Desjardins Analyst: Garda World Most Profitable Among Peers

Includes: BX, GWDAF
by: FP Trading Desk

Private equity firm The Blackstone Group (NYSE:BX) is paying $750-million to buy security personnel firm AlliedBarton Security Services, saying it was attracted by strong fundamentals in the sector.

The purchase price for the third largest U.S. physical security provider values privately-held AlliedBarton at 8.3 times EV/EBITDA for the latest 12 months, according to Desjardins Securities analyst Martin Landry. This compares with a multiple of 9.3x for Montreal-based Garda World Security Corp.(OTC:GWDAF), the fifth-largest security company in the world.

Mr. Landry considers AlliedBarton one of the least attractive names in the U.S. guarding space and told clients that the deal’s pricetag more than justifies Garda’s current valuation in the C$12.50 per share range.

He said:

We do not see the acquisition by Blackstone as a threat to Garda as the two companies do not target the same type of guarding work.

He noted that it will improve AlliedBarton’s weak financial position and make it more competitive.

Mr. Landry reiterated his “buy” rating and C$20 price target on Garda shares, saying recent weakness offers an good entry point. He also noted that it trades at a forward EV/EBITDA multiple of 5.6 times, which represents a 9% discount to its peers.

The analyst added:

We believe that the company deserves a premium valuation given it is the lowest cost operator, the fastest growing and most profitable company among its peers.