Low Valuation in SNC signals an Opportunity

1. SNC has come under pressure due to revised earnings guidance. We suspect that the move in the stock price was exaggerated because the news came out at month-end and there was likely an over-reaction from fund managers in the US and Canada to remove SNC from their holdings.

2. The current valuation is consistent with the low valuation that occurred in March 2009.

3. Opportunities to own good quality stocks at low valuations do not come often, we believe that SNC will rise above these challenges.

4. SNC pays a dividend of 2.1%, market capitalization of $5.8 billion. Scotia Macleod currently has a target of $46.

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6. Low valuation signal at USD $36.85 (SNC-T, $36.80). The low valuation can be seen by looking at the position of the Earnings per share line (white line) relative to the trading price. Our assumption is that earnings are temporarily impacted by $0.50 cents per share.

7. Over the next 18 months, the Purple Chips model sees a range of $35 - $53.00

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