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The Skikda thermal power plant, one of SNC-Lavalin's projects in Algeria
The Skikda thermal power plant, one of SNC-Lavalin's projects in Algeria

Bids for SNC-Lavalin? Not so fast Add to ...

The Financial Post, on its front page on Tuesday, has dangled the intriguing possibility that SNC-Lavalin Group Inc. might be a takeover candidate because its share price has slumped 28 per cent this year. The evidence – the stock is cheap next to rivals – is far from convincing, especially given that analysts remain upbeat about the engineering company’s prospects. If they’re right, any takeover bid would be seen as opportunistic and likely rejected by shareholders.

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Indeed, analysts seem to be standing behind SNC-Lavalin not because they think bids are coming, but because the recent turmoil surrounding the company – the missing money, the departure of key executives – might not be interfering with its ability to attract new business.

Pierre Lacroix, an analyst at Desjardins Securities, reiterated a “buy” recommendation and a $54 price target on Tuesday, implying gains of about 46 per cent from Monday’s closing price.

On Tuesday morning SNC-Lavalin announced that it had won a contract to design and build portions of AltaLink’s transmission lines in Alberta, worth about $1.6-billion over five years. Okay, SNC owns AltaLink. However, Mr. Lacroix believes the win is still significant because the bidding process was open and involved a risk that SNC wouldn’t be awarded big parts of the contract.

“This contract, combined with recent wins (total value of $1.5-billion to $2-billion Canadian), should offset, to a reasonable degree, investors’ concerns about SNC’s ability to win new business following recent internal issues,” he said in a note.

“We would also point out that SNC was short-listed last week in two major U.S. infrastructure projects in Indiana ($1.3-billion Canadian East End Crossing PPP project) and Texas ($4.4-billion U.S. I-35E interstate highway project). Recall that SNC management indicated last year that it intends to develop a greater presence in the US infrastructure market.”

 
Security Price Change
SNC-T SNC-Lavalin Group 47.19 -0.06
-0.127 %
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