RE:Next Wednesday Gabriel wrote: Clearly the valuation of Aecon is based on future earnings excluding the remaining LSTKs minus net debt The board owes it to shareholders to make sure management provides projections as to those. We need to hear a statement on the earnings range for 2024 and for 2025 with the minimum expected for both construction and concessions.
While I perfectly understand we will never involve again in complex LSTK projects, more so when they over 1B in value, we nonetheless should also promote the need for the industry as a whole to start to set aside an allowance for project losses in the future, just like banks whereby regulators require them to. Maybe the pressure should come from shareholders to support a legislation that obligates all publicly traded contractors to abide by such a requirement. These should be added on top and above projected costs and contingencies and used only for such situations. We need to deploy every innovative effort in addition to collaborative projects, BIM and the likes, to stop these mishaps from ever happening again. We will then see valuations based on EBITDA multiples over 10x. And it's about time we do.
I tend to disagree. Comparisons with banks are misleading. They take risks with other people's money. No point for contractors to tie up hard earned capital to sit idly by, instead of putting it towards growth.
Contingency budgeting ought to suffice.
Best way to minimize risk is to shun large LSTK bids. Period.
Just my 2cents. But you're the expert here.
Cheers