Concessions a hidden plus for SNC

Article Excerpt

SNC-LAVALIN GROUP INC. $60 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.2 million; Market cap: $9.1 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.1%; TSINetwork Rating: Average; www.snclavalin.com) is a leading Canadian engineering and construction company. SNC designs and builds large-scale public-works projects, such as roads, bridges, transit systems and water-treatment plants. It also builds mines, chemical plants and electrical-power systems. The company is working on projects in over 100 countries, but it gets about 55% of its revenue from Canada. Concession projects, such as roads and airports, are a growing part of SNC’s business. (Concessions are rights granted by governments to run public facilities.) Right now, concessions account for about 15% of SNC’s earnings. 407 is an underappreciated asset SNC’s biggest concession project is the 407 toll highway, just north of Toronto. Based on the recent sale of a 10% stake in 407 by the highway’s main shareholder, Ferrovial S.A. of Spain, SNC’s 16.77% stake…

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