DRX: $55M in New Contracts Signed
What you need to know:• ADF announced $55M in new contracts across Quebec and the U.S. Midwest, including additional work for its U.S. pharmaceutical client.
• Today’s announcement gives us further confidence that ADF can continue to grow the backlog as the infrastructure spending cycle prolongs.
• ADF trades at 3.5x EBITDA, the lowest multiple we have seen since covering the stock and a major discount to its peers and precedent transactions.
This morning, ADF Group (DRX:TSX, ADFJF:OTC) announced the signing of a series of new orders in Quebec and the U.S. Midwest totalling $55M. We remain highly bullish on ADF as it has now proven that it can continue to grow the backlog given the election headwind and that EV/EBITDA is at cyclical lows. We are maintaining our BUY rating and $23.00/share target price on ADF Group.
The $55M included another commercial agreement for additional work with its pharmaceutical client in the U.S. Midwest which ADF announced phases 1 and 2 for in 2023. The work involves the construction of the steel structure of an industrial-type building as part of the second phase. Fabrication work will begin in the coming months and will be carried out for approximately eight months.
The series of new orders also included structural steel fabrication contracts in various regions of Quebec, all in the industrial sector. ADF’s backlog stood at $402M as of July 31st (including some of the new orders announced today).
ADF Group is engaged in the design and engineering of connections, fabrication and installation of complex steel superstructures, heavy steel built-ups, as well as architectural and miscellaneous metalwork for the five principal segments of the non-residential construction market namely, office towers and high-rises, commercial and recreational buildings, airport facilities, industrial complexes and nuclear facilities, and transport infrastructures.
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