Wednesday’s close: $8.60 a share
52-week trading range: $7.10 - $9 a share
Annual dividend: 60 cents a share for a yield of 7 per cent
Analysts’ ratings: There were 4 buys, no holds and no sells, according to Bloomberg data. Target prices ranged from $9.50 a share by National Bank analyst Trevor Johnson to $11.75 a share by Canaccord Genuity analyst Yuri Lynk.
Recent history: Shares of the Langley, B.C.-based construction and infrastructure services company have gained 29 per cent (including dividends) over the past year. WesternOne, a former income trust, converted to a corporation at the end of last year, but maintained its monthly 5-cent a share dividend. The company’s Britco subsidiary, which makes factory custom-built modular buildings, recently joined forces with Black Diamond Group Ltd. to buy Australian Portable Buildings Group for about $75-million. Under the deal, Britco got 80 per cent of the Australian’s modular and 10 per cent of its leasing business. WesternOne recently was also awarded a $101-million contract to build the first phase of a workforce accommodation complex for Manitoba Hydro to be completed in 2014. The second phase worth $106-million still requires regulatory approvals for its Keeyask generating station project.
Manager insight: WesternOne has an attractive yield, but there is also growth potential from its Britco manufacturing division acquired in 2011 and from future acquisitions, says Michael Decter, president of investment firm LDIC Inc., and who has owned its shares for a few months. “The company has a 45-per-cent payout ratio so it seems conservative. We like their various businesses and are particularly keen on their Britco division.”
Britco is a way to play to growth in workforce accommodation in the mining sector as well as oil sands, pipeline and hydro-electric development in western and northern Canada, Mr. Decter said. It is particularly well positioned for contracts to build workforce camps in connection with proposed pipeline projects to ship natural gas to Kitmat and Prince Rupert, he noted. “We [also] like the Australian Portable Buildings acquisition. They see a market in Australia because there is a lot of resource development [in that country] so there are a lot of the same opportunities for mining camps...It also gives them access to the Asian market.”
WesternOne was previously focused more on construction rentals, but the contract win from Manitoba Hydro - the largest in Britco’s 35-year history - provides its manufacturing business with “a full order book, cash flow and basis for growth,” he said. “We are hoping that [the stock] can get to $10 a share over the next 18 months. With the combination of the dividend and some capital appreciation, we are hoping to see a 20 per cent plus return.”