KASLER: Firm Rides on Highways : Surge in Highway Spending Gives Boost to Kasler Corp.
Nobody enjoys paying taxes. But when it comes to highway taxes, it is possible to invest in a publicly owned construction firm that has been getting a good chunk of that tax money.
Kasler Corp., based in San Bernardino, has been benefiting from the surge in highway spending here in Orange County and elsewhere in the state. And analysts say it is one of only a handful of publicly traded companies in the country that is devoted almost entirely to highway construction.
“Kasler is the only pure play in highway spending out there,” said David Rast, a securities analyst with Burns, Pauli & Co., a brokerage in St. Louis.
More than 90% of the company’s roughly $300 million in orders last year was for highway and bridge building.
Of that, about $60 million in orders were for Orange County projects. It is Kasler equipment that holds you up in traffic on the San Diego Freeway between Long Beach and Costa Mesa. The first phase of a $21.8-million road-widening project is almost completed, and a second phase is under way between Costa Mesa and where the Santa Ana and San Diego freeways converge in Irvine. The San Diego Freeway improvement is paying Kasler--or costing taxpayers, depending on how you look at it--about $1 million a month.
Active in County
Kasler has a history of pouring concrete in the county. It built much of the Orange Freeway and the Newport Bay Bridge along Coast Highway.
It plans to be around in the future, too. Kasler is preparing to bid on the 7-mile Foothill Circulation Phasing Plan, the first section of a proposed 28-mile, $600-million toll road scheduled for completion in the late 1990s, according to George Pache, Kasler’s chief financial officer.
Rast said he likes Kasler stock, since the company should reap the benefits of a nationwide effort to rebuild roads and bridges. In California and Arizona, where Kasler now does most of its work, funds for highway construction have increased by as much as 40% over a few years ago.
The state earmarked $1.3 billion for bridge and highway repairs this year. Nationwide, more than $30 billion will be poured into rebuilding highways in 1989.
‘Attractively Priced’
According to Richard Rossi, an analyst with Dean Witter Reynolds, Kasler stock, at its current price of $9.75, is “attractively priced for participation in the infrastructure market.” The stock began the year at $6.25 and was as high as $10.25 in July.
The stock hit an all-time high of $22 a share in 1982, when the company landed several construction projects in Texas. At the time, Texas was still enjoying the riches of an oil boom.
But that move set the stage for a bleak lesson for Kasler in doing business deals in an unfamiliar market. Hit by labor, weather and, eventually, the bust in oil prices, Kasler lost money in 1985 and 1986. In 1986, the company’s worst year, Kasler lost $3.3 million.
Just last week, Kasler settled a lawsuit with the Dallas-Ft. Worth Airport in a dispute over a runway construction project. Kasler agreed to pay $383,000.
But the company has come home to familiar territory, another reason analysts look favorably on Kasler’s future prospects. In 1987, the company returned to profitability, making $1.1 million.
For the first nine months of this year, Kasler earned $1.7 million, compared to $637,000 for the same period a year earlier.
Rast estimates that the company will earn $2.4 million on revenues of $140 million for fiscal 1988, which draws to a close at the end of this month. Based on orders already in the bag, he is projecting that profits will hit $4.3 million in 1989.
