RE:RE:RE:Hummm JV HoneymoonHi all,
A few items that I took away from the Q3 earnings are as follows:
1. Earnings Beat: These were better than I expected and still managed to beat analysts expectations if you remove the CEWS.
2. JV Relationship: Technical projects are always tough especially when you are trying to integrate two different technical teams. The key for me will be to ensure that Macro is still held in good standing with TC Energy and is at least amicable with Spiecapag. Based on the press release, the continued involvement of Macro's construction equipment and crews suggests that this is the case and would also bring in several million per quarter in revenue; furthermore, one could argue that they have mitigated downside risk associated with cost overruns.
3. Strategy: The language in the release was a bit cryptic; however, if I read between the lines correctly, the JV swap will free up personnel to pursue another major project which I suspect is the NGTL work.
4. Valuation Gap & NCIB: Management has a history of not saying too much about the valuation gap. In my mind they are in growth mode so it may be difficult to imagine that they could throw too much at a share buyback but it would mean a lot to me if they got serious about the purchases under the NCIB program. I believe this program is up for renewal and I would encourage you to voice your support to Management over this initiative.
5. Privitization: Taking item #4 one step further, I believe that Macro's Management should take this company private at the end of 2021. Even if it were to be acquired at a healthy premium, I believe that there is substantial upside for Frank and the team. Being a public company does not appear to offer Macro any benefit and the Company does not have a need for public market capital. Frank is likely reminded of this every time he reviews the quarterly package and realizes he was essentially the only source of capital when they needed to to the Pref share raise. I would be curious to hear the thoughts of others regarding privitization especially if you have a dissenting viewpoint.
Sincerely,
LR