Bird Construction – Poor Performance and Not COVID Related

Bird Construction is a leading construction company in Canada. It operates from coast-to-coast and serves all of Canada’s major markets. The company has offices in major Canadian cities like St. John’s, Halifax, Saint John, Wabush, Montreal, Ottawa, Toronto, Winnipeg, Calgary, Edmonton, and Vancouver. 

Bird Construction has 100 years of extensive experience in the construction field and caters to clients in a wide range of industries ranging from commercial, institutional, retail, and multi-tenant residential, to industrial, mining, water, energy, and civil. Bird’s operations are evenly divided between the heavy industrial market and ICI (industrial, commercial and institutional) sector.

The company has relevant experience in the construction of hospitals, education facilities, schools, prisons, government buildings, etc. in the institutional sector and malls, offices, hotels, condominiums, etc. in the commercial sector.

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Key Investment Data

 

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Revenue Growth & Market Exposure

Given its reputation as a premier Canadian builder, Bird offers a diversified suite of construction services, end-markets, and geographies. The company is well-respected in the construction industry for its strong operational capabilities and has a track record of successfully delivering challenging projects across the country.

Bird provides comprehensive construction services ranging from new construction for industrial, commercial, and institutional markets; to heavy civil construction and contract surface mining sectors; as well as vertical infrastructure including, electrical, mechanical, and specialty trades. It is highly diversified by industries and geographies. 

Bird Construction partnered with Stuart Olson to further broaden its scope and service offering for clients in the commercial, institutional, retail, multi-tenant residential, industrial, mining, water and wastewater, energy, renewables, nuclear, and civil sectors. Its partnership with Stack Modular also expands Bird’s nationwide reach with expertise and resources.

The company also completed three partnerships in 2019- Stanton Territorial Hospital Renewal, Moncton Downtown Event Center, and East Rail Maintenance Facility. Bird Construction’s local strength, expertise, and relationships have enabled it to meet its clients’ needs in more effective ways over the last century.

Construction projects are essential for a country’s development and Bird’s reputation as a leading construction firm in Canada positions it well to gain from increasing investments in Canadian infrastructure. The company experienced temporary project shutdowns and reduced productivity on project sites as a result of the pandemic. But it continued to make good progress on the Stuart Olson integration during the quarter which is expected to create a strong platform for growth. Bird Construction’s revenues have grown at a rate of more than 4% CAGR in the last decade.

Dividends

Bird has demonstrated a track record of consistent growth and profitability. It has generated an annual profit for each consecutive year in the last two decades and has also paid monthly dividends uniformly. The company has an impressive high annual yield of 5.7% and a payout ratio of 70% currently. It last reduced its monthly dividend by nearly 50% in 2017.

Bird Construction usually enters into contracts involving a combination of a fixed price, unit price, design-build, public-private partnership, cost reimbursable clause which grants sufficient safety cushion to its cash flows. Its diversified expertise in the field of construction and designing acts as a strong differentiator for the company.

Bird continues to invest in key business development relationships and diversification of operations and earnings base. Its partnership with Stuart Olson has further created a new Canadian construction industry leader with significant financial synergies. The company is also looking for opportunities to expand commercial and institutional expertise into additional markets in Canada.

With Bird Construction’s position as a leading design firm in Canada, it stands a good chance to work with large clients on innovative projects. Growing demand for environmental services and infrastructure will act as a strong tailwind for the company.

Since the company operates in the construction industry, it is impacted by recessions and economic downturns. It is also very susceptible to fluctuations in commodity prices. However, a strong backlog (11% higher YoY) and a well-balanced portfolio of low to medium risk projects grants visibility to cash flows. Bird Construction is expecting $25 million in run-rate cost synergies by the end of 2021.

Bird Construction (BDT) historical yield
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Competition

The general contracting industry is highly competitive with low barriers to entry. Bird Construction competes with WSP Global, SNC-Lavalin, Stantec, Aecon Group, etc. SNC-Lavalin is Canada’s largest engineering and construction company by revenue while Stantec is a top-tier global design and consulting firm ranking third in North America. To combat competition, Bird Construction has also developed expertise in the construction of vertical elements and management of transportation-related projects over the years.

Bottom Line

The COVID-19 pandemic has definitely added uncertainty to the construction industry. However, Bird is well-positioned to capitalize on the growth of Canadian infrastructure and market recovery. It should continue its growth on the back of major developments and increasing infrastructure spending.

Bird’s focus on diversification has unveiled several opportunities for the company to expand either organically or through acquisitions. It stands a good chance to benefit from its proven capabilities to develop clients and work programs more broadly. A diversified business model and balance sheet strength should continue to support dividends in the future.

Can the execution on opportunities turn investor sentiment around?

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Bird Construction (BDT) historical PE
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DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.