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Aecon Group Inc T.ARE

Alternate Symbol(s):  AEGXF

Industrials Conglomerates
Aecon Group Inc. is a Canada-based construction and infrastructure development company. The Company delivers integrated solutions to private and public sector clients throughout Canada and other countries. It operates through two segments within the infrastructure development industry: Construction and Concessions. Its Construction segment includes all aspects of the construction of both public and private infrastructure, primarily in Canada, and internationally and focuses primarily on the civil infrastructure, urban transportation solutions, nuclear power infrastructure, utility infrastructure and industrial infrastructure. Its Concessions segment include the development, financing, build and operation of construction projects primarily by way of public-private partnership contract structures, as well as integrating the services of all project participants. The Company’s projects include Annacis Water Supply Tunnel, Bell Canada Gigabit Fiber Service, Finch West LRT, and others.


TSX:ARE - Post by User

Aecon Group Inc > NBF report
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Post by Gabrielon Nov 04, 2024 6:59am
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Post# 36294747

NBF report

NBF report

Aecon Group Inc.

Clean Q = greater re-rate

Q3/24 results — good performance

Q3/24 results recap — +7% beat on EBITDA vs. consensus as four fixed-price “legacy” projects are breakeven vs. previous string of losses

Revenue came in at $1,275 mln (+3% y/y), +2% above Street at $1,251 mln (NBF at $1,268 mln), despite lower industrial operations revenue in the Construction segment (-$108 mln y/y) due to tough comps from Q3/23 following the completion of a large pipeline construction job in Western Canada. Consolidated Adjusted EBITDA came in at $126.9 mln (imputing 10.0% margin — the highest margin for the company in 10 years), above NBF estimate at $106.3 mln and Street at $119 mln; The four construction projects that marred prior quarters are now breakeven, according to the company (more in outlook below) vs. a -$91.1 mln in Gross Profit in Q3/23. Adjusted EPS came in at $0.86, above our forecast at $0.66 (Street at $0.78 but there is a wide range).

Conference call takeaways — pro-forma operating profile significantly de-risked

1) Fixed price projects = largely status quo; 2) Progressive design-build projects will de-risk the backlog; 3) U.S. nuclear provides a wide opportunity set; further M&A is likely.

Valuation & recommendation — a cleaner earnings profile is conducive to further multiple expansion

With the pro-forma earnings profile significantly de-risked, we expect steady margin expansion moving forward; our forecasts impute potential losses; if those do not materialize, the numbers would move higher. Furthermore, revenue visibility is also improved with the multi-year nature of incoming progressive design-build projects and exposure to the thematically growing nuclear and utilities space (now 45% Construction revenues). We rate ARE shares Outperform and raise our price target to $28.00 (from $25.00) on higher EBITDA projections; our target is derived using a 6.0x / 7.0x 2025E EV/EBITDA multiple on core construction / JV assets and $2.33 for ARE’s Bermuda stake.


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