Opinions
Michael Sprung
Stuart Olson Inc
SOX-T
WEAK BUY
Oct 24, 2018
$4.740
Stock price when the opinion was issued
REAL ESTATE
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TOP PICK
They lost some money. Revenues will fall in Q1 and maybe also Q2 that could extend the loss, but they expect revenues this year to be higher than in 2018. He likes managerment. They've paid a dividend of 12 cents for 31 straight quarters until they cut it. Activist investors are looking to see SOX sold. (Analysts’ price target is $5.10)
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TOP PICK
He has owned this a long time. They cut the dividend by half and then eliminated it. This killed the stock price. The cut will save $14 million in cash flow. They have cut staff and they are getting hurt by events in the energy sector. They have $1.6 billion in back log and refinanced their debt. This could be a 10-bagger, or it could go bankrupt. Yield 0% (Analysts’ price target is $1.73)
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TOP PICK
He bought in when the dividend was over 9%, only to see them eliminate it and the stock got killed. Their revenues are going down, but he has faith as the management team is looking to make it lean and mean. Their backlog has gone up. They are not out of the woods and could see this going into double-digits in price. Yield 0% (Analysts’ price target is $1.74)
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COMMENT
In the construction space his favorite is WSP Global. SOX is similar and he thinks they may be a value trap as there is some concerns about the dividend, the strength of the balance sheet and their ties to the energy sector.
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A past top pick. The problem with construction companies is that they're much more volatile than the engineering ones. SOX is more construction, less engineering, and more dependent on the Alberta economy. It has a lot of upside from here, but it's riskier than peers Aecon, Stantec and SNC Lavalin.