Pembina Pipeline, SNC Lavalin & Crescent Point Energy: 3 value stocks on investors’ radar

Summary

  • Stocks of Pembina Pipeline (TSX: PPL), Crescent Point Energy (TSX: CPG) and SNC Lavalin (TSX: SNC) have recovered well since their March lows.
  • Pembina stocks have a high dividend yield of 8.05 per cent and ranks among the most actively traded companies on the TSX.
  • In the last six months, Crescent stocks have surged by 96.6 per cent while SNC stocks are up by 17 per cent.

Canadian markets reacted positively on Monday, buoyed by the news of COVID-19 vaccines and a flurry of multimillion-dollar merger and acquisition deals. As investors scouted for income-generating shares, three stocks stood out – Pembina Pipeline (TSX: PPL), Crescent Point Energy (TSX: CPG) and SNC Lavalin (TSX: SNC). All these three stocks have recovered well since their March lows spawned by the pandemic-induced downturn. Traders, trying to predict market moves, seem to be invested in these value stocks for a range of reasons. To understand why these three stocks piqued investors’ attention, let us look at the detailed analysis for each of them:

Pembina Pipeline Corporation (TSX: PPL)

PPL Stock Price (current): C$ 31.31

Calgary-based Pembina Pipeline is a North American energy transportation and midstream service provider. The energy firm operates integrated pipelines that carry crude oil, natural gas and NGL from Western Canada.

Pembina stocks are down nearly 35 per cent year-to-date (YTD). On March 19, the stock slumped to its lowest point in a decade during the pandemic-led market crash. Since then, it has bounced back by 89 per cent.

Pembina stocks have a high dividend yield of 8.05 per cent. It is among the most actively traded companies on the Toronto Stock Exchange in the last 10 days. Its current market capitalization is C$ 17.2 billion.

The company’s business was impacted by low crude prices and the COVID pandemic, which reflected in its latest second quarter 2020 financial results. The revenue slumped to C$ 1.2 billion from C$ 1.8 billion in Q2 2019. Earnings of C$ 253 million in the second quarter represented a 62 per cent year-over-year (YoY) decrease. However, Pembina’s EBITDA grew three per cent YoY to stand at C$ 789 million. It ended the quarter with C$ 2.8 billion cash and borrowing capacity.

Following the downturn in energy industry caused by the pandemic, Pembina deferred its project expansion plans, which led to a reduction 2020 capital spending by C$ 900 million to $1.1 billion.

Pembina has BBB credit rating (based on Standard and Poor's methodology and adjustment). The company entered a new C$ 800 million unsecured revolving credit facility, that increased its revolving credit facility to C$ 3.3 billion.

The company will release its third quarter 2020 results on November 6.

Crescent Point Energy (TSX: CPG)

CPG Stock Price (current): C$ 1.77

This North American oil producer is reeling under the pandemic, its scrips declining by over 69 per cent YTD. In its second quarter results, the company’s adjusted funds flow totaled C$ 109 million and net debt reduced by over C$ 450 million to approximately C$ 2.3 billion. Cash and unutilized credit capacity stood at C$ 2.4 billion as the end of the quarter with no near-term maturities. It announced a quarterly dividend of C$ 0.0025 (payable on October 1, 2020).

Following the volatile oil prices and low demand due to the pandemic, Crescent Point reduced its capital expenditures by >40 per cent. The company raised its annual average production forecast between 119,000 to 121,000 barrels of oil equivalent per day.

In the last six months, the Crescent stocks have surged by 96.6 per cent. Crescent Point’s current market valuation is C$ 937 million. The energy firm has 0.56 per cent dividend yield.

SNC-Lavalin Group Inc (TSX: SNC)

SNC Stock Price (current): C$ 23.09

This industrial share is currently on the list of TSX’s undervalued stocks, which are stocks with low price-to-earnings (P/E) ratios. The scrips are currently down nearly 23 per cent. However, SNC stocks climbed 17 per cent in the last six months and are up 2.4 per cent in three months.

SNC-Lavalin stocks trended this week after the news of William L. Young being appointed as the new chairman emerged. Last month, the company announced private offering of C$ 300 million of unsecured debentures.

In the second quarter 2020 results, SNC-Lavalin posted net loss of C$ 111.6 million, as compared to net loss of C$ 2118.3 million in Q2 2019. The company generated C$ 129.8 million net cash operating activities in the latest quarter. It announced quarterly dividends of C$ 0.02.

SNC-Lavalin Financial Highlights - 2nd Quarter Results (in millions of CA$)

(Source: SNC-Lavalin)

SNC-Lavalin is a project management firm offering engineering, financial and operations solutions. It has clients across industries such as infrastructure, nuclear etc.

As per data on the TSX, the company has a current P/E ratio of 1.8, price-to-book ratio of 1.18 and price-to-cash flow ratio is 10.10. Its current return on einquity stands at over 100 per cent, while return on assets is 19.41 per cent.

The company has dividend yield of 0.35 per cent. Its current market capitalization is C$ 4 billion.

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