Opinions
Michael Sprung
Shawcor Ltd. (A)
SCL-T
COMMENT
Aug 22, 2018
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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Chances are the Trans Mountain Pipeline will be built or at least East Mountain could. These things have been held up for so long, investors are losing faith, but if the pipelines are built, Shawcor will come back a long way. He expects better times for pipelines because there's so much supply pressure. Eventually these companies will do well, but it'll be uncertain for a few years.