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Cematrix is still undervalued, Bob McWhirter says

Cematrix
Cematrix
Bob McWhirter

Looking for a good back-to-work play for the post-COVID-19 economy? With its business expected to double in 2020 despite the economic contraction, portfolio manager Robert McWhirter says concrete company Cematrix (Cematrix Stock Quote, Chart, News TSXV:CVX) is where you want to be.

“The company makes fluffy concrete, so if you take normal concrete and you take out the sand as well as the gravel and you add air it basically allows you to end up using this as a base for road beds and it also has insulating abilities,” said McWhirter of Selective Asset Management on BNN Bloomberg last Friday.

“The real key is that sales in 2019 were $22.6 million. Sales are expected to double this year to approximately $45 million on guidance and the company is expecting that they’ll earn $6 to $7 million worth of EBITDA.”

“When you look at the combined enterprise value the company it’s roughly $52 million, so the stock is trading at approximately 7x enterprise value to EBITDA which is attractive,” McWhirter said.

Last week, Cematrix closed on an over-subscribed financing round for $5.5 million, where the company had originally hoped to raise $3 million —a testament to the faith investors have in Cematrix’s prospects.

The rise in share price in recent months is another good sign, where the stock has more than doubled over the past eight months.

The company reports no interruption in its current projects including those of its subsidiaries Cematrix (Canada), MixOnSire USA and Pacific International Grout, all of which are proceeding despite the COVID-19 crisis.

All told, the company has about $20 million in projects ready to begin by the end of the second quarter

“At Cematrix, we do consider ourselves very fortunate to be healthy, to continue to be considered an essential business and to continue to be able to satisfy the needs of our customers,” said Jeff Kendrick, President and CEO, in a press release in early April.

The future is even brighter, says McWhirter, who estimates CVX’s backlog at three times last year’s sales, while the combined book of business the company is currently bidding on is 12 times last year’s sales.

“That’s why I participated in the latest financing and we think there’s still good opportunity,” McWhirter said. “A lot of it is involved in infrastructure and you’ve seen activity here in Canada where people are jumping up and down saying to the federal government that it set money aside about a year ago and they need to get off the pot and spend it. And there’s a whole bunch of projects in Ontario for bridge abutments — 95 different projects, each one’s a million and a half bucks. That in itself would give Cematrix lots of opportunity.”

Cematrix’s share price has made huge strides over the past six months, climbing from the $0.20 range to now with the recent spike up to the high $0.40’s. McWhirter says there’s still more to come.

“We think that there’s an easy upside to at least 60 cents, if not beyond,” McWhirter said.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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