Opinions
Jerome Hass
Shawcor Ltd. (A)
SCL-T
BUY
Apr 23, 2013
Stock price when the opinion was issued
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The Enbridge 3 pipeline will get built by early next year, but Keystone is a question mark. Shawcor coats pipelines, so they benefit from this construction. But Ottawa is anti-pipeline as are well-financed interest groups opposing pipelines. Wait and see how the pipeline chips fall in coming months.
At 8X forward earnings and with investors/analyst attention seeming to increase, we don't think much has to change here. As always, we would use prudent portfolio principles around trimming/re-balancing to limit a single company becoming too much of a portfolio but do not think it needs to be sold just because it is 'up'. While it is up nicely over the last year, it is still down 30% over a five year period. Past prices don't really mean much, but sometimes zooming out can help.
In terms of a recession, in general it is difficult for all/any companies to avoid impacts but MATR might be a bit less sensitive to an economic slowdown than say a consumer discretionary company.
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Shaw family put their stake up for sale in Dec/12 and the share price took off. There wasn’t a bidder with an attractive price so the company decided to buy the shares at a premium. This didn’t go over well with some institutional investors. Dual Class share structure is now eliminated, which he likes. Largest pipe coating manufacturer globally. A lot of pipelines are 50-60 years old so this is a great structural play. Just bought the number 2 competitor in the offshore space so expects margins to increase dramatically. Feels it could breach $50 in 12 months.