SNC-Lavalin Group (SNC.TO), mcap=C$4.5bn, price C$25.55 vs C$29.11

Pitch: E&C company with a non-cyclical backlog of long-term strategic projects and additional toll road operations. Trades materially below peers. The business was mired in scandals and extra charges over the last few years, making the company/stock untouchable. But all the issues are now structurally resolved. The new CEO took the wheel and made drastic changes – SNC is fully out of the fixed price business (only 12% of revenue) and all the charges have been resolved. Expected to trade in line with these peers once all the dust has settled.

Valuation: $50/share target with project business at 11x 2023 EBITDA and toll roads at $2.9bn. Closest peer WSP.TO trades at 13x 2023 EBITDA. Another competitor STN trades at 12x.

Exp. gain: +73% to $50/share by 2023.

Full SNC.TO write-up (free guest account required):

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