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NEW YORK - Engine Capital LP, an investment firm holding approximately 9.8% of Civeo Corporation’s (NYSE:CVEO) shares, has proposed strategies to the company’s board that it believes could significantly enhance shareholder value. The investor suggested that Civeo is substantially undervalued in the market, trading at roughly 3.6 times its projected 2025 EBITDA. This view aligns with InvestingPro analysis, which indicates the stock is currently undervalued, with an enterprise value of just 4.45x trailing EBITDA and a substantial 20% free cash flow yield.
In a letter to Civeo’s board, Engine Capital recommended several actions, including eliminating the company’s dividend, aggressively repurchasing shares, aiming for a 1.75x leverage ratio, and significantly cutting costs. The firm estimates that these steps could potentially raise Civeo’s share value to approximately $47 in a standalone scenario. InvestingPro data reveals management has already been actively buying back shares, with the stock currently trading near its 52-week low of $20.26.
Additionally, Engine Capital highlighted the possibility of selling Civeo as an alternative method to realize substantial value for shareholders. The investment firm’s suggestions are geared towards closing the valuation gap they perceive in Civeo’s current market pricing.
Engine Capital specializes in value-oriented special situations, investing in companies experiencing change. This move by the firm is in line with its strategy of active involvement to unlock value in its investments.
The letter from Engine Capital to Civeo’s board is publicly available and can be accessed for review. The investment firm’s proposals are based on its analysis and represent its position as a significant shareholder of Civeo.
This news is derived from a press release issued by Engine Capital LP.
In other recent news, Civeo Corporation reported its fourth-quarter 2024 financial results, revealing a revenue shortfall and a notable net loss. The company reported revenues of $151 million, missing the forecasted $155.37 million, and a net loss of $15.1 million, or $1.10 per diluted share. Despite a 23% year-over-year revenue increase in its Australian segment, the Canadian market faced difficulties, leading to the company’s overall financial decline. Civeo announced plans to restructure its Canadian operations to reduce overhead costs by 25%, in response to ongoing challenges in that region. The company has set its 2025 revenue guidance between $630 million and $660 million, with an adjusted EBITDA target of $80 million to $90 million. Additionally, Civeo has announced a significant acquisition of four villages in the Australian Bowen Basin, expected to be immediately accretive to cash flow. Analyst firm Stifel noted concerns about the company’s asset-light versus asset-intensive business model, particularly in light of the Canadian market uncertainties. Civeo’s management remains optimistic about long-term growth, particularly in Australia, and plans to continue diversifying its revenue streams.
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