Cematrix is an infrastructure stock to own, Bob McWhirter says

By now the market has identified tonnes of technology-based names that have gotten a boost from COVID-19-related impacts on society and the economy, but one you may not have been watching is cement tech company Cematrix (Cematrix Stock Quote, Chart, News, Analysts, Financials TSXV:CVX), who according to portfolio manager Robert McWhirter has a huge opportunity upcoming in the United States.

“Cematrix makes puffy cement, so if you take a normal bag of concrete, take out the sand, take out the gravel and inject air into the mixture you end up with puffy cement that then gives an insulating potential and you can use it as roadbeds as well as bridge abutments,” says McWhirter, president of Selective Asset Management, who spoke on BNN Bloomberg on Friday.

McWhirter pointed to the US administration’s plans to increase infrastructure spending as a potential tailwind for Cematrix, which has sped up its pace in securing contracts.

On Monday, Calgary-based Cematrix announced $9.9 million in new projects. That puts the company’s backlog at $89.1 million, divided into $10.6 million in contracts and $78.5 million in contracts in process.

And soon, a proposed infrastructure spend by the US federal government would represent another source of potential business for Cematrix.

Last year, Democrats in the US passed a US$1.5-trillion infrastructure bill through the House but had it defeated in the then-Republican-led Senate. But with the clear passage recently of a US$1.9-trillion COVID-19 relief bill, the ground seems to be laid for funding a wide-scale upgrade in what many have called America’s neglect of its transit, utilities, roads and bridges. President Biden is key, as he had a $2-trillion infrastructure and clean energy stimulus as central to his election campaign last year.

McWhirter said, “’Joe Biden’ are the best words that Cematrix has ever heard as far as his successful election as president because Biden said, ‘You know what? That other guy talked about it but we’re actually going to do it as far as spending money on increased infrastructure, particularly roads and bridges. That should end up being very positive for Cematrix.”

Cematrix had a great 2020, going from $0.34 per share to $0.72 by the end of the year. The stock has been up and down so far in 2021, however.

McWhirter said the company could be doing better on the PR end as far as alerting investors to the company’s successes, both past, present and yet to come.

“The challenge is Cematrix has great numbers but they don’t frame them properly,” McWhirter said. “As an example, their backlog has grown 100 per cent year-over-year to approximately $100 million. That’s pretty good. Their sales relative to that backlog effectively are about $12 million bucks on a trailing basis … and the book of business that they’re bidding on is again twice that of their current backlog at over a quarter billion dollars.”

“This is also a COVID play because once COVID recedes into the background, if you expect 100 million people to be jabbed in the US, that then should get things flowing and the COVID concerns in the construction industry should fall away, and Biden’s money being thrown at the industry should help,” McWhirter said. “We think there’s a great opportunity for Cematrix to end up doing well over the coming 12 months.”

This past December, Cematrix announced a record US$23.5-million award in the form of a tunnel project.

“This is an incredible award for the CEMATRIX Group of Companies and a testament to the credibility and quality of our project team and our advanced technologies,” stated Jeff Kendrick, CEMATRIX President and CEO, in a press release. “The award is also a testament to the increased utilization of cellular concrete in the marketplace vs legacy solutions. We expect the number of awards and size of our projects to hit new levels, especially as more and more engineers and specifiers choose our industry leading cellular concrete as their product of choice.”

McWhirter said Cematrix has a potential green tech angle to it as well.

“Because they’re their product is puffy it takes less overall concrete per cubic yard of material delivered, so there’s a saving strictly on using less concrete in their work as well so they end up reducing carbon emissions because of their puffy technology,” McWhirter said.

Cematrix last reported earnings in early November, delivering third quarter revenues of $10.9 million, up from $7.6 million a year earlier, and EBITDA of $1.9 million, up from $894,735 a year earlier.

Even with the record top and bottom numbers, management said the company was still dealing with significant project delays related to COVID-19, with Canadian sales down more than 50 per cent year-to-date compared to the previous year. At the same time, the company’s the newly acquired US subsidiaries PIGCO and MixOnSite USA were performing above expectations, Cematrix said.