Niche pipeline services provider ShawCor Ltd (TSX: SCL/A, OTC: SAWLF), which we added to How They Rate coverage in the July issue, announced this week that it was exploring the possibility of putting itself up for sale. Virginia Shaw, who chairs the board and owns a controlling interest in the company, had said that she’s prepared to consider a sale of her shares as part of a sale of the company.

Ms. Shaw owns 90 percent of ShawCor’s B shares, which gives her a 60 percent voting interest.

ShawCor’s class A and class B shares closed at CAD35.08 on the Toronto Stock Exchange (TSX) on Wednesday, giving the company a market capitalization of about CAD2.5 billion. Shares surged to CAD42.20 on Thursday, or about CAD2.9 billion, as speculation swirled that a potential bid for the company could approach CAD3 billion.

ShawCor owns seven business units that provide pipeline-coating, corrosion-protection, pipe-inspection, tubing and other services to offshore oil and gas drillers as well as a range of other companies across the energy industry spectrum. It’s widely recognized as the global leader in offshore pipe coating.

ShawCor’s new order backlog increased 11.5 percent during the second quarter to a record CAD749 million. The company’s backlog has more than doubled over the past 12 months as a result of the award of a number of significant new pipe-coating contracts.

Larger oilfield services companies, pipe manufacturers, companies involved in the offshore engineering, procurement and construction space, and private equity players will be attracted by ShawCor’s clean balance sheet and strong free cash flow. General Electric Co (NYSE: GE) and National Oilwell Varco (NYSE: NOV), Halliburton Co (NYSE: HAL) and Schlumberger Ltd (NYSE: SLB) have been mentioned as possible suitors.

ShawCor is on the brink of the most explosive growth phase of its existence. Its Asia-Pacific operation is on schedule to commence full production at Pearl Energy in Thailand and Wheatstone in Australia gas supply trunk line pipeline projects in the third quarter and the Australia-based Ichthys gas export pipeline in the fourth quarter, and the company’s facilities in Malaysia and Indonesia are expected to be operating at record volume levels in the second half of 2012 with resulting strong operating margins.

Based on booked orders, management expects this level of activity to be sustained throughout 2013 and into 2014.

ShawCor reported a 36 percent jump in quarterly profit on higher bookings and strong performance in its pipeline and pipe services segment. Second-quarter net income rose to CAD21.4 million, or CAD0.30 per share, from CAD15.7 million, or CAD0.21 per share, a year earlier. Revenue rose 24 percent from a year ago to CAD326.9 million; on a sequential basis sales were up 5 percent from CAD312.3 million during the first three months of 2012.

Management declared a CAD0.10 per share third-quarter dividend payable Aug. 31 to shareholders of record as of Aug. 20; the shares will trade ex-dividend as of Aug. 16. ShawCor also paid CAD0.10 per share in the second quarter.

EBITDA in the second quarter of 2012 was CAD35 million, essentially unchanged from the prior year but CAD7.6 million below the first quarter of 2012 as a result of unfavorable changes in revenue mix plus costs incurred during the surprisingly quick start-up of the company’s operations in the Asia-Pacific region.

TD Securities placed ShawCor on its “action buy list” with a raised price target of CAD47 (up from CAD44) following the announcement. AltaCorp Capital Corp maintained its “outperform” rating and its CAD49 buy target, suggesting as well in a research note that based on prior oilfield services deals a valuation of 16.3 times earnings seemed reasonable. That would put an ultimate price of CAD53.47 per share on the company.

Cormark Securities raised its target price from CAD42.50 to CAD50 in maintaining its “buy” rating, while BMO Capital Markets stuck with its “market perform” rating but boosted its 12-month price target from CAD36 to CAD45.

As of this writing ShawCor is trading at CAD41.92 per share.

Another Upside Surprise Up North

Canada’s gross domestic product (GDP) grew by 1.8 percent in the second quarter, according to Statistics Canada, above consensus expectations from analysts but slightly below the Bank of Canada’s forecast of 1.9 percent. Canada continues to have the strongest economic growth among Group of Seven.

Business investment led the way with growth of 2.3 percent, the fastest pace since the second quarter of 2011, as companies invested in new equipment and stocked inventories.

Investment in the housing sector was relatively weak, rising by less than 2 percent on an annualized basis. Canadian consumers demonstrated some restraint, with demand growing by 0.3 percent. Exports edged up by 0.2 percent, while imports rose 1.6 percent.

Bay Street Beat

Five analysts who cover the stock maintained their ratings following EnerCare Inc’s (TSX: ECI, OTC: CSUWF) release of its second-quarter numbers, including all four who rate the stock a “buy” according to Bloomberg’s standardization of investment-house language.

In addition to its four “buy” ratings the stock has two “holds” but zero “sells.” The average 12-month price target is CAD10.70, with a high of CAD11.50 and a low of CAD9.50.

Analysts also maintained ratings on Northern Property REIT (TSX: NPR-U, OTC: NPRUF), which now has four “buys,” seven “holds” and one “sell.” Its average price target is CAD34.44, with a high of CAD36 and a low of CAD30.50.

RioCan REIT’s (TSX: REI-U, OTC: RIOCF) inspired similar reactions, as its line remained static at three “buys,” six “holds” and zero “sells.” The average price target for RioCan among the analysts who cover the stock is CAD30.01, with a high of CAD31 and a low of CAD28.85.

Things were not so quiet for Ag Growth International Inc (TSX: AFN, OTC: AGGZF).

Four analysts cut their ratings on the stock following its second-quarter report, probably due to fears about what the US drought will do to its second-half numbers. As Ag Growth has expanded its business overseas and continues to see solid results in Canada, the impact, though likely to be meaningful, won’t approximate the drama these reactions suggest.

Macquarie cut the stock to “underperform” from “neutral” and reduced its 12-month price target from CAD36 to CAD26. Cormark Securities Inc made it “reduce” rather than “market perform” and reduced its target from CAD35.50 to CAD28.

PI Financial Corp cut the grain-handling equipment maker to “neutral” from “buy” and cut its price from CAD35 to CAD32.50, while EVA Dimensions sliced it to “underweight” from “hold.” EVA doesn’t provide price targets for stocks it covers as a matter of practice.

National Bank Financial bucked the trend, upgrading Ag Growth to “sector perform” from “underperform.” NBF did, however, reduce its 12-month price target from CAD32.50 to CAD31.

Ag Growth now sports a line of two “buys,” five “holds” and three “sells” with average 12-month price target among the eight analysts who provide such a figure of CAD32.81. The high mark is CAD40, the low CAD26.

Pengrowth Energy Corp (TSX: PGF, NYSE: PGH) enjoyed an upgrade to “buy” from “sell” at Veritas Investment Research, though the 12-month price target was reduced from CAD8.50 to CAD7.25. Pengrowth now has seven “buy” ratings, nine “holds” and two “sells.” The average 12-month price target is CAD8.13, with a high of CAD9.50 and a low of CAD7.25.

Here’s the current buy–hold–sell rundown for the CE Portfolio, with average 12-month price targets in parentheses.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–6–1–2 (CAD34.50)
• Artis REIT (TSX: AX-U, OTC: ARESF)–6–3–0 (CAD17.94)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–1–3–3 (CAD13.72)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–2–5–0 (CAD15.08)
• Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF)–0–1–0 (CAD13.75)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPFF)–4–7–0 (CAD31.05)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–6–6–0 (CAD26.46)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–2–9–1 (CAD29.90)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–2–5–0 (CAD20.85)
• Dundee REIT (TSX: D, OTC: DRETF)–6–0–0 (CAD41.34)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–4–2–0 (CAD9.50)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–7–2–2 (CAD12.25)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–4–8–1 (CAD11.27)
• Just Energy Group Inc (TSX: JE, NYSE: JE)–2–5–0 (CAD12.79)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–6–2–1 (CAD50.44)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–4–7–1 (CAD34.44)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–6–6–0 (CAD29.73)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–3–6–0 (CAD30.01)
• Shaw Communications Inc (TSX: SJR/B, NYSE: SJR)–5–10–2 (CAD20.40)
• Student Transportation Inc (TSX: STB, NSDQ: STB)–3–2–1 (CAD7.35)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–8–3–0 (CAD22.25)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–0–4–0 (CAD11.44)
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–2–5–3 (CAD32.81)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–5–12–1 (CAD25.21)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–3–2–1 (CAD18.10)
• Colabor Group Inc (TSX: GCL, OTC: COLFF)–0–5–0 (CAD8)
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–17–5–1 (CAD47.61)
• Extendicare Inc (TSX: EXE, OTC: EXETF)–2–2–1 (CAD8.17)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–8–1–0 (CAD16)
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–1–0–0 (CAD8)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–4–5–0 (CAD16.47)
• Pengrowth Energy Corp (TSX: PGF, NYSE: PGH)–7–9–2 (CAD8.13)
• PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF)–16–5–0 (CAD16.86)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–12–2–2 (CAD24.86)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–1–12–1 (CAD9.60)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–8–5–1 (CAD51.68)
• Wajax Corp (TSX: WJX, OTC: WJXFF)–4–5–1 (CAD50.39)