Stuart Olson Inc CUUHF

TD Report

[SunsetGrill]

No mention of 6.6% Divy which i thought was suprising-read below

We are increasing our target price to $8.50 (from $7.00), driven by an increase in our target valuation multiple. Impact: POSITIVE Stuart Olson's share price has increased 37% since the release of its Q3/17 results on November 9, 2017 (it also coincided with our rating upgrade to BUY). This represents significant outperformance versus other North American pureplay construction peers we track, which are up ~2% over the same time frame. We would attribute SOX's recent share price strength to several factors. First, SOX delivered encouraging Q3/17 results. The quarter exceeded expectations (driven by healthy margin performance in several segments that had lagged), management's outlook was constructive, and SOX's leverage ratio improved notably. Second, we would argue that SOX's significant share price underperformance versus peers leading up to its Q3/17 results also helps explain its recent outperformance (i.e., SOX's stock price declined ~9% from January 1, 2017 to November 9, 2017 vs. an average increase of ~7% for the peer group). Finally, we view the recent strength in the price of oil and what appears to be generally improved investor sentiment toward the broader resources sector as the other factors that have been supportive of SOX's recent upward move. We have increased our target valuation multiple to reflect the passage of time and a modest improvement in sector valuations. SOX's EV/EBITDA (2018E) valuation has increased by approximately one multiple point since reporting Q3/17 results. Although its peers have lagged significantly from a share price appreciation perspective, the peer group's valuation has on average expanded by approximately 0.3 multiple points over this same period. We now value SOX based on a 6.5x-7.0x multiple (up from an arguably conservative 6.0x previously) applied to our 2018 EBITDA estimate, less forecast net debt. Our target price increases to $8.50 (from $7.00). TD Investment Conclusion We believe that SOX's financial performance will show continued improvement in 2018. Further, despite SOX's recent share price gains, the stock continues to look attractively valued versus peers (SOX is trading at 5.9x our 2018 EBITDA estimate vs. an average of 8.3x for its peers). We reiterate our BUY recommendation.