HIL

Publicly traded companies mentioned herein: Construction Partners Inc (ROAD), Hill International Inc (HIL), IES Holdings Inc (IESC), Sterling Construction Co Inc (STRL)

Highlights

The presenter is long shares of Hill International Inc (HIL), which provides project management, construction management, and other consulting services, mainly for infrastructure projects with some exposure to transportation and energy. HIL has a global footprint, with the US generating the largest portion of revenue (43%) followed by the Middle East (31%), Europe (13%), and Africa (8%). Rather than operating the actual construction projects, HIL oversees the construction. For example, a municipality looking to build a highway or bridge may use HIL to hire a construction crew, oversee the construction, and identify potential risks (e.g., delays and budget issues). The stock has a ~$150MM market cap (~$2.75 per share) and the company has faced internal issues in recent years, causing it to trade at a ~15% FCF yield and a ~5x forward EBITDA multiple (based on his 2021 expectations) compared to peers (e.g., STRL, ROAD, IESC) that trade at half the FCF yield and double the EBITDA multiple. HIL entered 2020 with momentum stemming from its Profit Improvement Plan before COVID-19 halted new business. As economies reopen the company is positioned to capitalize on pent up demand, a strong backlog, and upcoming stimulus globally. If HIL can reach its 2020 revenue target of ~$350MM in 2021, he expects the share price to reach $4 – $5. Additionally, he thinks the stock will appreciate to $5 – $6 per share if HIL executes on its medium-term guidance and sees it as a potential takeout candidate at a price of $8 – $9 per share down the road.