Scotia Capital Scotia Capital analyst Jonathan Goldman thinks Dexterra Group Inc. is “a much cleaner story with a more consistent EBITDA and FCF profile” following last year’s divestiture of its Modular Solutions (MS) business, while it “also pivots the narrative back to capital allocation.”
“While the dividend consumes a large portion of FCF (more than 40 per cent), we see room for consistent allocation to M&A,” he said. “That said, with shares up nearly 50 per cent in the LTM [last 12 months] and trading at 6.1 times EV/EBITDA on our 2026E versus our valuation multiple of 6.75 times, we think a good portion of that optionality is already priced in. With leverage near the high end of the comfort range following a recent flurry of larger deals, we think the near-term focus will be on integration and de-leveraging.”
While his third-quarter projections sit ahead of the Street’s expectations, Mr. Goldman resumed coverage of the Toronto-based company with a “sector perform” recommendation, emphasizing its organic growth target of 5-7 per cent per year is “a show-me story given actual results of 1.3 per cent in 2024 and 1.6 per cent year-to-date.”
“MS divestiture supports more consistent EBITDA/FCF and allocation to M&A,” he added. “MS was loss making in 2022 and 2023 due to cost inflation on fixed-price contracts and delays on affordable housing projects. It was also more capital intensive relative to Dexterra’s SS business. The company redeployed future proceeds from the divestiture to acquire CMI Management Inc. (1Q24), Right Choice (3Q25), and a 40-per-cent interest in Pleasant Valley Corporation (PVC; 3Q25), a large distributed-service platform, as it doubles down on its efforts to expand Integrated Facilities Management (IFM) in the United States. The company expects normalized FCF conversion to exceed 50 per cent annually.”
Mr. Goldman set a target of $11.50 per share. The current average target on the Street is $12.48.
“We value DXT at 6.75 times EV/EBITDA on our 2026E using an SoTP and a premium for M&A,“ he said. ”The company realigned its segments last year into SS and ABS. While the re-segmentation highlighted the capital-light nature of SS, the business still has a significant cyclical component in the form of its legacy workforce-accommodations business, which serves mining, oil and gas, and infrastructure. We estimate the ‘Camps’ business accounted for 40 per cent of EBITDA in 2024. The company expects leverage to be less than 1.75 times exiting 2025, well below the comfort range of 2 times to 2.5 times. But, as with the acquisition of PVC for 10.4 times, the company would likely have to pay up for IFM businesses, which limits value accretion. Dexterra is well positioned to capitalize on nation-building projects, which could support higher growth and valuation. However, we think it’s too early to underwrite that possibility.”