed-price contracts. Everyone wants more certainty in an inflationary environment; sometimes the company wins out, and sometimes the customer does. Nothing wrong with it. Earnings outlook is quite strong.
In the engineering and construction space, he follows STN and WSP, as they're pure-play design firms.
Recent addition into portfolio. Stock not as cyclical as perceived. Backlog of work projects very good. Work and revenue is guaranteed from the customers. Recent earning announcements very strong. Recent dividend increase by 50% very strong. Company growing to a size where larger investors start to invest.
There has been no material news, and the last news of any kind was a target price upgrade at National Bank in early December. Small caps had a rough December, and tariff fears are playing out in many sectors. But we have no news here and would consider it quite attractive today.
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Industrial stocks have come off on tariff, and other, fears. Very good ROE profile. Excellent earnings growth, with analysts projecting ~30% earnings growth a year for next 3 years. Quarters can be spotty due to lag time for project approval, so you have to own it for a while. At 9x forward PE, substantial discount to peers.
Small position for him. If it continues to perform, he'll continue to add.