The Globe and Mail
Globe says Aecon's valuation discount seen narrowing
2024-11-05 08:26 ET - In the News
The Globe and Mail reports in its Tuesday, Nov. 5, edition that TD Cowen analyst Michael Tupholme upgraded Aecon Group to "buy" from "hold" after the company posted a "clean" third quarter. The Globe's David Leeder writes in the Eye On Equities column that Mr. Tupholme's share target soared by $12 to $35. Analysts on average target the shares at $28.45. Mr. Tupholme says in a note: "Concerns regarding Aecon's fixed-price legacy projects kept us cautious. However, its recent quantification of maximum potential legacy project risks and a clean Q3/24 provide us considerable comfort. Meanwhile, a solid revenue growth outlook and Aecon's compelling valuation support our upgrade. Despite very strong recent share-price performance, on an ex-concessions and ex-legacy fixed-price project losses impact basis, Aecon is trading at 6.1 times our 2025 adjusted EBITDA estimate. This represents a notable discount vs. its closest Canadian peer Bird Construction (7.4 times our 2025E EBITDA), and vs. Aecon's broader construction peer group (average of 10.6 times 2025E EBITDA). With continued strong execution and legacy JV projects backlog run-off, we expect Aecon's valuation discount versus peers to narrow."