Q: I am not concerned about the pullback in share prices today as I purchased this one just after the start of the pandemic. But........I invested in Shawcor with the thought that they did pipeline coatings and would be a valuable part of the continuing use of pipelines to transport oil and gas. They have decided to divest themselves of this volatile 25% of their business. Is their remaining 75% positioned to prosper into the future? Thank you Gordo
5i Research Answer:
Yes and no. The goal was to improve 'full cycle margins' and reduce inherent business volatility (from very large pipeline contracts that come and go and are not always repeatable). But, as a 'materials' company MATR does now still have economic sensisitive, in business segments it operates in, such as autos. The debt reduction is a big positive and may improve its valuation (only 6X earnings now) but we think it is a bit too early to call this one as to whether it was the 'right' move. Note also the deal has yet to close, and MATR gets the profits from it until it does.