An SNC-Lavalin Group Inc. shareholder says the company has a blueprint to follow for a potential turnaround: Home Capital Group Inc.
“Look at the Home Capital playbook,” David Taylor, president and chief investment officer at Taylor Asset Management – which has owned “a significant position" in SNC for about a year and also lists Home Capital as one of “its largest positions” – said in an interview with BNN Bloomberg on Wednesday.
“Bring back confidence to the name and the stock can recover.”
SNC shares (SNC.TO) have dropped significantly since late January, plunging from $48.50 as of Jan. 25’s close to its lowest close of the year at $16.36 on Tuesday amid concerns over the company’s management, fraud and corruption charges, and its place in alleged interference between the Prime Minister’s Office and former attorney general Jody Wilson-Raybould.
Home Capital shares (HCG.TO), meanwhile, have rallied nearly 350 per cent since its May 2017 low of $6.68, which came amid regulator concerns over its disclosures.
Taylor says there are parallels to be found in the underlying businesses behind the two troubled companies.
“There are so many similarities,” Taylor said. “With Home [Capital] there was a complete lack of confidence. People sold irrespective of valuation. The business wasn’t broken… The assets, even the book of mortgages that they were selling at the darkest days, they were still getting 99 cents on the dollar.”
“SNC’s the same thing. A complete lack of confidence, but the underlying assets – whether it’s the remaining position in [Highway] 407 or their engineering service business – there’s still underlying assets.”
Taylor renewed his call for SNC to undergo a drastic management overhaul in hopes that the share price can recover to what he believes is a $35-per-share valuation.
“There’s a complete lack of confidence, and that’s why you fire the CFO, you get rid of the investor relations guy, you change the board, you make wholesale changes.”
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