Dredging award confirmed. Yesterday, ORN confirmed the award of a $14.65 million contract that we discussed in a June 30th research report. There were two other bids, and the work requires dredging ~1.8 million cubic yards of material to maintain channels between the Padre Island jetties and the entrance to Port Mansfield. The work begins in September and will be completed in 1Q2021 so it adds some visibility to late 2020 and early 2021. The work is a small part of the $5 billion of federal funding to USACE for recovery efforts post Hurricane Harvey.Risk to existing projects is moderating. Despite moves to curb the spread of COVID-19, work continues on the Terminal 5 upgrade and the Fairview Avenue North bridge replacement in Seattle. Also, the crude oil price recovery dampens some risk on the pacing of construction in Texas, notwithstanding the recent rise in COVID-19 cases. For a more thorough discussion of the current outlook, please see our recent video interview with Mark Stauffer, CEO, and Robert Tabb, CFO, that is available on our research portal, www.channelchek.com.Recent move to expand credit revolver is a positive. The revolver expansion of $20 million will bolster previous 1Q2020 liquidity of $25.6 million. Free cash flow remained strong in 1Q2020, but some discretionary capex, including development of an ERP system, has been deferred. Moreover, ORN is looking to monetize idle/non-core assets, including real estate, and has recently highlighted the Tampa yard as an attractive sale candidate.Maintaining 2020 EBITDA estimate. Minor disruptions seen to date and bidding activity continues in both segments. Work goes on and we expect EBITDA will move up more than 15% to $43.3 million. Since risks are moderating, we will not be surprised if 2020 EBITDA guidance is reinstated, possibly when 2Q2020 numbers are out near the end of July.Maintain Outperform and price target of $7.40/share. After a positive move of 19% in June, Orion is down 11% in July, or ~46% this year, due to COVID-19 uncertainty and broader economic concerns. We remain convinced that the outlook is positive and the current stock price doesn't fairly reflect structural improvements from the ISG restructuring program and the positive 2H2020 outlook. A combination of the above-average backlog, improved profitability, lower financial leverage and attractive valuation of 3.5x 2020E EBITDA supports our constructive view, and the current risk/reward profile remains compelling.Read More >>