SHAWCOR LTD. $43 (Toronto symbol SCL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 59.6 million; Market cap: $2.6 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.2%; TSINetwork Rating: Average; www.shawcor.com) gets 90% of its revenue by making sealants and coatings that keep oil and gas pipelines from rusting. The remaining 10% comes from manufacturing industrial products, such as electrical wire and protective sheaths.
The company continues to benefit from recent acquisitions that have increased its North American manufacturing capacity. As well, demand for its pipeline-coating services continues to rise in Asia, Latin America and Europe. Asia now supplies 39% of ShawCor’s revenue, followed by North America (38%), Europe (15%) and Latin America (8%).
In the three months ended June 30, 2013, ShawCor’s revenue jumped 39.9%, to a record $457.3 million from $326.9 million a year earlier. That’s mainly because the company paid $30 million for the 49% of Socotherm LaBarge LLC that it did not already own. Texas-based Socotherm coats and insulates pipelines for deepwater oil and gas projects. Its clients operate in the Gulf of Mexico and off Africa’s west coast.
Earnings soared 152.2%, to $53.9 million, or $0.90 a share. A year earlier, ShawCor earned $21.4 million, or $0.30.
The company ended the quarter with an order backlog of $778 million, up 4% from a year ago.
ShawCor is now bidding on over $800 million of new contracts. Its strong reputation should also help it win new pipeline-coating deals if regulators approve new liquefied natural gas projects on B.C.’s west coast.
ShawCor’s long-term debt of $366.2 million is a low 14% of its market cap. It also holds cash and investments of $97.2 million, or $1.63 a share.
The stock trades at a low 10.6 times ShawCor’s likely 2013 earnings of $4.06 a share. The $0.50 dividend yields 1.2%.
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