SHAWCOR LTD. $29(Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 70.6 million; Market cap: $2.0 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.1%; TSINetwork Rating: Average; www.shawcor.com) makes sealants and coatings that protect oil and natural gas pipelines from corrosion. It also makes industrial equipment, such as electrical wire and protective sheaths.
The company’s expertise and strong reputation are helping it win new contracts. For example, it recently won a $400-million U.S. deal to provide coatings and other services to a natural gas pipeline in the Ichthys gas field off the northern coast of Australia.
The company will also provide coatings for a 300-kilometre pipeline that pumps natural gas from fields off the coast of western Australia to the Wheatstone liquefied natural gas facility. This contract is worth $170 million U.S. In addition, Shaw- Cor recently announced a $45 million U.S. deal to coat a pipeline in the Arabian Gulf.
In all, these deals are worth $615 million U.S. To put this figure in context, ShawCor’s revenue was $271.5 million (Canadian) in the three months ended September 30, 2011. That’s down 4.1% from $283.0 million a year earlier. Lower demand for pipeline-coating services in Asia and Latin America offset strong sales in North America.
ShawCor lost $3.1 million, or $0.04 a share, in the quarter. That’s mainly because it wrote off $9.6 million that it was owed due to a pricing dispute with a client in Brazil. The company also realized a $6.5-million foreign exchange loss. A year earlier, ShawCor earned $32.1 million, or $0.45 a share.
The stock trades at a high 34.1 times the $0.85 a share that ShawCor will probably earn in 2011. However, the company’s earnings should recover to $2.02 a share in 2012. The stock trades at a more reasonable 14.4 times that figure.
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