Bird Construction Inc. (TSX: BDT) operates as a general contractor, with a decent presence across the Canadian market. The company focuses primarily on projects related to industrial, commercial and institutional sectors of the general contracting industry.

In a recent update, the company informed that it had received an order for construction at LNG Liquefaction Export Terminal Facility located in northwestern British Columbia. The contract is related to the construction of concrete foundations and paving inside the battery limits of the LNG trains process area. However, the amount of the contract is not disclosed by the company.

The Corporation announced a monthly cash dividend of CAD 0.0325 per share, payable on July 20, 2020.

Q1FY20 Financial Highlights: For the period ended March 31, 2020, BDT impresses with its quarterly performance and reported revenue of CAD 321.64 million, as compared to CAD 261.77 million in pcp. The increase was driven by growth in the industrial work program, while the commercial and institutional work program remained flat. Gross profit soared to CAD 16.92 million from CAD 6.32 million in pcp, thanks to a higher top-line while an elevated cost of construction remained a drag. Income from operations stood at CAD 3.86 million, as compared to a loss of CAD 7.98 million in Q1FY19, driven by a lower general and administrative expenses and a higher income from equity-accounted investments. Net income during the period stood higher at CAD 1.12 million, as compared to a loss of CAD 6.46 million in pcp, aided by a higher finance income and operating income. The Group exited the quarter with a Cash balance of CAD 140.40 million while total asset stood at CAD 821.60 million.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock corrected ~14% so far this year due to prevailing uncertainty across the industry on account of ongoing COVID 19 restrictions. The company reported impressive top line and bottom line in Q1FY20 amidst the macro slowdown. However, the company reported a slowdown in the construction activities during the month of April and May 2020, primarily attributed to the shutdowns and reduced productivity on project sites. Meanwhile, the company took a prompt measure in managing its cost structure and balance sheet by implementing precautionary measures by means of a temporary reduction in salary in mid-April for the Board of Directors, executives and non-project related staffs. The group's backlog increased to CAD 1,426.6 million, up 11.2% on an annual basis, which is likely to help in earning a sustainable revenue. Further, the group expects its high margin industrial work program to drive the growth going forward. The stock is offering a dividend yield of 6.3%, which is lucrative amid the current interest rate environment. The stock witnessed a pullback rally and soared ~19% in the last one month, and trading above the 200 days simple moving average (SMA) of CAD 5.97, indicating a bullish trend. The stock is currently trading at forward EV/EBITDA multiple of 4x against the industry (construction and engineering) average of 7.7x. A slowdown in construction in construction activities poses a key risk for the group. If the slowdown in construction activities persist for a prolonged time, it might hamper the company's performance. However, we expect construction activities to pick up following the easing in lockdown restrictions. Hence, considering the aforementioned facts and risk scenario, we recommend a 'Speculative Buy' rating on the stock at the current market price of CAD 6.15 as on June 12, 2020.

BDT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

WSP Global Inc.

WSP Global Inc. (TSX: WSP) offers several professional services like engineering and design to a wide range of clients across the Transportation & Infrastructure, Property & Buildings, Environment, Power & Energy, Resources and Industry sectors, as well as offering strategic advisory services.

Recently, the Company reported initiation of a private placement of 5,080,000 common shares at an offer price CAD 86.00 per share with IBC Capital Markets, National Bank Financial Inc. and TD Securities Inc. 

Q1FY20 Financial Highlights: WSP reported higher quarterly revenue, aided by organic growth while a rise in operational costs acted as a spoilsport. Further, the several challenges related to the oil and gas industry remained as a drag. WSP reported quarterly revenue of CAD 2,210.0 million as compared to CAD 2,173.6 million in the previous corresponding quarter, aided by an improved revenue from the public sector. Earnings before net financing expense and income taxes stood lower at CAD 88 million against CAD 95.9 million in Q1FY19 primarily attributable to higher personnel costs, other operational costs coupled with an elevated depreciation and amortization expense, partially offset by a lower sub-consultants and direct costs. The quarter witnessed a higher net finance expense, majorly due to a significant rise in long-term debt, resulting in a hit on the bottom line. Net earnings slide to CAD 14.3 million from CAD 62 million in Q1FY19. The Group exited the quarter with a cash and cash equivalent of CAD 902.6 million followed by total assets of CAD 9,788.2 million.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock stood resilient and generated a return of 22% in the last one year. Most of the services or projects of WSP are considered essential services, and the group has maintained good productivity levels. Most of the group’s clients have remained committed to their projects, particularly in the public sector. The group has started witnessing improvement in its operation Hong Kong and mainland China, since early March. The group has a solid backlog of CAD 8.5 billion, which are equivalent to 11.1 months of revenue, indicating solid revenue visibility. The group drew funds from its credit facility as a precautionary measure to increase liquidity and preserve financial flexibility which resulted in higher debt. The group has liquidity of CAD 1.2 billion of available short-term capital resources which seems sufficient to navigate the current challenging environment. The group’s net debt to adjusted EBITDA ratio increased to 1.3x; which is in the management’s target range. The stock is trading at a forward price to cash flow multiple of 12.1x, which is in line with the industry (construction and engineering) average of 12x. Hence, we recommend a ‘Watch’ stance on the stock at the closing market price of CAD 84.74 as on June 12, 2020 and look for a better entry point.

WSP Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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