Thoughts for longs it does not take a genius to figure SNC is a buy.
1. Engineering services has a projected EBITDA over 600m in 2021 and over 700m in 2022, therefore a value of over 10B or 56$ per share for this division. Add 14$ for Capital incl. 407 and you have 70$ per share.
2. Market is discounting losses on the three remaining LSTK rail contracts, except we have only about 125m (our share in the Crosslinx consortium) remaining on Eglinton and we won the legal case in the Superior court of Ontario but were not paid because Crosstown LRT (owner) appealed the ruling and we had to provision 30m in losses last Q3. Considering the contract and clauses and many legal opinions on the ruling I posted on this board including the ruling and jurisprudence, we will prevail and we will get paid our Covid related costs which include price increases and supply disruption related costswhich Crosstown LRT (owner) is objecting to. The ruling in our favor raised the partnership aspect of a PPP and ruled in our favor because it was fair to claim force majeure related costs. In any case, only 125m is left as of Sept 30, 2021 and all unpaid claims are already accounted for. They said it during Q3 conference call. The Ottawa LRT has about 300m left and as far as I understand is doing fine. The last one is the REM with about 600m left and it was already announced and I posted the reference indicating that the CDPQ has accepted to pay covid related costs. So basically we should be out of these at no losses going forward plus we have a 400 m ongoing claim against Services Canada (ex PW) on Champlain. In my humble opinion as a seasoned infrastructure specialist (B$ scale), we should be out of the LSTK at zero or minimal losses in the worse case scenario. Take the worse of the worse at 350m, you're talkin' 2$ per share. End of story.
3. Excluding Capital at 2.5B (407: 10.01% in 2019 fetched 3.25B and 3 parties wanted to pay that price: CPPIB, Cintra and OMERS so 6.67% is worth at a minimum 2.2B today with lousy rates, add all other concessions), the EV of SNC is 175.5m shares * 35$ + 1B net debt - 2500m = 4.6B only for a revenue of 7B+ or 65% of revenue.
WSP, Tetratech, Jacob, Stantec are 2 to 4.5 times revenue. That is 3 to 7 times more.
You all should read this:
https://seekingalpha.com/article/4463663-snc-lavalin-group-inc-sncaf-ceo-ian-edwards-on-q3-2021-results-earnings-call-transcript
The CEO and CFO set safe priorities :
1. Complete the 3 Infra LSTK with a profit (CC of 2021) + aggressively claim when justified.
2. Grow Eng’g Services in design, project management in energy (net zero, wind, nuclear,..), transportation abd resources projects + build upon expertise in life cycle project management from design to construction and operations, maintenance and finance to partner in « alliance » collaborative partnership contracts with minimal risk and elevated upside.
3. Grow internally (mid single digit EBITDA) and acquire US firms at the right price only or buyback shares.