Infrastructure plays have been much-discussed investments since government stimulus dollars began to roll out. After all, who needs a rebound in consumer spending when the real money is being spent on new bridges, highways and buildings?
Bird Construction Income Fund has been on the receiving end of a lot of this attention. The units have surged nearly 76 per cent since the start of the year, driving down the yield to just 5.1 per cent. The units are now just 22 per cent below their record high, in mid-2008.
Michael Tupholme, an analyst at TD Securities, expects more good times ahead. He raised his price target to $39 from $34 and maintained a "buy" recommendation on Bird Construction.
"Over the last several months, Bird has announced four new contracts totalling approximately $252-million that are expected to be added to the company's Q3/09 backlog," Mr. Tupholme said in a note.
Specifically, he pointed to a $35-million contract to renovate Osgoode Hall Law School. As well, Bird will construct an industrial building for Potash Corporation of Saskatchewan Inc. and help build two schools in New Brunswick - projects that total $132-million. And fourth, Bird won a $84.7-million contract to build a a new maintenance hangar at CFB Trenton, in Ontario.
"Although we have yet to see strong evidence of improving demand within Bird's industrial or retail and commercial end markets, the healthy level of announced new contract awards this quarter (the majority of which relate to the institutional market) gives us comfort that revenue growth is likely to be somewhat stronger than we had previously been anticipating," the analyst said.
He raised his revenue forecast for 2009 to $919-million from $908.2-million previously. For 2010, he raised his forecast to $1038.5-million from $958.2-million - an 8 per cent bump.