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Enterprise Group Inc.


Enterprise Group Inc. is a consolidator of construction services companies operating in the energy, utility and transportation infrastructure industries. The company's focus is primarily construction services and specialized equipment rental. Its strategy is to acquire complementary service companies in Western Canada, consolidating capital, management and human resources to support continued growth. Enterprise became a Western Canadian leader in flameless heat technology in September 2012 with its acquisition of Artic Therm International Ltd., a leader in underground infrastructure construction in June 2013 with the acquisition of Calgary Tunnelling & Horizontal Augering Ltd., and a leader in oilfield service rentals in January 2014 with the acquisition of Hart Oilfield Rentals Ltd.

The information provided below is from analysts, newsletters and other contributors. Please contact the company and visit its website before making an investment decision.

Expert Comments:

The Energy Report Interview with Steven Salz (12/18/14) "Enterprise Group Inc. provides mostly maintenance and sustaining services, so it has been insulated. . .the company is divided into two major buckets—Utility/Infrastructure Construction Services and the Equipment Rentals group. In Utility/Infrastructure services, the company has Calgary Tunnelling Horizontal Augering and T.C. Backhoe and Directional Drilling. In Equipment Rentals, it has Hart Oilfield Rentals, Artic Therm International and now the Westar acquisition. . .the common theme would be western Canadian-focused companies that offer utilities/energy services to a blue-chip client base. . .

Enterprise looks for specialized companies with a western Canadian focus and substantial existing management expertise [in an acquisition]. It typically leaves management teams in place post-acquisition. . .the company will also look for a demonstrated track record of organic growth. . .Enterprise wants to see businesses that are tuck-in acquisitions, where it can cross-sell and leverage locations to build into new geographies. . ." More >

Russell Stanley, Jennings Capital (11/14/14) "Enterprise Group Inc. reported Q3/14 revenue of $18.8M. . .at quarter end, the company had cash and equivalents of $8.6M. . .we continue to rate Enterprise a Buy."

Jason Zandberg, PI Financial (11/14/14) "Enterprise Group Inc. reported Q3/14 revenue increased 88% to $18.8M; EBITDA was $4.6M compared to $3.9M last year and EPS was $0.01. . .the Utility/Infrastructure division increased revenue by 25% to $12M, and the Equipment Rental Services division increased revenue by $6.4M to $6.7M. . .management has maintained its capex plan for FY/14 which includes $3M for underground and tunneling equipment, $2M for hydrovac trucks and $15M for flameless heaters and well-site rental equipment. . .we are maintaining our Buy rating; the company will benefit from pipeline construction, expansion of utility infrastructure, and oil and gas activity."

Steven Salz, M Partners (11/13/14) "Enterprise Group Inc. reported Q3/14 revenue of $18.8M, EBITDA of $4.6M (24.2% margin), and fully diluted EPS of $0.01. . .an extensive backlog of work in the utility/infrastructure division should provide needed stability within the current oil price environment. . .as the company derives 40% of its revenue from utility/infrastructure work, the hefty backlog should insulate it from the expected downturn in oil and gas producer activity as a function of the commodity price. . .we rate the company a Buy with a one year price target of $1.50/ share."

Steven Salz, M Partners (11/11/14) "We rate Enterprise Group Inc. as a Buy. We believe the diversity of the company's services, many of which are utilized beyond energy producers, insulates it from its more energy-focused Western Canadian service peers, which are reflecting the compression in oil prices. Within this context, we view Enterprise as an ideal alternative play to retain exposure to Western Canada with a reduced oil and gas profile."

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Steven Salz, M Partners (10/16/14) "Yesterday, Enterprise Group Inc. announced that it completed the acquisition of Westar Oilfield Rentals Inc. . .the final purchase price for the acquisition was $13.5M. . .the company will also commit $3M toward improving Westar's fleet for 2015. . .we continue to rate Enterprise Group a Buy."

Jason Zandberg, PI Financial (10/15/14) "Enterprise Group Inc.'s acquisition of Westar Oilfield Rentals is accretive while adding additional exposure to northeast British Columbia. . .we have added $2M in revenue in Q4 FY14 and $8.3M in FY15. . .we continue to recommend the company as a Buy."

Steven Salz, M Partners (10/1/14) "Enterprise Group Inc. provided an update on its Fort St. John acquisition and announced the completion of its $20M 2014 capex program. The final purchase price for the acquisition will be $13.5M. . .the company will also commit $3M toward improving the acquisition target's fleet for 2015."

The Energy Report Interview with Russell Stanley (9/25/14) "We like private companies that are running flat out. Their fleets are extended. They are renting third-party equipment to support customer demand. They have great customer relationships. When they have trouble renting to meet increasing demand for services, they inject capital to expand the fleet. It is better to buy the equipment necessary to meet demand; renting equipment from a third-party reduces margin.
A good example of a company using these tactics is Enterprise Group Inc. Enterprise is involved in oil field construction and equipment rentals, as well as in serving the local utilities and transportation markets in western Canada. It is currently injecting capital to displace the use of third-party equipment to drive margin improvement. . .

We attribute Enterprise's performance to its strong M&A strategy. Enterprise recently announced an LNG acquisition in the Fort St. John area of British Columbia. Its last significant acquisition was Hart Oilfield Rentals in early 2014. It acquired a couple of companies in 2013. The companies Enterprise acquired sold at very attractive prices, usually 3x trailing EBITDA. Most are operating in niche markets, offering a service or a line of equipment that is in high demand. Because Enterprise is a public company, it has excellent access to the capital markets. It can support the growth of the acquired companies on a post-strength action basis." More >

Russell Stanley, Jennings Capital (8/14/14) "We are maintaining our Buy recommendation and 12-month target price of CA$1.50/share on Enterprise Group Inc.; at current levels, this implies a potential return to target of 70%. The company recently reported Q2/14 results that beat our estimates for revenue, EBITDA and cash flow."

Steven Salz, M Partners (8/14/14) "Late yesterday, Enterprise Group Inc. announced Q2/14 revenue of $14.1M, EBITDA of $2.7M and fully diluted EPS of $0.00. Revenue was ahead of our estimate of $10.6M and consensus at $11.9M. . .the beat can largely be attributed to an outperformance in the company's Equipment Rental division."

Jason Zandberg, PI Financial (8/14/14) "Enterprise Group Inc. reported Q2/14 results for the period ended June 30, 2014. Revenue was up 191% to $14.1M, EBITDA was $2.7M compared to break even last year and EPS was $0.00 versus a loss of ($0.02) in Q2/13. . .gross margins improved to 39% from 35% due to higher utilization of rental equipment and higher utilization of Utilities/Infrastructure division equipment."

Jason Zandberg, PI Financial (8/11/14) "The second quarter has typically meant big losses for Enterprise Group Inc. . .we believe the addition of Hart Oilfield Rentals (acquired in early January 2014) and a full quarter from Calgary Tunnelling (acquired in late Q2/13) will push the company's profits back into the black in Q2/14. . .Hart Rentals not only provides rental revenue, which typically earns enviable margins (long-life equipment can earn rent several times the initial cost), but offers a premium product at premium prices. We expect gross margins will be 46% this quarter—an increase of 110 basis points over last year."

Steven Salz, M Partners (8/7/14) "We are expecting Enterprise Group Inc. to report Q2/14 revenue of $10.6M. . .we rate the company a Buy with a one-year target price of $1.50/share. . .a combination of tuck-in acquisitions, such as the recently announced letter of intent, to complement the organic build of existing subsidiaries, expected synergies and cross-selling beginning with the consolidation of E One, and 2015E liquefied natural gas upside supports our positive outlook on Enterprise."

Jason Zandberg, PI Financial (8/1/14) "Enterprise Group Inc. announced that it has signed a letter of intent to acquire a privately held oilfield site services rental company based in Fort St. John, B.C. . .we view this announcement as positive, as this expands Enterprise's footprint to two locations in northeast British Columbia in addition to its current location in Pouce Coupe."

Steven Salz, M Partners (7/31/14) "Enterprise Group Inc. announced that it has signed a letter of intent (LOI) to acquire a privately owned oilfield site service company based in Fort St. John, British Columbia. . .it affirms our belief that Enterprise will look to capitalize on the liquefied natural gas (LNG) opportunity. . .a combination of tuck-in acquisitions, such as this announced LOI, to complement the organic build of existing subsidiaries, expected synergies and cross-selling beginning with the consolidation of E One, and 2015E LNG upside supports our positive outlook on Enterpise."

Jeb Handwerger, Gold Stock Trades (7/23/14) "In a recent interview with The Energy Report, I highlighted one of my favorite companies in the energy sector, Enterprise Group Inc. . .the company is one way to play this booming oil and gas space, which may take North America to energy independence by 2015. . .big money is investing in Enterprise, as the company has raised over $27M for acquisitions." More >

Steven Salz, M Partners (7/22/14) "We continue to rate Enterprise Group Inc. a Buy. . .a combination of tuck-in acquisitions to complement the organic build of existing subsidiaries, expected synergies and cross-selling beginning with the consolidation of E One and 2015E liquefied natural gas upside supports our positive outlook on the company."

The Energy Report Interview with Jeb Handwerger (7/10/14) "One of our favorite companies that could benefit from this trend [to supply Asia] is Enterprise Group Inc., which is a one-stop shop for the major oil exploration and production companies. It has contracts with some of the big boys, including Royal Dutch Shell and Encana, and it is getting major capital. Enterprise was able to raise $27M to invest in the sector. Big money is interested in the oil and gas services business. Enterprise has an attractive balance sheet and the ability to grow. The company announced Q1/14 revenue of $21M, more than double last year's $9M. Enterprise also recently announced its largest contract ever: $19M with Canada's largest natural gas producer. A small-cap oil field service company with a market cap below $150M and contracts with large players planning to spend billions of dollars on drilling over the next decade is really a unique situation. . .[oil service] companies have contracts with some of the largest companies with long-term exploration plans. The opportunity really is in the infrastructure. One of the least risky ways to make money is providing the services to the explorers and the producers. That's what Enterprise is doing." More >

Jason Zandberg, PI Financial (6/20/14) "Enterprise Group Inc. has grown annual revenue at a compounded growth rate of 31% from FY10 to FY13 from $15.6M to $34.8M; this increase is a combination of acquired and organic growth. The company has also improved its bottom line through this period. . .we are initiating coverage of Enterprise Group with a Buy rating."

Tom Varesh, M Partners (5/27/14) "Enterprise Group Inc.'s Hart Oilfield Rentals announced a renewal of its contract with Canada's largest natural gas producer. . .once again, the company is proving out its business strategy and delivering as expected. . .we reiterate our Buy recommendation. . .Enterprise remains our Top Pick for 2014."

Russell Stanley, Jennings Capital (5/14/14) "Enterprise Group Inc.'s Q1/14 gross margins were stronger than expected (50% versus 46%), so overall gross profit was in line with our estimate in dollar terms. . .we continue to rate the company a Buy and maintain our 12-month target of CA$1.50/share."

Tom Varesh, M Partners (5/14/14) "Before the markets opened yesterday, Enterprise Group Inc. announced its Q1/14 results, which were in line with our expectations as the company executed on integrating its Hart Oilfield Rentals Ltd. and Calgary Tunnelling & Horizontal Augering Ltd. acquisitions and growing both those businesses organically. . .this is the type of quarter we were looking for and for a 'show me' story, and Enterprise delivered."

Tom Varesh, M Partners (5/2/14) "For Q1/14, we are expecting Enterprise Group Inc. to report fully diluted EPS of $0.04. . .revenue in Q1/14 is expected to increase to $21.9M, up from $8.9M in Q1/13. . .we are maintaining our Buy recommendation and our 12-month target price of $1.75 on the company, which remains our Top Pick for 2014."

Russell Stanley, Jennings Capital (4/2/14) "Enterprise Group Inc. reported Q4/13 revenue and gross margins that were below our estimates. However, we expect the closing of the Hart acquisition in early Q1/14 and additional debt and equity financing to support strong improvement in subsequent quarters, beginning with the Q1/14 results next month. We therefore view the recent share price weakness (down 5% yesterday on over 2x normal volume) as a buying opportunity. . .and continue to rate the company a Buy."

M Partners (3/25/14) "Enterprise Group Inc. is our Top Pick for 2014 and almost a quarter into the year, it has not disappointed. . .it is up 28.2% year to date in 2014 and with significant upside still in the stock. On March 4, 2013, the company announced an equity offering for $24M, which increases to $27.6M if the overallotment is exercised."

The Mining Report Interview with Jeb Handwerger (3/18/14) "Enterprise Group continues to have a phenomenal year. It's making several strategic acquisitions in an area that's going to benefit from this buildout in energy infrastructure. It has a tunneling company, which clears the way for the pipes to run under highways, trains, bodies of waters. It also has a pipeline business, Artic Therm, which has a patent-protected flameless heat technology to assist the operators working in cold weather conditions. It has Backhoe, a directional-drilling company. It has a heavy-equipment rental service for drill sites. Enterprise Group has developed and taken over these specialized hard-margin businesses that are generating earnings for shareholders. It has attracted a blue chip stable of companies, including Apache and Suncor Energy. This is why it had a major run in 2013, and it may just be the beginning.

"As Enterprise continues to announce strong revenues, earnings per share and projects that are getting awarded, the story's just beginning to get noticed in the United States. Enterprise announced that it's going to become a reporting issuer in the U.S. and so it will hopefully attract a larger audience. It has very strong revenue growth. With a return on equity of over 35% and with revenue currently at $30M, the management wants to grow that to $150M by the end of 2015. This could be a major growth company and can get a lot of attention in the U.S." More >

The Energy Report Interview with Tom Varesh (3/12/14) "The rollup theme is very prevalent. Enterprise Group Inc. [has] the currency to roll up private enterprises working in the service sectors in western Canada. . .Enterprise Group [has] already benefited from recent successful capital raises and it's full steam ahead. . .Enterprise Group is a great infrastructure play—it is very acquisitive. In 2012, it bought a heating business called Artic Therm. It also owns TC Backhoe, which does a lot of pipelining and cable laying for utility companies in Alberta. And it acquired Calgary Tunneling last summer. At the start of this year, Enterprise closed on Hart Oilfield Rentals. This group of service-related companies can cross-sell their services to their major oil field clients in western Canada.

"I characterize Enterprise as a hands-on management entity. In the not-too-distant future, we will likely see a rebranding of this corporation and each of its businesses. The reason that Enterprise will rebrand is to demonstrate that it is very active in each of the business segments. Each of the managers or previous owners of those various businesses is still running operations under the Enterprise umbrella. The executive management team at Enterprise is making the capital allocation and the growth strategy decisions in concert with the managers running each business unit. It is a very collaborative effort intended to grow each business and to cross-sell the services. . .when we launched on Enterprise a year ago, the stock was at $0.35. It is now in the $1.10 range. That is great performance, and there is more to realize in the stock as it proves out the earnings potential of its recent acquisitions. It is our top pick!" More >

Jennings Capital (2/26/14) "Enterprise Group Inc. is well positioned to benefit from continued energy-driven investments in infrastructure, as well as specific growth opportunities related to oil sands development, pipeline construction and the potential development of liquefied natural gas in British Columbia. The company has established strong positions in both construction services and equipment rentals, while focusing on niche business lines for which there tends to be limited direct competition. . .with recent acquisitions made, Enterprise has a significant opportunity to cross-sell new capabilities to its existing client base."

The Mining Report Interview with Keith Schaefer (2/18/14) "Enterprise Group Inc. has done a fantastic job of buying highly specialized, niche companies that have higher-than-average profit margins. When you do a rollup play like this—an aggressive M&A strategy—what makes the stock go up is being able to drive organic growth out of it. This company has been able to do that better than any I've seen. It has surprised to the upside, achieving revenue jumps quarter after quarter. Not just revenue jumps, but real positive cash flow. I'm quite impressed with what the Enterprise team has been doing. The feedback the company is getting in the market suggests that cash flow is going to triple this year, which indicates the stock should be $2. It's currently trading at about $1. We will see what happens this year, but I like what the team is doing." More >

Jeb Handwerger, Gold Stock Trades (1/16/14) "I have been looking for undervalued public companies that are taking advantage of this major buildout in Western Canada; I have found one company, Enterprise Group Inc., which should be considered by my subscribers. The company is on the verge of its next breakout at $0.89 after the closure of its most recent acquisition. . .with the current market cap around $74M, a double over the next 24 months could be considered a conservative target."

The Energy Report Interview with Keith Schaefer (1/9/14) "Enterprise Group Inc. has had real success in buying what I call 'oddball' service companies with proprietary technologies and higher profit margins than the service sector as a whole. Enterprise's managers are good at convincing the oddball firms to sell out to them, and then they grow these acquisitions very quickly under their corporate umbrella. I love that aspect. And the stock is trading great. It is definitely one to watch for 2014. Enterprise could see up to 30% organic growth every year for the next three or four years." More >

The Metals Report Interview with Jeb Handwerger (12/10/13) "I just took a position in Enterprise Group Inc. It's getting awarded contracts in the energy services field. It is earning $0.05/share/quarter. There are great growth aspects there and the company is making some impressive acquisitions." More >

The Energy Report Interview with James West (7/2/13) "Enterprise Group Inc. recently announced several acquisitions. It has acquired a specialized engineering firm, an underground infrastructure construction company that is generating $12M per year in revenue. The acquisition will give Enterprise 40% of its earnings before income tax, depreciation and amortization in 2013. Enterprise's business model is to consolidate the oil field services industry in Western Canada. The plan is starting to pay off. . .

The company is integrating horizontally. It is in a position to capitalize on new trends in geophysics. It is able to offer everything to everyone. Companies that are more specialized tend to be boom-and-bust. When things are particularly good in their particular sector, then let the good times roll. But when the public appetite goes in a different direction, then those companies can flounder for years. Enterprise Group is acquiring companies across various subsectors in the oil field services, thereby insulating itself against future soft spots in the market." More >

The Energy Report Interview with Roger Wiegand (6/20/13) "We recently found a solid petroleum service company in the Calgary region of Canada, Enterprise Group Inc. It is a pipeline and construction company that provides equipment and services to regional oil and gas drillers. It was formed from a combination of three smaller companies and management has plans to expand. . .Enterprise is a pick and shovel operation and its business is very steady. If one element of its trade slows down, the other two revenue sources can pick up the slack. It had tremendous new net profits on the last report. The managers are very sharp guys. I spent an hour with them and I was very impressed." More >

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