Still more upside to ATS Corp, says Stifel

It’s been an amazing run over the past two-plus years for ATS Corp (ATS Corp Stock Quote, Charts, News, Analysts, Financials TSX:ATS), but investors can expect even more upside from current levels. That’s according to Stifel GMP analyst Justin Keywood, who delivered a flash note to clients on the company on Tuesday and reiterated a “Buy” rating on the stock.

Based in Cambridge, Ontario, ATS Corp is an automated solutions provider for companies in markets such as life sciences, food & beverage, transportation, consumer products and energy. Last week, the company closed a US$282.9 million IPO to list on the NYSE, selling 6.9 million shares including 900,000 in over-allotment at a price of US$41 per share. The company said it will use the proceeds to fund strategic opportunities including acquisitions and to pay down amounts drawn on its $750.0 million revolving senior secured line of credit.

ATS also announced last week the adoption of a shareholder rights plan, which the company said is aimed at treating shareholders fairly in the event of a takeover bid, including the accumulation of more than 20 per cent ownership by another party. The plan gives a right to each common share other than that of an Acquiring Person to, upon the occurrence of a Flip In Event (defined as more than 20 per cent ownership), acquire six common shares at a price equal to 50 per cent of the market price.

ATS said in a statement that the Rights Plan is not being adopted in response to any specific proposal nor is the company aware of any pending or threatened take-over bids.

“The Rights Plan has been adopted to ensure, to the extent possible, that all shareholders of the Company are treated fairly in connection with any takeover bid for the Company and to protect against ‘creeping bids,’ which involve the accumulation of more than 20 per cent of the Company’s common shares through purchases exempt from applicable take-over bid rules,” ATS said in a press release.

Commenting on the move, Keywood said the Rights Plan will act as a “poisoned pill” to deter takeovers at unfavourable prices and to prevent investor activism.

“Although, the rights plan could highlight take-over potential for ATS, our thesis is largely unchanged,” Keywood wrote.

With his “Buy” rating, Keywood also maintained a one-year target price on ATS of $75 per share, which at press time represented a projected return of 23 per cent. On valuation, Keywood estimated ATS to be currently trading at 14x forward EBITDA versus its peers at about 15x.