Gabriel

Hello Dazel, Thanks Dazel and everyone for your posts. I am using this source that compiles EBIT of engineering and construction firms. Engineering firms usually trade at a higher multiple so we are conservative here. The EBIT multiple is 20.84 (reference below). EBIT of engineering services is projected at 650m in 2022. so the EV here is 13.55B for this division only. Add Capital which you say should not be sold and you have another 2.5B for the 407 (based on previous 10.01% sale and some) and 0.4 B for the rest (per FBN financials) minus 1B debt and you get 15.45B / 175.5m shares or 88$ per share or 37 cents on the dollar. I added 31,500 shares today. We are going to 40$ when they announce the buyback in September. Why and how do i know? Because they are as smart as you and me, and it is the best thing to do when they sell resources. Source: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/vebitda.html 1. NYU professor credible source + the Excel sheet is provided with all the sheets for all engineering companies - Reliable. 2. Data provided (link top right to all disaggregated data including that of SNC Lavalin 3. Large and representative sample size - You can do your own verification. 4. Conservative considering multiples are lower for construction firms than engineering firms and they are bundled together here - Better.

Pelagic: I closed the XOM 300 Jan 2022 puts @ 35$ for 0.30$. I am keeping the naked puts for jan 2023 at 35$. Thanks. I have now to decide on a BCE calendar spread. You are welcome to comment. Long 300 calls Jan 2023 @ 50$ and short 300 calls June 11 @ 60$ for a net 9.27109 CAD debit per share. (Paid close to no time value for the long call on May 26). Ex-Dividend date is June 15. The short call will most likely be exercised and I will have to pay the dividend. So to optimize, I need to roll it further in time with sufficient time value (and avoid being exercised on the short call for the dividend), and instead exercise my Long call on June 10 to collect the 0.875 CAD dividend and reduce my cost price to 50 + 8.396$ + credit from rolling the 60$ call one or to weeks. How would you optimize this? I have the funds. Thank you. Gabriel

Very appreciated. Yes on margin, not cash secured, but blocking 2% only today of available margin. I meant should XOM exceptionally fall to 35$, I would sell covered calls at the same strike price and collect the dividends to say that the “worse” outcome is not “so bad”. The key decision metric you raise is the return and better use of this portion of the margin elsewhere, but the risk of being exercised increases in an expensive market. The better decision may possibly be to keep even this portion of the margin unused for other opportunities. Thank you fir a very clear answer. Gabriel

On the Media side, it is definitely a positive based on : 1) the price you're paying; 2) the right Captain, David Zalav, 3) the integration of key winner brands with bundling potential, 4) a huge IP variety that Netflix and Disney do not have. On the 5G side, it is also definitely a positive based on: 1) the price you're paying, 2) the huge potential of 5G. Most everything will be ran by 5G, from robots learning how to flip an egg to the driverless car, the robot dentist, your food order and delivery,.. It reduces the debt load, albeit rates might turn negative too. Debt is depreciated in an inflationary environment. Good comments above. Thank you. Gabriel

The EBITDA of XOM is projected at about 43 to 48B this and the next few years with a net debt of about 60B. Question: I sold lots of 35$ naked put contracts (550) in March 2020 expiring Jan 2022 and Jan 2023 for respectively 7-10$ and 12$ and converted them at 1.4066 CAD/USD. I closed about half the position a few months ago. Those left (300 + 50 contracts) are now worth about 0.40$ (Jan 22) and 2.5$ (Jan 23). I am not convinced paying 25K is worth it at this ridiculously low strike price. I am thinking i could roll them or just buy them and sell covered calls. Any thoughts welcome. Thank you. Gabriel

EV/EBIT ratios of engineering firms - NYU study dated Jan 21 EBIT of Engineering Services in 2020 was 571M - Data per Q and links below, puts the value of Engineering Services at 11.3B or 64$ per share. ADD 12-16$ PER SHARE FOR CAPITAL = 80$ PER SHARE ADD 30% FOR APPRECIATION IN NEXT 2-3 YEARS PRE/POST PANDEMIC + BIDEN INFRA PLAN EFFECT and remove 5$ for debt. AVERAGE EV/EBIT of 61 MAJOR engineering services AND construction firms (usually lower ratios) is 19.80 on average per study conducted at NYU. Source: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/vebitda.html LINKS TOP LEFT PROVIDE ALL THE DATA INCLUDING THOSE OF SNC-LAVALIN. Are you smelling what I am smelling ? Q4 2020: Slide 18 shows EBIT = 153.1M https://www.snclavalin.com/~/media/Files/S/SNC-Lavalin/investor-briefcase/en/2020/q4-2020-conference-call-presentation.pdf Q43 2020: Slide 6 shows EBIT = 142M https://www.snclavalin.com/~/media/Files/S/SNC-Lavalin/investor-briefcase/en/2020/q3-2020-conference-call-presentation.pdf Q2 2020: Slide 19 shows EBIT = 133M https://www.snclavalin.com/~/media/Files/S/SNC-Lavalin/investor-briefcase/en/2020/q2-2020-conference-call-presentation.pdf Q1 2020: Slide 21 shows EBIT = 143M https://www.snclavalin.com/~/media/Files/S/SNC-Lavalin/investor-briefcase/en/2020/conference-call-presentation-q1-2020.pdf

CDPQ holds 35m shares JFL holds 24m shares as of 1/12/2020: https://www.dropbox.com/s/948up0gm0ir1zv5/Jarilowsky.pdf?dl=0 RBC holds 23m shares as of 1/12/2020: https://www.dropbox.com/s/fgb6fy23zler0x5/RBC.pdf?dl=0 CDPQ CEO said lately he likes SNC and is holding. JFL sees a great opportunity. RBC also sees the same per their Q4 2020 note to investors. "We hold several event-driven positions, with a core holding in SNC-Lavalin. While SNC has been a significant detractor from returns over the past two years, it is now more appropriately sized and offers meaningful upside given its depressed current valuation and positive catalysts in 2021." https://www.rbcgam.com/documents/en/fund/rbc-multi-strategy-alpha-fund-qc.PDF

I saw the swaps on SEDI. Maybe hedges against newly granted options. We should receive the annual report this week. Hopefully it says something about dividends and buybacks. A hike to 5 cents per Q and a 200m buyback would make sense to pull us above 35$.

Thank you all for your great comments on this board. I have communicated to IR the need to announce a share buy back during the next shareholder meeting and a few other recommendations, two of which have already been implemented (clarity and sale of resources). I know my thesis was shared, acknowledged and appreciated by top management. I have also virtually met with one main shareholder and they confirmed that they support the idea.

Thanks LC. Absolutely we do not need 7%. All you need is a compounded growth rate above the borrowing rate of 2-3% today and 78 X becomes a theoretical conservative figure. The threshold has been substantially lowered. Toll increases are unconstrained. They are established solely by what the market is willing to pay and elasticity estimates.

This is the 2019 P&L modified to include your proposed IR of 2.14% EBITDA: 1,309 *2019 reported EBITDA Capex: (100) *Ferrovial estimated 100M of capex in 2019 Taxes: (275) *26.5% rate (from Ferrovial) and using 172M as the interest payment (e.g. 8B outstanding debt * 2.14%) Pre-Interest Income: 934M That looks reasonable to me but let me know if you disagree. It's been a while since I sat here modelling cash flows, but from a 934M figure, how do you want to get to the types of 40B, 50B+ valuations you are discussing? Thank you LC. The present value (PV) of 934M increasing by a substantial and solidly grounded growth rate made of : 1) diverted traffic from the increasing congestion on the 401 which has reached capacity, 2) separate and additional growth rate of the GTA population and 3) separate and additional toll increase least as high as inflation (these compound to multiple the numerators of the PV equation); and discounted (at the denominator level) by rates in those very low ranges (2 to 3%) (lesser than the above-compounded growth rate) equate to a larger figure than : 78 years * 934M or 72 Billion. This because the numerator factor is higher than the denominator factor in the summation of the yearly PVi for each year "i". We finally have to remove 8.5B debt and 22% taxes so the net present value is about 50B. OMERS paid 3.25B for 10.01% so they assessed the concession at 32.5B. Now we have lower rates and the effect is substantial per previous posts, just to say the remaining portion of 6.76% is worth north of 2.5B or 14$ per SNC share. Based on the closing price of 27$, Atkins and ex SNC engineering services and they are something let me tell you, and Nuclear Candu are valued at 13$ per share or 2.3B. Atkins was paid 3.5B or so (21$ per share) and has grown since. Plus ex SNC engineering services + Nuclear Candu.

Thank you LC. The revenue on the 407 have been growing at more than 7% year over year since the signing of the concession as a result of the GTA population growth (3 to 4%), the increasing congestion on the alternative 401, deviating an additional congestion-induced traffic from the 401 to the 407, and the increase in tolls (3% or so), all of which compound (all three). There cannot be another alternative highway really at a more competitive cost. The only option to increase capacity is to widen this highway and develop transit systems. As long as the three-component compound rate is above the borrowing rate (now 2-3%), then the value of the 407 is above 50B as shown below. This means your rent is increasing by more than the discount (or borrowing) rate. In other words, the present or discounted value of my next year's rental revenue is higher than this year's rental because it increases by more than the borrowing or discount rate. In addition, even assuming as you do, that interest payments are the same for the remaining 78 years of the concession, then the PV of the concession is above 78 * 575MM or 45B CAD and SNC's share would be above 3B (6,76%) because of the above. However, using the net earnings in 2019 as a basis assumes interest payments are the same for the remaining 79 years (2019 to 2098). The 407ETR debt is about 8B CAD only. So we need to discount before interest payments and then reduce by the debt of 8B. That is the correct way and your valuation doubles. No wonder CPPIB raised its right of first refusal and threw OMERS out. And CINTRA Ferrovial contested in court. Look at Ferrovial's Excel sheet: https://www.ferrovial.com/en/ir-shareholders/share-information/toll-roads-valuation/ As Dazel puts it, this is the best asset in the world. He is right. I lead Independent Engineering teams for major consulting firms to identify lucrative and technically feasible (etc.) infrastructure investments in the world and this one is the crown jewel. My own analysis is on this link (sorry for the typos, done by French assistant but under my supervision) : https://91800060qi.securevdr.com/d-s2656021ce36d48729687d457818a1974 All input data is referenced including dividends received by SNC of 154.3 million in 2018 (when they had 16.67% of the shares).

Jarilowski Fraser added shares recently: https://www.dropbox.com/s/948up0gm0ir1zv5/Jarilowsky.pdf?dl=0

LC, Below are some comparisons and assessments. The first portion of this post compares the market valuation of the 407 stakes of Ferrovial and SNC, and the second portion of the post assesses the value increase of the 407 stake owned by SNC in light of lesser borrowing rates by 407 ETR. FERROVIAL vs SNC valuation of the 407ETR stakes Ferrovial holds 43.23% (ref. 1 below) of the 407ETR for a value of minimally 3.25B * (0.4323/0.101) = 13.91B CAD (9.047 B euros based on reference 2 below and the 3.25B price paid by CPPIB in 2019 for 10.01% of 407ETR). Ferrovial values its stake at 10-12 B - see References 3 and 4, links below. Other 3 main assets are all valued in Reference 4: Download the last file titled "Cintra portfolio valuation and financial models" and go to page 5. The rest is about 2.5B (2017). Most importantly, check slide 7 which assumes borrowing rates for the 407 ETR double what they got in May (1.8% till 2025 and 2.5% for 2030 or so). At 20.55 euros/share, the market assessed value including market capitalization and net debt is 19.66B euros (market attributed equity of the asset + debt). Assuming the 407 is worth 15% more post-pandemic (we found 50-70% below - second portion of this post - if rates are locked 1% lower based on recent refinancing of the 407ETR), then the 407 stake is worth 10.4B euros. With the other assets owned by Ferrovial we get to 13B. SNC however is still a much cheaper deal because even without the 15% "post-pandemic premium", you are still paying Atkins: 27$ - 13$ = 14$ to compare with 21$ per share that SNC paid to acquire Atkins in 2017 (4 years ago) despite its growth and the value of Nuclear Candu and other engineering services unit of ex-SNC. No wonder CINTRA argued to get a stake of our 3.25B deal with the CPIBB for the 10.01% stake. Reference 1: https://www.407etr.com/en/highway/news/news-release/2021/news-release2021-02-11.html Reference 2: https://www.dailyfx.com/francais/eur-cad Reference 3: Click on 407 ETR model and Go to sheet titled "Valuation" and then col. S for 2021. https://www.ferrovial.com/en/ir-shareholders/share-information/toll-roads-valuation/ Reference 4: https://www.ferrovial.com/en/ir-shareholders/share-information/analyst-recommendations/ ___ Value of the 407. Substantially higher with lower borrowing rates by 407ETR https://www.lelezard.com/en/news-19647912.html Press release also available on 407ETR.com under Highway and Press Releases. Revenue in 2019 was 1,505.3 million. OMERS offered 3,250 million for 10.01% and CPPIB raised its ROFR (right of first refusal) and committed to same and settled during Q3 2019. Ferrovial / Cintra wanted in and sued, also based on ROFR but dropped its claim. This puts the value of the 407 at 3,250 / 0.101 = 32,178m which means it was based on a 20 X projected revenue for 2020 of 1,608 million or 6.88% higher than that for 2020. This growth is consistent with the 7% annual growth in revenue of the 407. That was before Covid. Now rates are lower rates (about 2.14% on average versus 3.14% before) so 407ETR is borrowing at lesser rates so its revenue will be higher. Discounted future earnings post-covid are higher in present value terms. Below are two simulations to make the case. Just to show the PV is substantially higher if you lock the rates long term. My calculations show it is about 78% if we assume growth rate of 7% (as before), 1.5B revenue in 2021 and 2.14% average borrowing cost for the next 78 years (not a given :) For those not familar, the present value, i.e. the value today of tolls collected in 10 years is those tolls divided by (1+ DR)^10. If Discount rate (DR) or borrowing cost of 407ETR goes from 3.14% to 2.14%, your present value of the tolls in 10 years is increased by (1.0314/1.0214)^10 or 10.2%. Over the next 78 years, a 1% difference has a devastating effect on the net present value of the tolls. T (n) is tolls, year n; and PV is the present value in 2021. g is the annual growth rate of revenue, 7% over the last 20 years or so as a result of the growth in the GTA Toronto Area, increased congestion on the alternative 401 and fare increase, surely to go higher with inflation roaring. PV = T (2021) + T (2022) / (1+DR)^1 + .. T(2098) / (1 + DR) )^77 PV = T (2021) + T (2021) ( (1+G)/(1+DR) )^1 + ... T(2021) ( ( 1+g)/(1+DR) )^77 ND = Net discount = (1+G)/(1+DR) Multiply PV with ND on the left side and the right side. ND^1 * PV = T (2021) * ND^1 + ... T(2021) ND^78 Substract left sides and right sides of the last two equations to eliminate intermediate values. PV (ND -1 ) = T (2021) * ( ND^78 - 1) So PV = T (2021) * ( ND^78-1) / (ND -1) Application : With a borrowing rate of 3.14% T (2021) = 1.5 B g = 7% DR = 3.14% see reference below - borrowing rate as of March 2019 before sale of 10.01% stake ND = (1+G)/(1+DR) = 1.07 / 1.0314 = 1.0374 PV (before Covid lower rates) = 1.5B (1.0374^78-1)/(1.0374-1) = 663 Billion Our 10.01% was theoretically value at 66 Billion based on a growth rate of 7% year over year). Sure we need to account for lane capacity versus flow during rush hour because 3% of the increase in revenue is due to increase in toll prices and 3.5% due to traffic increase (1.035^78 = 14.6X means we would be above capacity of 2,000 vehicles per lane per hour if traffic today is higher than 137 vehicles per lane per hour during rush hours. Means we would need to pay for widening at some point (or increase fares even more to reduce demand). With a borrowing rate of 2.14% T (2021) = 1.5 B g = 7% DR = 2.14% see reference below - borrowing rate as of March 2019 before sale of 10.01% stake ND = (1+G)/(1+DR) = 1.07 / 1.0214 = 1.0476 PV (after Covid lower rates) = 1.5B (1.0476^78-1)/(1.0476-1) = 1,185 Billion 1,185 B / 663 B = 1.78. 407 is worth 78% more as a result of the reduced rate from 3.14 to 2.14% Borrowing rate of 407ETR was 3.14% in 03/2019 just before offer to purchase from OMERS https://www.407etr.com/en/highway/news/news-release/2019/news-release2019-03-04(2).html Borrowing rate of 407ETR was 1.8% to 2.59% in 05/2020 https://www.407etr.com/en/highway/news/news-release/2020/news-release2020-05-14.html This said, I truly hope we can get more than 2.5B considering my previous post on the valuation, whether we assume 7% year over year increase in revenue for the next 78 years or even 3% the result is about the same. If we consider a growth of 3.14% only in revenue (and not 7% as in the past) we still increase the Present value of the 407 by 50% (176/117) - see below. With a borrowing rate of 3.14% T (2021) = 1.5 B g = 3.14% DR = 3.14% see reference below - borrowing rate as of March 2019 before sale of 10.01% stake ND = (1+G)/(1+DR) = 1.0314 / 1.0314 = 1 PV (before Covid lower rates) = 1.5B * 77 years = 117 Billion With a borrowing rate of 2.14% T (2021) = 1.5 B g = 2% DR = 2.14% see reference below - borrowing rate as of March 2019 before sale of 10.01% stake ND = (1+G)/(1+DR) = 1.0314 / 1.0214 = 1.01 PV (after Covid lower rates) = 1.5B (1.01^78-1)/(1.01-1) = 176 Billion 1,185 B / 663 B = 1.78. 407 is worth 78% more as a result of the reduced rate from 3.14 to 2.14% Borrowing rate of 407ETR was 3.14% in 03/2019 just before offer to purchase from OMERS https://www.407etr.com/en/highway/news/news-release/2019/news-release2019-03-04(2).html Borrowing rate of 407ETR was 1.8% to 2.59% in 05/2020 https://www.407etr.com/en/highway/news/news-release/2020/news-release2020-05-14.html

Buyback yes. Management doing great job. Shorts are welcome to keep price low. Sailing up though. Above 30$ pretty soon, easy double from here. Dividend increase from 2c to 10c makes 32c more per year. Not interesting compared to buyback at these ridiculously low prices. Name change to Atkins Global once the covenant with CDPQ (no moving out and no name change) expires.