Q: Can I get your thoughts on BBU.UN? It seems outrageously cheap at only $3bil market cap when Westinghouse is producing $650mil in Ebitda and the company earned $1.3bil in ebitda in 2020.
A: The stock is cheap at 12X earnings and very low EV/EBITDA. Two reasons: (1) earnings are highly variable and are expected to decline this year. (2) Debt is very high at more than 5X cash flow. On the first point we have no concerns: it is simply the nature of the business. On #2 is needs to be watched, but the company has substantial assets and we would not see debt as a huge issue. The Q4 was better than expected, and low rates and a growth recovery should continue to be positive for its businesses.
So said 5iResearch last week. GLTA