Nearly $500 billion is a difficult number to picture. It’s roughly enough money to make even Canada’s collection of proposed mines, data centres, ports, power lines and mega-projects look slightly less expensive.
That was the headline coming out of the Canada Investment Summit. Prime Minister Mark Carney told investors from nearly 30 countries that Canada had secured almost $500 billion in new investment and financing commitments.
His pitch was considerably shorter: “Canada is building big. Build with us.”
Investors should add one important asterisk. This isn’t $500 billion hitting corporate bank accounts tomorrow. Nearly $325 billion comes from bank financing commitments, almost $100 billion from institutional investors, with additional capital targeting artificial intelligence (AI), infrastructure and Canadian businesses. Still, the direction of travel is difficult to miss.
Source: Getty Images
From promises to construction
The summit repeatedly returned to one problem. Canada has plenty of capital and plenty of projects. Getting those projects built has been harder.
Blackstone president Jon Gray described Canada as “a bit of a sleeping giant economically,” pointing to natural gas, critical minerals, hydro power and the infrastructure required for AI.
Carney’s response was speed. The federal government has already referred 27 projects representing roughly $500 billion in private investment opportunities to its Major Projects Office. For future projects and supply chains, Carney gave regulators a new target: “One project. One review. One year.”
A mine requires environmental work before anyone starts digging. A transmission line needs planning and engineering. Data centres need electricity and water. Ports, roads and pipelines all require years of design work before construction crews arrive. So, rather than guessing which mega-project eventually wins, I’d buy a company paid to help design several of them.
That’s Stantec (TSX: STN).
STN
Stantec provides engineering, architecture, environmental and infrastructure consulting services. That leaves it exposed to exactly the areas Canada wants to build, including electricity systems, transportation, water infrastructure, buildings and resource projects.
Crucially, Stantec can make money well before the ceremonial shovel appears. Its engineers and consultants can work on planning, design, permitting and environmental assessments. Faster project decisions could therefore move more work through Stantec’s pipeline while reducing the years projects spend stuck between proposal and construction.
The existing business already looks strong. Second-quarter net revenue climbed 11.5% year over year to $1.78 billion, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 17.1% to $333 million. Most importantly, backlog reached $9.2 billion, up 17.5% from a year earlier and representing roughly 13 months of work. That’s already a healthy project pipeline before Canada’s latest investment push really gets moving.
Considerations
Stantec shares recently closed around $96, down roughly 40% from their 52-week high near $160. That leaves the stock trading at only about 15 times forward earnings. Those numbers interest me considerably more than buying an infrastructure stock after everyone has already decided the boom is guaranteed.
There are risks. Governments can promise faster approvals without eliminating labour shortages, cost inflation or local opposition. Stantec also grows through acquisitions, bringing integration risk. And $500 billion of commitments certainly doesn’t guarantee $500 billion of completed projects.
Bottom line
In short, Canada is trying to build mines, grids, data centres, transportation systems, and entirely new supply chains simultaneously. Someone has to design all of it. At today’s valuation, Stantec is the stock I’d want holding the pencil.
