WSP Global Inc
WSP held an Investor Day in Toronto on Wednesday which we attended. While WSP did not make any official changes to its 2017 guidance, the company hinted at strong organic growth in several regions, and that it is well on track to achieve 2018 targets. Focus will continue to be on M&A, as WSP looks to consolidate further. While we applaud WSP’s diversification strategy, we still struggle with valuation. We maintain our Neutral rating and $54 price target.
Six Key Takeaways from WSP’s 2017 Investor Day include:
(1) Bigger Is Better – The Cross Pollination Advantage: A common theme during the Investor Day was WSP’s focus on increasing size, leading to higher win rates, larger project sizes and deepening relationships with customers. For example, WSP/Mouchel beat competition to secure the largest share (23%) of Highways England’s recent $285MM Regional Investment Program after coming together. Within the Nordics, WSP is now the largest international player, and post the potential Opus acquisition, WSP’s will also have a leading position in New Zealand. While WSP has a strong presence in the US transportation market (via PB), the company admits that it is subscale in other end-markets such as Water and Environment.
(2) No change To 2017 Guidance But Hinting At Higher Organic Growth In Certain Regions: WSP left its 2017 guidance unchanged (net revenues of $5Bn-$5.3Bn; EBITDA of $510MM-$560MM). That said, the company hinted at very strong organic growth (high single digits) for Australia/New Zealand and the Nordics. Within Canada, the turnaround looks to be effective. While 2017 is expected to be negative to flat, WSP expects a more positive 2018 for Canada. The number of offices and employees are down to 153 (from 180 Y/Y)and 7,900 (from 8,300 Y/Y).