Aecon Group Inc (TSE:ARE, Mkt cap 724.22M, P/E 22.32, Div/yield 0.10/3.12, EPS 0.57, Shares 56.16M) has finally come good on the protracted sale of its 45.5% stake in Quito International Airport for US$232 million, which is likely to be met with overwhelming approval from investors.
As the Financial Post reports, Aecon has been looking to part with Quito International Airport since it opened in 2013, leaving some to question the Toronto-based firm’s growth potential.
However, analysts believe the higher-than-expected sale, with the Street’s average forecast coming in around $200 million, will bolster’s Aecon’s balance sheet sufficiently enough to allow it bring about some significant change.
Benoit Poirier, an analyst at Desjardins Capital Markets, said that Aecon now has a free rein to pursue public-private-partnership bidding opportunities and emerge as a near pure play in the Canadian construction market.
He pointed out how the company tops the shortlist for a number of large projects which are set to be awarded over the next six months. This should solidify its growing backlog and prospects for EBITDA (earnings before interest, taxes, depreciation and amortization) margin improvements, he added.
“In the medium to long term, we are encouraged by the massive, multi-year opportunity offered by the upcoming nuclear reactor refurbishment in Ontario and M&A opportunities,” Poirier wrote in a research note.
Meanwhile, TD Securities analyst Michael Tupholme is anticipating Aecon to use the sale proceeds to paint a better picture of its balance sheet, while pouring any leftover cash into its P3 project portfolio.
“Although we had no notable concerns about Aecon’s financial leverage, we see the increased financial flexibility that the sale affords Aecon and the simplification of the company’s structure that results from the divestiture of Quito as additional positives,” Tupholme said.
Aecon Group Inc. is a Canadian company involved in construction and infrastructure development. It operates in four segments within the construction and infrastructure development industry: Infrastructure, Energy, Mining and Concessions.
Infrastructure includes transportation sector, including roads and bridges, rail and transit, asphalt production and aggregates and municipal construction; heavy civil sector, including hydroelectric, tunnels, foundations and airports, and social infrastructure including transit stations, industrial site buildings and tenant improvements.
Energy segment includes industrial construction and manufacturing activities, such as in-plant construction, site construction and module assembly.
Mining segment focuses on mine site installations and contract mining.
Concessions segment include the development, financing, construction and operation of infrastructure projects.
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