SNC-Lavalin: despite concerns, analysts remain confident

SNC-Lavalin: malgré des préoccupations, les analystes demeurent confiants

MONTREAL — in The aftermath of a difficult day where SNC-Lavalin has received a slap on the part of federal prosecutors so she tries to put aside the criminal charges that weigh on it from 2015, the engineering firm retained Thursday the confidence of analysts.

Some have even estimated that the downward spiral of the action that occurred Wednesday on the Toronto stock Exchange could represent an interesting opportunity for patient investors.

For the moment, SNC-Lavalin will not be able to negotiate with the public prosecution Service of Canada (DSPPC) in order to obtain a repair agreement, which is possible since recently thanks to a federal law. These agreements generally provide for the payment of a fine and a series of conditions to be met in exchange for an abandonment of the judicial proceedings.

This news has plunged the share of the multinational company, which has abandoned Wednesday 6,99 $, or 13.48 per percent, to close at 44,86 $. The title did not finish under the bar of $ 45 since the beginning of 2016.

“While we consider this element as negative, we believe that the market reaction has been exaggerated at this level,” observed the analyst Mona Nazir of Laurentian Bank securities, in a note, recalling that approximately 70 percent of the turnover from SNC-Lavalin was generated outside of Canada.

Thursday’s session proved to be more stable, since the action has not retired as 50 cents, or 1,11 percent, closing at 44,36 $.

In the long term?

For the moment, most of the analysts, ensuring the monitoring of SNC-Lavalin have lowered their price target for the action, expressing in passing some of the concerns, without, however, modifying their recommendation on the title.

“Despite this challenge and the uncertainty caused to the stakeholders related to SNC-Lavalin, we continue to believe that the company will reach agreement with the DSPPC and that patient investors will be rewarded”, wrote in a report, Frederic Bastien, Raymond James.

In his opinion, it is possible that the federal government does not want to settle the case as quickly as the law allows to conclude the agreements of repair is not in force only since mid-September.

For his part, Chris Murray of Altacorp Capital, held that federal prosecutors were not going to negotiate with SNC-Lavalin “for the moment”, which, in the opinion of the analyst, is an important element.

“We wonder if this is part of a strategy in which the DSPPC tries to have more influence in the negotiation, to report his or her independence or to take more time to evaluate a new policy recently entered into force”, he felt, in a note sent to its clients.

For his part, Benoit Poirier, Desjardins capital Markets reiterated its buy recommendation, arguing that the current evaluation of the title of SNC-Lavalin was too attractive to be ignored.

Possible Sanctions

According to the royal Canadian mounted police (RCMP), the firm would have paid $ 47.7 million to holders of public office in Libya for the purpose of influencing government decisions. In addition, two divisions would have private a variety of local organizations of about $129.8 million.

The multinational company, who says that he has nothing to hide, has pleaded not guilty. The folder must come back before the court on the 29th October.

Meanwhile, thanks to an agreement reached in 2015 with the Trudeau government, the engineering firm may, however, continue to bid on federal contracts until the conclusion of judicial proceedings.

However, if SNC-Lavalin was found guilty, she could be dismissed tenders federal for a period that could stretch up to 10 years.

If this scenario were to materialize, Jacob Bout, CIBC world Markets, suggested that it would be possible for the firm in quebec to bid through subsidiary companies established in the outside, like Atkins, whose head office is located in the United Kingdom.

The analyst recognizes, however, that it is difficult to confirm this possibility, given that the parent company is facing charges.

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