CIBC NotesBird Construction
CEO - Teri McKibbon; CFO - Wayne Gingrich
1. Seeing Signs Of Increased Government / PrivateSector Spending: Though COVID-19 has delayed permitting timelines, BDT noted that it is seeing signs of more projects in procurement. Recall, BDT recently won the Alberta schools P3 project (5 schools).The company is also seeing growth in agriculture-related construction, and BDT should have a good chance in winning work pertaining to BHP’s mega Jansen potash project over the next several years(recall, BDT built potash storage facilities at Rocanville).
2. Margins North Of 5%-6% Possible Over The Mid-to-long term: While BDT does not provide targets, management did indicate at the conference thata margin north of 5%-6% would be an aspirational goal. We currently forecast adj. EBITDA margin of4.7% in 2021 (or 3.9% excluding CEWS). Though CEWS rolling off is a headwind to margins in H2/21,the combination of more self-perform work (Dagmar acquisition helps) and cross-selling opportunities should drive higher margins over the mid-to-long term.
3. Raw Material / Labour Inflation Manageable: BDT does not expect to see a significant impact to margins from higher raw material costs (given built-in material escalation clauses with clients). The labour market is tighter than the past 24 months, a sign that the industry demand for construction services has improved.
4. Dagmar – Platform For Horizontal Infrastructure Expansion: BDT’s legacy civil infrastructure business is primarily focused on industrial clients. Dagmar provides access to Ontario’s horizontal infrastructure(road, rail, etc.) market (several transportation projects are currently in procurement in Ontario).