I reviewed the numbers and listened to the conference call.
Results are pretty much what I expected and not much of a surprise up or down. Glad the momentum from Q1 results continued and we now have the 2 back to back qtrs of sustained improvements. As such I think the fear out there has subsided with the investment community. We are now on a clear path to grow and prosper.
NOTES and/or COMMENTS
1. We reduced the LSTK backlog by $200m. This was satisfactory considering we were pretty much still in full lockdown during the qtr. As we are now starting to lift restrictions in Q3 my guess is we reduce the backlog by $250m in Q3 and another $300 or so in Q4 with full back to work liftoff in effect come early Sept labour day. That will leave a balance of roughly $750 by end of this year. That improves the outlook of SNC tremendously and speeds up the completion of the LSTK by end of 3'rd Qtr 2022 or possibly end of 2022 to be conservative.
2. Oil and Gas division is just about done and last hurdle to get official sign off to be done 3'rd qtr provided the Saudi's don't make things difficult and resist. Would like to see this sign off happen quickly this qtr and not drag out. The longer this goes without closure the more questions and doubts that surface. Get this done quickly Ian and don't sit on your butt with no closure to this important milestone event
3. I like the 2 areas of growth that SNC is focusing on (ie. Climate Change and Digital Transformation). This is not just a Canada or North American opportunity but a "Global" opportunity that needs the services that SNC has a great business model and experience to utilize its strengths and gain market share and project wins here. Very smart move that will benefit the company and shareholders.
4. Revenues and order backlog and cash flows continue to increase and should accelerate once the balance of the LSTK contracts are completed and we are no longer draining our FCF and earnings on this losing construction side of the business. 1 to 1.5 years to go imo and we are done with this for good.
5. Nuclear shows to be a good future revenue and earnings machine that will only get better and better. Candu technology is a prime example of a unique asset that increases its NAV with time. Undervalued and underfollowed asset imo.
6. Capital (407asset) although no dividends distributed this past qtr I am sure we will get our dividend this qtr with the volume of traffic increasing and lockdown restrictions now being lifted and people are going back to work or carrying on with their daily lives. Life does go on. People like to get out and do things and don't like sitting in traffic on busy highways. They will pay for the convenience of using a traffic free toll Hwy. There aren't enough hours in the day to get things done so traffic should not be a concern if you can find an alternative.
7. Infrastructure bill - I liked Ian's messsge about specifically acquiring Atkins for their strategy of penetrating the "USA" and winning their fair share of contracts in America. He made reference to California as a hot spot to utilize where Atkins will win its fair share of contracts. The largest state (50m plus) so why not? Atkins is a global leader and it's name is well respected in the engineering world. Look for Atkins to move up the food chain and gain dominance as it moves up in the rankings and carries the SNC name up with it
8. NCIB- last question was asked if SNC would initiate a Normal Course issuer Bid to buy back shares. Didn't like their response that more details would come out at the investors day in late September.
9. Dividends increases? Still no mention of this. Maybe they will enlighten us with details when/if we are getting one at the investors day?
10. Heard them defer questions about 3 or 4 times to the Investors Day presentation. I hope they come prepared ready with a sound plan to explain to shareholders and institutions on how they are prepared to unlock the value of SNC and reward investors. We should be at a much higher share price.
11. The share price performance since yesterday mornings earnings release bounced around a bit. I guess investors were digesting the results. I am sure the MM's were at it again playing with peoples emotions and getting them to sell while they were picking up the shares later in the day when they felt they got the price they wanted. Glad we finished up $1.14. Better than being down $2 plus dollars based on history.
12. I am convinced the worst is over. The LSTK projects are well on their way to completion by end of next year. The O&G resources division should be closed off end of this qtr. Expect a nice pop in share price when the news release comes out.
13. Expect to see some analyst upgrades to follow in the next few days. $40 plus share price minimum target is pretty much "universal" now but we should be looking at a slight premium based on these results.
14. Still say the vultures are working behind the scenes to strategize and buy SNC out. Only a matter of time imo. These results from Q2 confirmed it for them that the coast is clear and that the company has reduced its risk profile significantly. Hopefully the shareholders come away with a nice profit and something to get excited about based on our long suffering days we endured. I suggest you hold onto your shares and nibble away and add more on any pullbacks if you have extra funds. Could be the easiest and quickest 25 to 50 percent return you make in the blink of an eye if the takeover news breaks out. Then you can decide if you want to keep your shares or sell and move on. Depends on what the options are and the alternatives we are presented with on any deal put forth on the table.
Good luck gang.
Ron