esearch e r initiating coverage enterprise...

Disclaimer Note: In accordance with NASD Rule 2711 and IIROC Rule 3400, Salman Partners Inc. refers the reader to the endof our research report for our firm’s specific disclosures, policies and procedures in respect of research analysts and researchreports. This report is distributed in the U.S. by Salman Partners (USA) Inc. and was prepared by its Canadian Broker Dealeraffiliate, Salman Partners Inc. Please refer to the end of this report for the disclosure statements, including the Analyst’sCertification. Analysts employed by non-U.S. affiliates are not registered pursuant to NASD rules.

ENTERPRISE GROUP INC. APRIL 8, 2014

TSX: E $0.99

EQUITY RESEARCHINITIATING COVERAGE

RECOMMENDATION BUY

12-MONTH TARGET $1.45

A Company Levered to Strong Western Canadian Trends

We are initiating coverage of Enterprise Group with a BUY and a 12-month target price of$1.45, for a potential total return of 46%. Enterprise Group through its aggressive growthstrategy over the last few years has positioned itself as a specialized equipment and serviceprovider to key sectors in Western Canada. The company operates five distinct companiesclassified into two major business segments: Utilities and Infrastructure ConstructionGroup and Equipment Rental. Going forward, the company is expected to leverage thevarious segments to cross sell services and provide more complete end to end customizedsolutions.

The key drivers of our investment recommendation include:

•Strong growth prospects within existing markets. At current demand levels,operations are operating close to full capacity in most segments and a strong return isexpected on an aggressive capital spending program over the next two years.

•Several opportunities exist to further grow revenues, which are not fully capturedin our valuation. These opportunities include the potential LNG build out in N.E. B.C.,expansion into new regions and development of pipelines in Western Canada.

•Management’s focus on accretive acquisitions. Management is targeting revenues of~$150 million by 2015 accounting for an additional acquisition. Given its focus ongrowing complementary service offerings and track record to date, we believe EnterpriseGroup will continue to strengthen its competitive positioning within Western Canada.We do not include future acquisitions in our estimates and our revenue expectationfor 2015 is $106 million. Including an additional acquisition to bring revenues tomanagement's target and assuming margins will be in line with current operations,our valuation per share increases to $2.07 (excl. costs related to acquisition).

EstimatesWe forecast EPS to grow by 25% in 2014 to $0.10 and a further 60% in 2015 to $0.16. Weexpect EPS to benefit from strong revenue growth in all segments, including the impactof the Hart acquisition in 2014 and 2015. We also expect EPS to increase at a highergrowth rate than top-line revenue growth as the revenue mix shifts towards higher marginspecialized equipment rental revenues.

Valuation and Recommendation

We are initiating coverage of Enterprise Group with a BUY and a 12-month target priceof $1.45, for a potential total return of 46%. Our target price of $1.45 is based on 6.0xour 2015F EBITDA estimate of $42.3 million, which is a premium relative to the overall oiland gas service space, which we believe is warranted as Enterprise Group offers one of thestrongest earnings growth profiles, coupled with very attractive EBITDA margin levels.

Kam Mangat, CFAInvestment Analyst

(416) [email protected]

52-Week Range $0.41 - $1.19Shares O/S (M) 144.9Shares FD (M) 164.9Market Cap (M) $143.5Net Debt (M) $21.8Enterprise Value (M) $165.2

EPS (f/d) Q1 Q2 Q3 Q42012A $0.00 $0.01 $0.00 $0.032013A $0.05 $(0.02) $0.05 $0.012014F $0.03 $0.01 $0.02 $0.042015F -- -- -- --

2012A 2013A 2014F 2015FEBITDA $4.0 $9.0 $28.0 $42.3EV/EBITDA 6.3x 10.7x 5.9x 3.9xEPS (f/d) $0.05 $0.08 $0.10 $0.16P/E 4.6x 9.8x 9.9x 6.2x

One-Year Share Price History

APR-12 DEC-12 AUG-13 APR-14

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All figures in Canadian dollars unless otherwise specified.

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ENTERPRISE GROUP INC. INDUSTRIALS

2

TABLE OF CONTENTS INVESTMENT SUMMARY ............................................................................................................................................................ 4

INVESTMENT HIGHLIGHTS ........................................................................................................................................................ 5

A. Strong Macro-Environment in Alberta Supports Organic Revenue Growth ..................................................................... 5

B. Increasing Market Share and Developing New Market Opportunities Provides Further Upside to Revenues ....... 9

C. Focused Acquisition Strategy Should Further Strengthen Competitive Position ......................................................... 12

D. Improving Margin Profile Expected to Drive Strong Earnings Growth ............................................................................ 12

BUSINESS OVERVIEW ............................................................................................................................................................. 13

Utilities and Infrastructure Construction Group ............................................................................................................................ 13

Equipment Rental ..................................................................................................................................................................................... 14

FINANCIAL OUTLOOK ............................................................................................................................................................ 16

FINANCINGS .......................................................................................................................................................................... 18

VALUATION AND RECOMMENDATION .................................................................................................................................... 19

Sensitivity Analysis .................................................................................................................................................................................. 20

SELECTED KEY MANAGEMENT ............................................................................................................................................... 21

TOP 10 MAJOR SHAREHOLDERS............................................................................................................................................ 21

KEY RISKS ............................................................................................................................................................................. 22

APPENDIX A: FINANCIAL MODEL .......................................................................................................................................... 23

APPENDIX B: RELATIVE PERFORMANCE OF ENTERPRISE GROUP VS. MAJOR INDICES .............................................................. 24

ENTERPRISE GROUP INC.NDUSTRIALSI

3

INVESTMENT SUMMARY

We are initiating coverage of Enterprise Group with a BUY and a 12-month target price of $1.45, for a potential total return of 46%. Our target price of $1.45 is based on 6.0x our 2015F EBITDA estimate of $42.3 million, which is a premium relative to the overall oil and gas service space, which we believe is warranted given the strong earnings growth profile coupled with the very attractive margin levels. In our valuation approach we took into consideration the revenue contribution of the different segments going forward and the comparable multiple that should be applied to each one in order to derive our consolidated target EV/EBITDA of 6.0x.

The key drivers of our investment recommendation include:

Strong growth prospects within existing markets. At current demand levels, operations are operating close to full capacity in most segments and a strong return is expected on an aggressive capital spending program over the next two years.

Several opportunities exist to further grow revenues, which are not fully captured in our valuation. These opportunities include the potential LNG build out in N.E. B.C., expansion into new regions and development of pipelines in Western Canada.

Management’s focus on accretive acquisitions. Management is targeting revenues of ~$150 million by 2015 accounting for an additional acquisition. Given its focus on growing complementary service offerings and track record to date, we believe Enterprise Group will continue to strengthen its competitive positioning within Western Canada. We do not include future acquisitions in our estimates and our revenue expectation for 2015 is $106 million. Including an additional acquisition to bring revenues to management’s target and assuming margins will be in line with current operations, our valuation per share increases to $2.07 (excl. costs related to acquisition).

Enterprise Group is a TSX-listed stock. Through its aggressive growth strategy over the last few years has positioned itself as a specialized equipment and service provider to key sectors in Western Canada. The company currently operates five distinct businesses that offer various services from underground infrastructure building, installing and repairing underground utility lines, heavy equipment and industrial heat rentals to one-stop oilfield site service and modular/combo equipment rentals. Going forward, the company is expected to leverage the various segments to cross sell services and provide more complete end to end customized solutions. Enterprise Group is not only diversified across different sectors (energy, utility, pipeline and transportation) but also has a strong base of blue chip customers, including Telus, Suncor and Encana.

Given the evolving business model, the historical trends for Enterprise Group have limited value in providing insights for future performance. Since 2012, Enterprise has acquired three businesses which are expected to account for ~74% of revenues in 2014. There are many competitors in the markets Enterprise Group operates in, however given the specialized nature of operations, skilled workforce and in some cases patent protection, we believe revenues generated in the past at the acquired companies have limited downside risk. That being said, the ability of management to integrate these companies, transition customers, retain and further build operational workforce will be critical. Provided that management executes well on its strategy going forward, we believe the stock will re-rate higher on a multiple basis warranting an even higher premium relative to the broad base of O&G service and equipment providers. In terms of estimates, looking ahead, we forecast EPS to grow by 25% in 2014 to $0.10 and a further 60% in 2015 to $0.16. We note that the fully diluted outstanding shares have increased significantly from 75.8 million in 2013 to an expected 164.9 million in 2014 as a result of recent equity financings and the impact of options and warrants. Looking at net income in 2014 we expect earnings to increase by ~3x the 2013 level, including the impact of the Hart acquisition.

The greatest risk to our investment case is a downturn in Alberta’s economy, particularly energy, as ~90% of current revenues are generated within the province. Other risks include ability to retain skilled labour, impact of changes in commodity prices (i.e., oil prices), government regulation and extreme weather conditions.


4

INVESTMENT HIGHLIGHTS A. Strong Macro-Environment in Alberta Supports Organic Revenue Growth Strong economic underpinnings will continue to support organic revenue growth for Enterprise Group. The majority of Enterprise Group’s revenues are generated in Alberta (~90%) where GDP continues to outpace all other regions of Canada. This strong economic growth continues to support strong employment growth and housing trends which benefits sectors such as construction and infrastructure, directly benefitting segments such as Calgary Tunnelling and T.C. Backhoe. Calgary Tunnelling is largely focused on large infrastructure projects and T.C. Backhoe is primarily involved in installing and repairing underground utility lines which directly benefits from housing starts and construction activities. For 2013, GDP is expected to come in at 3.3%, lower than the 2012 GDP of 3.8% and then improve to 3.7% in 2014, based on the Government of Alberta forecasts.

Western Canada GDP Trends

Source: Salman Partners Inc., Bloomberg

The largest component of Alberta’s economy is the Energy sector which comprises ~28% of total GDP. Despite Enterprise Group having minimal exposure at this point to the oil sands (~10-15% of Artic Therm’s revenues), evaluating capex trends for the oil sands is one good benchmark for measuring the spending patterns for the region. CAPP forecasts that capital expenditures will be around $25 billion in 2014 similar to 2013 levels and as per Stats Can, capital expenditures for mining and oil and gas extraction in total for Alberta is expected to increase by 3.2% to $57.4 billion, a very solid spending level. Providing further evidence as to the health of the energy sector are the oil production forecasts for Alberta. Based on CAPP production forecasts, production is expected to increase from 2.6 million barrels per day to 3.9 million by 2020, an average annual growth rate of ~7%. Further supporting production levels is a weakening Canadian dollar and an improving U.S. economy which bodes well for crude petroleum exports, which in 2012 was ~60% of Alberta’s total major exports.

Overall, total capital spending intentions for Alberta in 2014 are expected to increase by 2.4% and focusing on key sectors Enterprise Group is exposed to, spending intentions are expected to increase by 3.1% (excl. utilities, 4.1% growth). One key note, capital spending in the utilities sector is expected to decline after a significant increase in 2013, however on an absolute dollar amount it is expected to remain at a higher level versus historical trends. Enterprise Group is expected to benefit from these trends, but also as Enterprise Group integrates new businesses and strengthens its offerings, it provides an opportunity to capture a greater share of the market, particularly in the oil sands.

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Alberta Capital Expenditures

Source: Salman Partners Inc., Stats Can 2013 based on preliminary actual data from Stats Can 2014 based on spending intentions data from Stats Can

Alberta Crude Oil Production Forecast (000s b/d)

Source: Salman Partners Inc., CAPP

Alberta - Capital Expenditures 2011 2012 2013 2014

Alberta 90,026 102,373 111,159 113,822

10.7% 13.7% 8.6% 2.4%

Total of Below Sectors 69,762 82,111 89,514 92,258

Growth 16.9% 17.7% 9.0% 3.1%

% of Total 77.5% 80.2% 80.5% 81.1%

Mining and Oil & Gas Extraction 47,006 54,561 55,603 57,361

Growth 26.8% 16.1% 1.9% 3.2%

% of Total 52.2% 53.3% 50.0% 50.4%

Utilities 4,072 4,916 7,533 6,880

Growth 5.0% 20.7% 53.2% -8.7%

% of Total 4.5% 4.8% 6.8% 6.0%

Construction 1,531 1,772 1,945 2,017

Growth 12.5% 15.8% 9.8% 3.7%

% of Total 1.7% 1.7% 1.7% 1.8%

Transportation and Warehousing 4,685 5,996 8,235 9,304

Growth 19.0% 28.0% 37.3% 13.0%

% of Total 5.2% 5.9% 7.4% 8.2%

Housing 12,468 14,867 16,198 16,696

Growth -7.4% 19.2% 9.0% 3.1%

% of Total 13.8% 14.5% 14.6% 14.7%

2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F

Light & Medium 447 516 543 553 558 565 574 581

Conventional Heavy 151 152 149 146 143 140 137 135

Oil Sands 1,985 2,158 2,280 2,443 2,590 2,766 2,946 3,223

Total 2,583 2,826 2,972 3,142 3,291 3,471 3,657 3,939

Growth 9.8% 9.4% 5.2% 5.7% 4.7% 5.5% 5.4% 7.7%


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Strong infrastructure spending both at the government level and by private sector is indicative of strong construction and industrial related trends in Alberta. In its most recent budget, the provincial government in Alberta has allocated $19.2 billion to spend over the next three years on infrastructure with ~$5 billion alone allocated to the provincial highway network. The provincial highway network projects include ongoing construction of the Edmonton and Calgary ring roads and provincial road rehabilitation work. In terms of large size infrastructure projects, Alberta has 11 out of the top 100 infrastructure projects ranked by Renew Canada, which total about $15.1 billion (~11% of the Top 100).

Capital Spending to Stay at Elevated Levels

Source: Salman Partners Inc., Government of Alberta

Large Infrastructure Projects Slated for Alberta

Source: Salman Partners Inc., Renew Canada

With strong employment growth and continued population growth as workers migrate from other regions, housing starts are another area that is expected to outperform other provinces in Canada. Net migration alone in 2013 was 105,200 people with the majority of individuals within the age range of 20-34 years old. As these individuals settle, continued population growth will be further supported by growing families. These trends translate into higher demand for increased housing and infrastructure needs such as schools, hospitals, etc. Housing starts based on consensus estimates is expected to continue to increase over the next two years versus declines in most other provinces. The value of building permits – a leading indicator for construction activity, further provides evidence that demand is expected to continue at a high growth rate. On a 12-month rolling basis, the value of building permits has increased by 21.2% versus 1.9% for Canada. In fact, building permits have been increasing at a double digit growth rate since the beginning of 2012, whereas for all of Canada it has ranged from the low single digit to mid-single digit growth rates. These trends are very positive for end markets which Enterprise Group serves.

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Government of Alberta Capital Plan ($M)

2014 Top Alberta Infrastructure Projects Value ($M)

Edmonton Valley Line (Southeast to West LRT) 3,200

Calgary International Airport Developments 2,400

Northeast Anthony Henday Drive 1,800

Western Alberta Transmission Line 1,650

H.R. Milner Coal Plant Expansion 1,500

Shepard Energy Centre 1,300

Edmonton North LRT 755

Cassils to Bowmanton to Whitla Transmission Lines 678

Grande Prairie Regional Hospital 621

Edmonton Arena 601

Blackspring Ridge Wind Project 600

Total 15,105

% Value of Top 100 Projects in Canada 10.8%


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Canada – Value of Building Permits Have Leveled Off

Source: Salman Partners Inc., StatsCan, Bloomberg

Alberta – Strong Growth Spells High Demand for Construction and Industrial Related Services


One key risk to note is given the large exposure to the energy sector and other cyclical-based industries, during economic downturns, Alberta’s economy is more exposed. During the downturn in 2009, Alberta’s GDP declined by 4.1% which compares to a decline of 2.7% for Canada. However, given exposure to utilities, government infrastructure spending and a diverse set of blue chip customers, we believe these streams of revenues will partially offset the downside risks in other segments.

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B. Increasing Market Share and Developing New Market Opportunities Provides Further Upside to Revenues

As Enterprise Group acquires different specialized firms with unique offerings, one of its key strategies is to develop a specialized sales force to increase market awareness and target services for new markets. The firms acquired to date had a limited focus on increasing their market as demand was already strong and they were operating at high utilization rates. Given Enterprise Group’s consolidated size and ability to access funding to invest in more equipment, investing in a specialized sales force is the next logical step to leverage opportunities to further grow revenues. We highlight some of these general opportunities below and provide detailed revenue opportunities for each segment in the following section.

Regional Expansion into Neighboring Provinces

Both British Columbia and Saskatchewan have strong economic trends that would generate revenues for Enterprise Group. We specifically focus on construction building trends, which we believe are indicative of the potential demand levels from customers that Enterprise Group would target. B.C. GDP trends are more or less similar to overall national trends, however Saskatchewan has been experiencing stronger growth similar to the trends in Alberta in 2013. Specifically, looking at public infrastructure trends both provinces are expected to invest heavily in infrastructure with B.C. government outlining a $19 billion capital budget plan over the next 3 years with $4.4 billion allocated to transportation related investments. Saskatchewan is planning to spend $850 million on infrastructure in 2013/14 alone, up 8% from the previous year. Saskatchewan is planning to spend $2.2 billion in highways and transportation infrastructure over the next four years. In terms of total (public + private) infrastructure trends, B.C. is a more lucrative market. In Renew Canada’s top 100 projects, B.C. accounted for almost a quarter with a value of $29 billion (~21% of total value) whereas Saskatchewan accounted for about 4 projects (~2% of total value), however we do note that the number of projects in Saskatchewan has doubled from the year before.

B.C. Accounts for ~1/4 of the Top 100 Projects in Canada

Source: Salman Partners Inc., Renew Canada

2014 Top B.C. Infrastructure Projects Value ($M)

Site C Clean Energy Project 7,900

Port Mann Bridge /Highway 1 Improvements 3,300

Vancouver International Airport Upgrades 1,800

Rocky Creek Wind Energy Project 1,500

Evergreen Rapid Transit Line 1,430

Thunder Mountain Wind Project 1,000

John Hart Generating Station Replacement Project 940

The Waneta Expansion 900

Prince Rupert Port Expansion 820

Canpotex Potash Terminal 800

Seaterra Program 783

Mica Generating Station Upgrade 739

Northwest Transmission Line 736

Ruskin Dam and Powerhouse Upgrade 715

Interior to Lower Mainland Transmission Project 709

BC Children & Women's Hospital/Health Center Redevelopment682

Juan de Fuca Power Cable 665

Kicking Horse Canyon Project - Phase 4 631

North Island Hospitals Project 600

Surrey Memorial Hospital Expansion 512

Gordon M. Shrum Generating Station Refurbishment 500

Mount MacDonald Wind Project 500

Upper Lillooet Hydro Project 420

Lions Gate Secondary Wastewater Treatment Plan 400

Total 28,981

% Value of Top 100 Projects in Canada 20.6%


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B.C. Building Permits Indicates a Stable Stream of Construction Activity


After a Strong Growth Period, Saskatchewan Building Permit Trends Indicate Construction Activity is Sustainable at a Higher Base


2013 Western Canada Economic Indicators

Source: Salman Partners Inc., StatsCan B.C. GDP based on B.C. Economic Forecast Council forecasts Alberta GDP forecast based on Government of Alberta Economic Outlook Saskatchewan GDP based on Conference Board of Canada forecasts

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2013 Economic Indicators GDP Employment Growth Unemployment Rate Housing Starts (000s)

Canada 2.0% 1.3% 7.1% 188.0

Alberta 3.3% 2.8% 4.7% 36.1

B.C. 1.4% -0.2% 6.6% 27.1

Saskatchewan 3.8% 3.4% 4.0% 8.3


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LNG Opportunity in B.C. Provides Further Upside to Revenue in 2015-2016

The proposed LNG investments in B.C. are another source of potential revenue growth for Enterprise Group, which is not included in our estimates. Currently, there are 14 different companies which have applied for export licenses with three of those approved for terms of 20-25 years. The project costs for each facility alone ranges from $500 million to ~$35 billion and costs for natural pipeline projects in total are estimated to be ~$18 billion. In addition to the build-out of upstream drilling, pipelines and the LNG facilities there will be other investments needed to support the communities that will grow alongside these projects, such as infrastructure and housing developments. We believe the segments that will most benefit from the LNG related opportunities will be Hart, Artic Therm and CTHA. We do note that none of these projects have made a final investment decision (FID) and the companies involved were waiting to see what tax framework the B.C. government would implement. Given the recent unveiling of the two tier tax policy we expect the companies are one step closer to making those decisions. Nonetheless, companies are spending money despite not having made a FID. The B.C. government has noted that LNG spending was ~$27 billion during 2009-2013, up from ~$1.8 billion in 2000. In 2014 alone, Kitimat LNG partners are expected to spend ~$2 billion. We do not expect these opportunities to have a meaningful impact on Enterprise Group until the 2015-2016 timeframe.

Several Proposed Pipelines in Western Canada

There are numerous pipeline projects announced, proposed or already under construction within the region, however we focus on the larger ones that have been proposed for crude and natural gas that are expected to run through difficult terrains that specialty service providers, such as Enterprise Group are competitively positioned to benefit from. The natural gas pipelines currently proposed total ~$18 billion and are largely expected to run from northern B.C. where the various shale formations, such as Horn River Basin, Liard Basin and Montney Shale exist. The two crude oil pipelines proposed, that also provide potential upside to revenues are the Enbridge Gateway and the Kinder Morgan Trans Mountain pipelines. Both these pipelines start from the Edmonton region and are expected to reach the west coast of B.C. CTHA has already done work for Kinder Morgan in the past and given the established relationship, we expect it should be well positioned to be awarded more work from this project. The construction for this pipeline is expected to start in 2015/2016 and slated for operations by late 2017. The project is estimated to cost ~$5.4 billion. The Enbridge Gateway is estimated to cost ~$6.5 billion and is expected to run 1,177km to the deep water port at Kitimat, also slated for operations in late 2017. We have not included potential revenue related to these opportunities in our estimates.

Proposed Natural Gas Pipelines

Source: Salman Partners Inc., B.C. Business

Crude Oil Pipelines

Source: CAPP

Pipeline Cost Size Location Expected Start Supports

Pacific Trail Pipeline $1.0BN 463Km Summit Lake to Kitimat LNG by 2018 Kitimat LNG

Coastal GasLink $4BN 700Km Montney to export facility near Kitimat early 2014 LNG Canada

Prince Rupert Gas Transmission Line $5BN 900Km Hudson's Hope to Lelu Island end of 2018 Pacific Northwest LNG

Westcoast Connector $8BN unknown Cypress (NE B.C.) to Prince Rupert by 2019


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C. Focused Acquisition Strategy Should Further Strengthen Competitive Position Enterprise Group originally completed an IPO on the TSX Venture as a CPC (Capital Pool Company) for $1.5 million (~6 million shares) in 2004. It then completed its first acquisition on August 24, 2005 purchasing A&G Grant Construction for $3 million. A&G Grant was a company based in Slave Lake, Alberta which provided pipeline construction and oilfield maintenance services. This business no longer exists and the fleet was transferred to the E-One segment. Since the first qualifying transaction, an additional four acquisitions diversifying operations across different specialty services have been completed. Enterprise Group continues to be focused on acquiring more companies which fit the profile of offering unique construction services and specialized equipment that are complementary to existing services and where expansion has been limited due to capital constraints. The key criteria for acquisitions include a strong growth profile over the next 2-3 years, reasonable valuation (<3.0x EV/EBITDA) and ability to retain key executives. The company is targeting to reach ~$150 million in revenues including another acquisition. Our estimates exclude the impact of acquisitions and based on organic growth we expect 2015F revenues to be $106 million. An acquisition of another complementary business could add ~$0.65 per share to the stock price (~45%), by our estimates (assume acquisition drives revenues to $150M, margins are ~40% and excl. costs related to acquisition). In addition to diversifying the business through acquisitions, Enterprise Group continues to gain economies of scale by consolidating capital, management and human resources.

Enterprise Group Acquisitions To Date

Source: Salman Partners Inc., company reports

D. Improving Margin Profile Expected to Drive Strong Earnings Growth Given Enterprise Group’s focus on acquiring complementary businesses that offer specialized services with a strong competitive positioning, EBITDA margins are expected to improve from 25.9% in 2013 to 39.9% by 2015. The key driver of margin expansion over the next two years is the shift in revenue mix towards equipment rental where both Hart and Artic Therm are expected to operate at high utilization rates. When compared to its peer group within the oil and gas service sector, the average for the group in 2013 is expected to be 22.6% increasing to 25.1% by 2015. To put this into perspective, Enterprise Group’s margins are similar to a more stable sector with a recurring base of revenues such as Telecom which on average has EBITDA margins of ~38% (based on TSX/S&P Capped Telecom Index). As a result of the leverage to improving margins, net income is expected to increase y-o-y by 62% in 2015 to $25.7 million, while revenue growth is expected to increase y-o-y by 29.1% to $106.0 million.

2013 vs. 2015F Revenue Mix


Company Acquired Date

Purchase

Price

Trail. EV/EBITDA

Multiple

A&G Grant Construction August 24, 2005 $3M na

T.C. Backhoe & Directional Drilling Inc. May 4, 2007 $13.9M na

Artic Therm International Ltd. (ATI) September 1, 2012 $6.5M 2.4x

Calgary Tunnelling & Horizontal Augering Ltd. (CTHA) June 14, 2013 $12M 2.0x

Hart Oilfield Rentals January 3, 2014 $22.6M 3.1x

Utilities / Infrastructure Construction,

76%

Equipment Rental, 23.6%

2013 % Revenues by Major Segment

Utilities / Infrastructure Construction,

38%

Equipment Rental, 61.8%

2015F % Revenues by Major Segment


12

BUSINESS OVERVIEW

Enterprise Group Inc. is a TSX-listed stock which operates five distinct companies classified into two major business segments: Utilities and Infrastructure Construction Group and Equipment Rental. Enterprise Group is primarily a consolidator of construction services tied to energy, utility and transportation infrastructure industries.

Enterprise Group was established in 2004 (originally under the name Enterprise Oil Ltd.) and since then has been acquiring businesses that are based in Western Canada with complementary services. The company is focused on acquiring companies where they can consolidate capital, management and human resources while leveraging strong revenue with higher margins. The company is headquartered in St. Albert, Alberta with 15 additional offices throughout Alberta and B.C. An additional two branches are expected to be added near term.

Enterprise Group Locations

Source: Company reports

Utilities and Infrastructure Construction Group

Calgary Tunnelling & Horizontal Augering Ltd. (CTHA) (~20% of 2014E Consolidated Revenues)

CTHA was recently acquired in June 2013 for $12 million (excluding working capital). CTHA provides highly specialized underground infrastructure services, primarily in situations where an open trench is not possible. Examples include construction activities at the Calgary Airport where tunnelling activities are required under runways and buildings. Revenues are generated from a diverse group of sectors including railways, energy, utilities and pipeline companies within Western Canada (Alberta, B.C. and Saskatchewan) and tend to be tied to large infrastructure type projects. The business has limited competitors in the space and retaining labour is critical as training new members to operate specialized tunnelling equipment can take up to one year and could potentially disrupt operations.

Revenues are expected to increase by 5% to $16M in 2014, up from $15.2M in 2013 on an organic basis (revenues allocated to Enterprise Group starting June 2013 are ~$10M). Revenues are expected to further increase by 12.5% to $18 million in 2015. Revenues are supported by strong infrastructure and construction trends and by targeting a greater share of the addressable market and providing a more complete service offering by leveraging equipment offered through other divisions (i.e., E-One). There is further upside to revenues from pipeline development projects in the region and opportunities tied to the potential LNG projects in northern B.C.


13

T.C. Backhoe & Directional Drilling (~24% of 2014E Consolidated Revenues)

T.C. Backhoe is primarily involved in installing and repairing underground power, telecommunications and natural gas lines and generates majority of its revenues from large based utility companies, including telecommunications and cable companies. The company has been operating around the Edmonton, Alberta region since 1975 and Enterprise Group acquired the company for $14 million in the spring of 2007. Since the acquisition, revenues generated from this segment have been a significant component of operations; in 2011 it was 77% of consolidated revenues and by the end of 2013 revenues were <50% as additional businesses have been acquired. To date, revenues have been increasing at a healthy rate and given the trends, particularly as it relates to new subdivision development and major road and highway projects, revenues are expected to continue to grow in the mid-teen growth rate. In 2014, we expect revenues to increase by 20.0% to $20 million and in 2015 we expect revenues to increase by 12.5% to $22.5 million.

T.C. Backhoe is expected to continue to benefit from the strong housing and development trends in the Edmonton region. For 2013, the greater Edmonton area posted the best residential construction trends since 2007, with housing starts up over 14% on a yearly basis (single-detached starts increased 5.5% and multi-family starts were up 22%). Looking forward, the increase in the Edmonton area building permit values (up 15% to $4.81 billion in 2013) indicates the robust activity should continue. In addition, the division is also in the process of expanding its hydrovac services with 10 hydrovacs currently in operation and an additional six expected over the next six months. Mobile hydrovacs result in more accurate excavations resulting in less downtime and increased safety. The margin profile should also improve as higher utilization of hydrovacs results in lower labour and supply costs. Overall for the segment, approximately 40% of revenues are generated from long term contracts (defined as 12-18 months), which partially offsets the volatility around shorter term contracts in other segments.

Equipment Rental

E-One Limited (~2% of 2014E Consolidated Revenues)

E-One is a heavy equipment rental business which primarily serves the oilfield and construction sectors in and around Slave Lake. The E-One division was launched in Q1 2012 by sourcing the equipment from a former division. The fleet includes excavators, bulldozers and pipe layers and typical rental rates range from $5,500 to $19,500 per month, with utilization rates around 60% to 95%. The majority of the revenues for this division are generated during the first quarter of the year. E-One is not a strategic focus for the company and as such limited investments and revenues are expected to be generated going forward.

Artic Therm International Ltd. (~18% of 2014E Consolidated Revenues)

Artic Therm rents out advanced and environmentally friendly flameless heaters, which are ideal for use in remote locations and extreme weather conditions. The heating units can be utilized for various applications with heat output ranging from 500,000 to 3.3 million BTUs. The heating units offer several key advantages over other industrial heaters such as being more efficient, which leads to lower operating costs and can be utilized for larger surface areas, given the forced air capacity (transfers the heat further distances, up to 15,000 CFM).

The heating units are based on proprietary technology and the company holds several patents which have on average 6 to 9 years left until expiry. Given the patent protection, Artic Therm has no direct competitors in their space that can offer similar benefits. One key area Artic Therm has been a pioneer in, is the thermal pipeline expansion solution where heat is applied to pipelines being laid during the winter months to accurately gauge the expansion and contraction characteristics of the pipeline throughout the year. This results in lower ongoing maintenance costs for companies managing the pipelines.

Previous management largely focused on revenue opportunities during the winter season, however Enterprise Group is focused on expanding the business into other markets which should lead to less seasonality in revenues over time. One example of a potential revenue opportunity would be the maintenance and cleaning process for large tanks in the oil and gas sector. In the O&G sector, every three years certain tanks need to be verified and maintained for integrity and safety purposes. This process traditionally can take up to two to three weeks, however the flameless heaters at Artic Therm can de-humidify and dry the tanks within 48 hours resulting in lower costs and faster turnaround times for the customer. This opportunity is very attractive given the recurring nature of revenues and the large installed base of tanks within Enterprise Group’s regions. Enterprise Group has completed a pilot program testing the process and ensuring there is value added in terms of safety, costs and turnaround times relative to the current processes employed. Enterprise Group is now working on establishing relationships with the larger companies and given the nature of the business and stringent safety and approval processes, gaining acceptance for a new application can be a lengthy process. Given the versatility and mobility of the equipment this is just one


14

application Enterprise Group is targeting, there are numerous other potential industrial applications that can be targeted over time.

Artic Therm was founded in 1997 and then acquired by Enterprise Group in September 2012 for $6.5 million. Given the timing of the acquisition, revenues generated in 2012 had a minimal impact on consolidated results and then in 2013 accounted for majority of the revenues in the Equipment Rental segment. Currently, there are 105 small units and 7 large units which on average have high utilization rates (~90%) throughout the winter season, peaking in Q1. Enterprise Group expects to add an additional three large units in early 2014 which on average costs ~$500K each. Given limited competition and strong pricing power, payback on these units is approximately one month assuming 100% utilization. For 2014, we expect revenues to roughly double from 2013 given the strong demand levels, increase in units and dedicated sales force. For 2015, we expect revenues to increase a further 37.9% to $20 million.

Hart Oilfield Rentals Ltd. (~36% of 2014E Consolidated Revenues)

Hart is primarily a full service one-stop oilfield site service and infrastructure company. Hart primarily provides conventional and modular/combo rental equipment to Tier One E&P customers operating within the Western Canadian Sedimentary Basin. Hart designs, manufacturers and assembles its own modular and combo equipment and has 14 patent pending modular designs, which allows for more customized solutions depending on the site. In total, the rental fleet comprises of ~1,500 pieces. Hart also provides service and technical support which is included in the rental rates. The company currently has five branches located throughout Alberta and one in B.C.

Enterprise Group acquired the business in November 2013 for $22.6 million (closed January 2014) and is expected to generate revenues of $29.9 million in 2014 (up 31% from 2013). The two key drivers of revenues for 2014 are the addition of more packages to meet increased demand levels and offering more rental equipment directly instead of through a third party (currently ~500 pieces) which results in revenue sharing (currently Hart only captures 20% of the rental stream associated with third party rentals). Another key benefit of the Hart acquisition is the ability to offer Artic Therm flameless heaters to its existing customer base, which is not included in our estimates.


15

FINANCIAL OUTLOOK

We forecast EPS to grow by 25% in 2014 to $0.10 and a further 60% in 2015 to $0.16. We expect EPS to benefit from strong revenue growth in all segments, including the impact of the Hart acquisition in 2014 and 2015. We also expect EPS to increase at a higher growth rate than top line revenue growth as revenue mix shifts towards higher margin equipment rental revenues. Our EPS estimates assume an effective tax rate of 25% starting in 2014.

Given visibility on current customer demand levels and contracts, we expect organic revenue growth to be 29%-30% for both 2014 and 2015. In addition there are several opportunities for Enterprise Group to leverage providing more upside to revenues, including expansion into new regions, new market opportunities and gaining more market share in existing markets. We provide a more in depth analysis around revenue expectations for each segment in the previous section.

Revenue Growth Forecasts (000s)

Note: Organic growth adjusts for acquisitions Source: Salman Partners Inc., company reports

Margins are expected to expand significantly over the forecasted period. In 2014, margins are expected to improve by ~815bps to 34.1%, and then in 2015 by a further ~590bps to 39.9%. Margins will benefit from consolidating costs as integration of new acquisitions are completed and from revenue mix changes towards higher margin businesses, such as Hart and Artic Therm.

Enterprise Group EBITDA Trend


Segment 2012 2013 2014F 2015F

Utilities / Infrastructure Construction 15,248 26,622 36,000 40,500

Equipment Rental 3,256 8,227 46,088 65,512

Consolidated Revenues 18,504 34,849 82,088 106,012

% Y-o-Y Growth 3.5% 88.3% 135.6% 29.1%

% Y-o-Y Organic Growth 3.5% 10.8% 30.4% 29.1%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

(5,000)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2010 2011 2012 2013 2014F 2015F

Marg

in (

%)

Enterprise Group EBITDA and EBITDA Margin Trend

EBITDA % EBITDA Margin


16

Near-term free cash flow is expected to be impacted by an aggressive capital spending program. Over the next two years, Enterprise Group is expected to spend $20M annually on capex to support future growth, primarily for Artic Therm and Hart segments. In addition, we expect there to be a step up in working capital requirements to accommodate the acquisition of Hart. As a result, on a simple free cash flow basis we expect Enterprise Group to turn positive in 2015. We highlight that to support the capital spending program over the next two years, Enterprise Group has accessed the capital markets for equity financings. Enterprise Group also has a senior credit facility to borrow up to $35 million, which at the end of Q4 2013 had a balance of $15.2 million.

Simple Free Cash Flow Summary


Balance sheet and debt levels expected to improve over time. At the end of Q4 2013, net debt stood at $21.8 million and net debt to total capitalization was at 42.4%. We expect an improvement to be made in debt levels going forward and expect longer term net debt to total capitalization of ~25% or less. Total cash on hand at the end of Q4 2013 was $4.6 million and book value per share was $0.30. Replacement value based on an asset base of ~$50 million is $0.51 per share based on outstanding shares as of Q4 2013 (based on 164.9 million shares which includes recent financings, the replacement value is $0.30 per share).

Enterprise Group Consolidated Financial Profile


Year Ending December 2010 2011 2012 2013 2014F 2015F

Cash Flow From Operations (incl. W/C) (1,070) 405 1,918 9,577 8,791 21,698

Capital Expenditures (23) 72 (2,968) (9,335) (20,000) (20,000)

FCF (1,093) 477 (1,050) 242 (11,209) 1,698

FCF Margin -7.0% 2.7% -5.7% 0.7% -13.7% 1.6%

FCF per Share ($0.02) $0.01 ($0.02) $0.00 ($0.07) $0.01

(20,000)

0

20,000

40,000

60,000

80,000

100,000

120,000

2010 2011 2012 2013 2014F 2015F

CD

N $

M

Enterprise Group Financial Profile

Revenues Gross Profit EBITDA EBIT


17

Enterprise Group Cash Flow Profile


FINANCINGS Since the end of Q3 2013, Enterprise Group has been active in accessing funds through various different means to support its recent acquisitions and capital spending program for 2014-2015. The key recent financings are:

November 20, 2013: Increased senior secured finance facility from $20M to $35M with interest rate of

prime +2%.

December 20, 2013: Equity financing of $15M completed, where subscription receipts for $0.72 per receipt

were issued (total subscription receipts 20.8M). Each subscription receipt entitles holder to one common

share + ½ common share purchase warrant. A full warrant entitles holder to purchase one common share at

$1.00 for 24 months after closing. In addition, broker warrants of 1.3M (6% of total subscription receipts)

were issued, entitling the holder to purchase one common share at $0.80 per share for up to 24 months after

close.

March 25, 2014: Equity financing of $27.6M completed, where 27.6M common shares were issued for $1.00

per share. The financing included the exercise of the over-allotment option for 3.6M common shares. In

addition, broker warrants of 1.38M were issued, entitling the holder to purchase one common share at $1.00

per share for a period of 24 months after close.

(15,000)

(10,000)

(5,000)

0

5,000

10,000

15,000

20,000

25,000

2010 2011 2012 2013 2014F 2015F

$M

Enterprise Group Cash Flow Profile

Cash Flow From Operations (incl W/C) Capex Free Cash Flow


18

VALUATION AND RECOMMENDATION We are initiating coverage on Enterprise Group with a BUY rating and a 12-month target price of $1.45, for a

potential total return of 46%. Our target price is based on a 6.0x EV/EBITDA target multiple applied to our 2015E EBITDA of $42.3 million. Our target price translates into a ~9.2x P/E multiple.

We value Enterprise Group’s operations using an EV/EBITDA multiple compared against a group of similar publicly traded companies within the oil and gas service sector. The historical trading range for Enterprise Group is not a relevant benchmark given the number of acquisitions made recently. However, we did take into consideration the revenue contribution of the different segments going forward and the comparable multiple that should be applied to each segment to derive our consolidated target EV/EBITDA multiple. Based on this approach our target multiple is 6.0x, taking into consideration workforce accommodation companies such as Black Diamond Group Ltd. and Horizon North logistics, which currently trade between F EV/EBITDA of 6.0x to 8.0x, based on 2015 consensus estimates. We also took into consideration companies such as Badger Daylighting and Lonestar West which also trade at higher multiples relative to the overall group. We believe given the strong earnings profile for the company a 6.0x target multiple is justified relative to the group average of 5.1x (~17% premium). Provided management executes well on integrating recently acquired acquisitions and given the favorable growth and EBITDA margin outlook, we believe the stock will re-rate higher on a multiple basis and will warrant an even higher premium relative to its comparables. Our valuation assumes net debt of $17.7 million and fully diluted shares of 164.9 million which includes the recent equity financing for $27.6 million.

EV/EBITDA Comparative Valuation

Note: Conversion of convertible debt included in share count. Net debt excludes convertible debenture of $4.1M as of Q4 2013. Source: Salman Partners Inc., company reports

Comparative Valuations

Numbers in millions except per share data and multiples. Forecasts for Enterprise Group Inc. are Salman Partners Inc. estimates. *2013 data based on actuals As of April 7, 2014 Source: Salman Partners Inc., Bloomberg, Thomson Reuters

EV/EBITDA Comparables Valuation

2015E EBITDA ($000s) 42,333

Multiple 6.0x

Enterprise Value (value of operating assets) 253,998

Less: Net Debt 17,704

Equity Value 236,294

Outstanding Shares (F/D) 164,900

Equity Value / Share $1.43

Implied P/E Multiple 9.2x

Dividend Market Net Debt / P/E P/E P/E EV/EBITDA EV/EBITDA EV/EBITDA

Company Name Ticker Price Yield EV Cap EBITDA 2013F 2014F 2015F 2013F 2014F 2015F

Enterprise Group Inc. E-TSX $0.99 na 156 137 2.2x 12.4x 9.9x 6.2x 17.2x 5.6x 3.7x

Aveda Transportation AVE-TSXv $4.95 na 122 99 1.1x 16.4x 9.5x 8.8x 8.4x 4.3x 3.7x

Badger Daylighting* BAD-TSX $41.36 0.9% 1,605 1,532 1.7x 37.9x 30.2x 25.6x 19.1x 14.4x 11.9x

Black Diamond Group Ltd.* BDI-TSX $34.03 2.6% 1,588 1,440 1.0x 23.8x 19.2x 16.5x 9.5x 9.1x 7.9x

CERF Incorporated CFL-TSXv $2.95 8.1% 48 48 1.4x 14.0x 9.8x 8.4x 3.8x 3.1x 2.8x

ENTREC Corp.* ENT-TSXv $1.45 na 268 167 2.3x 12.1x 7.9x 6.9x 5.9x 4.1x 3.6x

Essential Energy Services* ESN-TSX $2.81 4.3% 390 353 0.4x 15.4x 9.8x 7.5x 6.8x 4.8x 3.9x

High Arctic Energy Services* HWO-TSX $4.43 4.1% 200 222 na 7.5x 8.4x 8.1x 4.3x 4.0x 3.8x

Horizon North Logistics Inc.* HNL-TSX $8.10 4.0% 972 892 0.7x 21.3x 15.6x 12.4x 7.7x 6.8x 5.7x

Logan International* LII-TSX $6.35 na 280 213 1.1x 11.5x 7.0x 5.5x 6.4x 4.6x 4.0x

Lonestar West Inc. LSI-TSXv $2.89 na 65 65 2.1x 31.1x nmf 24.1x 16.0x 9.8x 5.3x

Macro Enterprises* MCR-TSXv $5.28 na 158 158 na 6.8x 5.6x 4.7x 4.0x 3.1x 2.6x

N. American Energy Partners* NOA-TSX $8.10 1.0% 392 282 2.4x nmf 30.4x 16.2x 12.5x 6.6x 5.5x

Petrow est Corp.* PRW-TSX $0.95 na 246 164 1.5x nmf 11.5x 8.6x 7.8x 5.7x 5.0x

Total Energy Services* TOT-TSX $20.48 1.2% 712 641 0.6x 17.2x 12.7x 9.9x 8.0x 6.6x 5.5x

Western Energy Services* WRG-TSX $9.60 3.1% 953 705 2.0x 14.8x 13.3x 11.2x 6.2x 6.2x 5.7x

WesternOne Equity* WEQ-TSX $7.42 8.1% 358 232 5.7x nmf 30.7x 14.6x 11.8x 6.8x 5.7x

Average 17.7x 14.8x 11.8x 8.6x 6.3x 5.1x

Average - for M arket Cap < $250M 14.2x 13.4x 10.6x 8.1x 5.2x 4.2x


19

Sensitivity Analysis

We stress tested our valuation across different multiple ranges and growth scenarios for our forecasts in 2015.

In our downside scenario we assume that revenues in Calgary Tunnelling and TC Backhoe will hold up relatively well compared to the other segments, given their exposure to infrastructure spending which is partially supported by government spending. Given Artic Therm and Hart’s exposure towards end markets are more heavily tied to cyclical spending, we assumed revenues would decrease by 50%-70%. For E-One we assume zero revenues in our downside case. As a result, consolidated revenues are $51.4 million in our downside case. EBITDA margins are assumed to be 25% and EPS is $0.02. We highlight that the current replacement value of ~$50 million translates to $0.30 per share (based on 164.9M F/D shares).

In our upside scenario we assume an additional acquisition will be completed which will result in revenues of $150 million. EBITDA margins are assumed to be 39.9% similar to our base case and EPS is $0.24. Our analysis excludes any additional acquisition related costs.

Scenario Analysis


EV/EBITDA Multiple

$1.43 5.0x 5.5x 6.0x 6.5x 7.0x

EBITDA Downside 12,859 $0.28 $0.32 $0.36 $0.40 $0.44

($000s) Base 42,333 $1.18 $1.30 $1.43 $1.56 $1.69

Upside 59,850 $1.71 $1.89 $2.07 $2.25 $2.43


20

SELECTED KEY MANAGEMENT

Leonard D. Jaroszuk – President, Chairman & CEO

Mr. Jaroszuk has over 28 years of experience across various sectors including Real Estate, Construction, Natural Resources and Exploration. Mr. Jaroszuk has been involved with Enterprise Group since its initial stages in 2004 and has managed the company through the downturn of 2008-2009. Mr. Jaroszuk has been instrumental in evolving the company into a diversified specialized service and equipment provider. Prior to Enterprise Group, Mr. Jaroszuk was the President & CEO of a private financial investment company. Mr. Jaroszuk also currently serves as the President & CEO of Samoth Oilfield Inc. (TSXv: SCD) and is a member of the Board of Directors for Dalmac Energy Inc. (TSXv: DAL).

Desmond O’Kell – Director, Senior Vice President & Corporate Secretary

Mr. O’Kell has over 25 years of experience in various functions such as corporate development, finance and business operations. Mr. O’Kell has been with Enterprise Group since its inception and has been a board member since 2011. Mr. O’Kell is also a board member of Samoth Oilfield Inc. (TSXv: SCD) and has extensive experience with private and public companies within the mining and resource sector.

Warren Cabral – Chief Financial Officer

Mr. Cabral recently joined Enterprise Group in 2013. Mr. Cabral has extensive finance experience and was most recently with the Alberta Investment Management Corporation as a CFO.

Doug Bachman – Chief Operating Officer

Mr. Bachman has over 25 years of experience in corporate finance and management, including experience at a tier-one Canadian chartered bank.

Source: Company reports

TOP 10 MAJOR SHAREHOLDERS

As of March 5, 2014 *These individuals also sit on the Board of Directors Note: Ownership summary does not take into account recently completed equity financing. We provide estimate % based on 164.9M shares. Note composition of top 10 shareholders also expected to change. Mr. Jaroszuk is a controlling shareholder of West One Limited Mr. O’Kell is a controlling shareholder of Eland Jennings Investor Services Source: Bloomberg

Top Ten Investors % Ownership

% Est. Based on

Updated Share Count

Leonard D Jaroszuk* 5.45% 3.66%

West One Limited 5.42% 3.64%

Sprott Inc. 2.83% 1.90%

Douglas Bachman 0.55% 0.37%

Ronald Ingram 0.54% 0.36%

Desmond O'Kell* 0.52% 0.35%

Redwood Asset Management 0.40% 0.27%

John H. Pinsent* 0.19% 0.13%

Warren Cabral 0.13% 0.09%

Eland Jennings Investor Services 0.08% 0.05%

16.11% 10.83%


21

KEY RISKS

Integration Risk A key part of Enterprise Group’s strategy is to acquire companies with complementary services and grow revenues to ~$150 million within the next two years. Integrating new operations can be highly risky as key talent needs to be retained and customers transitioned smoothly.

Commodity Prices A significant portion of Enterprise Group’s revenues are tied to the oil and gas industry. As a result, fluctuations in oil prices will impact customers demand for some of Enterprise Group’s services.

Overall Economy The majority of Enterprise Group’s revenues are generated in Alberta (~90%) and given the cyclical nature of Enterprise Group’s business, the overall health of Alberta’s economy impacts operations.

Labour Enterprise Group’s operations are reliant on highly skilled management, sales and technical personnel. The ability to retain, develop and attract qualified employees is an important part of the overall strategy. Failure to maintain a skilled workforce impacts Enterprise Group’s ability to run its operations.

Government Regulation Enterprise Group’s businesses are tied to industries which are highly regulated by the government. Any changes in government regulations could impact demand levels for Enterprise Group’s services, examples include approval process for pipelines.

Weather Companies operating in regions such as Alberta experience extreme weather conditions. Adverse weather conditions may impact operations, which may result in lower revenues. For example, lower temperatures in the winter leads to difficulty in mobilizing equipment, adversely impacting the number of operating days.


22

APPENDIX A: FINANCIAL MODEL

Income Statement

EBITDAS is adjusted for share based payments as per company reporting Source: Salman Partners Inc., company reports

Cash Flow Statement


Year Ending December 2010 2011 2012 2013 Q1 2014F Q2 2014F Q3 2014F Q4 2014F 2014F 2015F

Total Revenues 15,623 17,884 18,504 34,849 19,128 12,555 20,569 29,836 82,088 106,012

% Growth -43.6% 14.5% 3.5% 88.3% 114.8% 160.2% 105.5% 168.5% 135.6% 29.1%

Cost of Sales 13,833 13,173 10,842 19,537 7,864 7,045 10,366 13,984 39,258 47,634

Gross Profit 1,790 4,710 7,662 15,312 11,264 5,510 10,204 15,853 42,829 58,378

% Gross Margin 11.5% 26.3% 41.4% 43.9% 58.9% 43.9% 49.6% 53.1% 52.2% 55.1%

Growth (bps) 375bps 1488bps 1507bps 253bps 47bps 931bps 636bps 1611bps 824bps 289bps

% Growth -16.2% 163.1% 62.7% 99.8% 116.5% 230.2% 135.8% 285.3% 179.7% 36.3%

EBITDAS (833) 2,510 4,332 9,980 7,640 3,019 6,504 10,797 27,960 42,333

% Margin -5.3% 14.0% 23.4% 28.6% 39.9% 24.0% 31.6% 36.2% 34.1% 39.9%

PT Growth (bps) 77bps 1937bps 938bps 523bps -387bps 2394bps -724bps 1650bps 542bps 587bps

% Growth -50.7% -401.2% 72.6% 130.4% 95.8% 61984.6% 67.3% 393.6% 180.1% 51.4%

EBIT (3,262) 820 2,550 6,360 6,211 1,589 5,075 9,367 22,243 35,067

% Margin -20.9% 4.6% 13.8% 18.3% 32.5% 12.7% 24.7% 31.4% 27.1% 33.1%

Per Share ($0.07) $0.02 $0.05 $0.08 $0.04 $0.01 $0.03 $0.06 $0.13 $0.21

Net Earnings (Loss) (5,564) 79 2,489 5,782 4,449 983 3,597 6,816 15,846 25,673

Diluted EPS ($0.11) $0.00 $0.05 $0.08 $0.03 $0.01 $0.02 $0.04 $0.10 $0.16

Outstanding Shares (F/D) 48,682 51,516 56,186 75,753 164,900 164,900 164,900 164,900 164,900 164,900


Operating Activities

Net Income (5,564) 79 2,489 5,782 15,846 25,673

Items Not Affecting Cash 4,288 2,156 2,213 3,364 6,831 8,102

Cash Flow from Operations Before W.C. (1,276) 2,235 4,701 9,146 22,677 33,775

Total Changes in Working Capital 206 (1,829) (2,434) 1,192 (19,169) (20,635)

Net Cash Provided by Operating Activities (1,070) 405 1,918 9,577 3,509 13,141

Investing Activities

Purchase of PPE, Rental Equipment (883) (427) (3,226) (9,465) (20,000) (20,000)

Proceeds on Disposal of PPE, Rental Equipment 860 499 258 131 0 0

Other (Acquisitions, etc.) 0 0 (4,599) (12,708) (20,930) 0

Net Cash Provided by Investing Activities (23) 72 (7,566) (24,093) (40,930) (20,000)

Financing Activities

Repayment/New Issued Debt (183) (1,410) 6,414 9,749 (987) 0

Private Placement of Issuance of Common Shares 0 913 0 5,172 42,601 0

Share Issue Costs 0 (15) 0 (557) 0 0

Stock Options Exercised 0 0 15 422 0 0

Warrants Exercised 0 0 13 3,147 0 0

Other

Net Cash Provided by Financing Activities (183) (512) 6,443 17,932 41,614 0

Change in Cash and Cash Equivalents (1,276) (35) 794 3,417 4,193 (6,859)

Cash and Cash Equivalents, Beginning of Year 1,668 392 357 1,152 4,568 8,761

Cash and Cash Equivalents, End of the Period 392 357 1,152 4,568 8,761 1,902


23

Balance Sheet


APPENDIX B: RELATIVE PERFORMANCE OF ENTERPRISE GROUP VS. MAJOR INDICES

As of April 7, 2014 Source: Salman Partners Inc., Bloomberg


Assets

Cash and Short-term Investments 392 357 1,152 4,568 8,761 1,902

Other Current Assets 3,856 7,096 7,742 14,411 37,934 54,887

Long-term Assets 10,481 9,221 19,557 47,898 85,754 98,489

Total 14,729 16,674 28,450 66,877 132,449 155,277

Liabilities

Current Liabilities 6,142 6,515 2,454 9,302 13,266 11,254

Long-term Liabilities 829 1,254 13,971 28,030 29,686 29,686

Shareholders' Equity 7,758 8,905 12,026 29,545 89,497 114,337

Total Liabilities and Shareholders' Equity 14,729 16,674 28,450 66,877 132,449 155,277

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Relative Price Performance

Enterprise Group

S&P/TSX Composite Index

S&P 500 Index

S&P/TSX Capped IndustrialsIndex

S&P/TSX Capped Energy Index

S&P/TSX Small Cap Index


24

SUMMARY: ENTERPRISE GROUP INC.Price (TSX:E.CN) $0.99Shares O/S (M) 144.9Shares FD (M) 164.9Market Cap (M) $143.5Net Debt (M) $21.8Enterprise Value (M) $165.2Earnings Yield 8.1%FCF Yield (1.3)%BVPS $0.30Order Backlog (M) NA52-Week High $1.1952-Week Low $0.41

Recommendation BUY12-Month Target $1.4512-Month Potential Return 46.0%Dividend Rate (Cdn$/share) 0.00Yield 0.0%Avg. Daily Trading Volume (52 week) 733,377

Major Shareholders (% of shares o/s):Leonard D. JaroszukWest One LimitedSprott Inc.Douglas Bachman

5.5%5.4%2.8%0.6%

Fiscal Year EPS (f/d)(Dec) Q1 Q2 Q3 Q4 FY Y/Y%2011A $(0.01) $(0.02) $0.01 $0.02 -- NA2012A $0.00 $0.01 $0.00 $0.03 $0.05 NA2013A $0.05 $(0.02) $0.05 $0.01 $0.08 60.0%2014F $0.03 $0.01 $0.02 $0.04 $0.10 25.0%2015F -- -- -- -- $0.16 60.0%

Financial Forecasts 2011A 2012A 2013A 2014F 2015FTotal Revenue $17.9 $18.5 $34.8 $82.1 $106.0EBITDA $2.1 $4.0 $9.0 $28.0 $42.3EBIT $0.8 $2.6 $6.4 $22.2 $35.1Net Earnings $0.1 $2.5 $5.8 $15.8 $25.7Cash Flow from Operations (bf changes in working capital) $2.2 $4.4 $8.4 $28.0 $42.3Capital Expenditures $(0.4) $(3.2) $(9.5) $(20.0) $(20.0)Free Cash Flow (before changes in working capital) (before dividends) $2.3 $1.4 $(0.9) $8.0 $22.3Per Share DataShares Outstanding FD 51.5 56.2 75.8 164.9 164.9EPS (f/d) -- $0.05 $0.08 $0.10 $0.16CFPS (before changes in working capital) $0.04 $0.08 $0.11 $0.17 $0.26FCFPS (before changes in working capital) (before dividends) $0.04 $0.02 $(0.01) $0.05 $0.14Margin AnalysisEBITDA Margin 11.6% 21.7% 25.9% 34.1% 39.9%EBIT Margin 4.6% 13.8% 18.3% 27.1% 33.1%FCF Margin 2.7% (5.7)% 0.7% (13.7)% 1.6%Return AnalysisROE 0.9% 25.6% 29.2% 26.6% 25.2%ROA 4.9% 14.0% 16.0% 16.7% 18.3%ROC 6.4% 15.7% 19.4% 21.2% 21.6%Debt Service MetricsNet debt-to-Total Capitalization ratio 35.2% 50.2% 42.4% 15.6% 17.0%Net debt-to-TTM EBITDA ratio 2.3x 3.0x 2.4x 0.6x 0.6xTTM Interest Coverage 1.2x 6.2x 4.7x 20.0x 41.9xTTM EBITDA-to-Interest Ratio 3.0x 9.8x 6.7x 25.1x 50.6xValuation Multiples 2011A 2012A 2013A 2014F 2015FP/E NA 4.6x 9.8x 9.9x 6.2xEV/EBITDA 5.0x 6.3x 10.7x 5.9x 3.9xEV/EBIT 12.7x 9.9x 15.1x 7.4x 4.7xP/CFPS 2.5x 3.0x 7.0x 5.8x 3.9xAll figures in Cdn$ millions, except per share data.Source: Company reports, Bloomberg, Thomson ONE Analytics, Salman Partners Inc. research


25

RISKS

The greatest risk to Enterprise Group is a downturn in Alberta's economy, particularly energy, as ~90% of revenues aregenerated within the province. Other risks include ability to retain skilled labour, impact of changes in commodity prices(i.e., oil prices), government regulation and extreme weather conditions.

Company Description

Enterprise Group Inc. is a TSX -isted stock which operates five distinct companies classified into two major business segments:Utilities and Infrastructure Construction Group and Equipment Rental. Enterprise Group is primarily a consolidator ofconstruction services tied to energy, utility and transportation infrastructure industries.


26

Salman Partners Inc. DisclosureIn accordance with NASD Rule 2711 and IIROC Rule 3400, Salman Partners Inc. (“Salman Partners”) refers the reader to ourwebsite (www.salmanpartners.com) for our firm’s specific disclosures, policies and procedures in respect of research analystsand research reports. Salman Partners hereby confirms that as of the date of this report:(i) the research analyst(s) referenced herein and any member of the research analyst’s household, or an individual directly

involved in the preparation of this report, does not hold a financial interest in the securities of the company in this report;(ii) the Pro Group holdings of the firm, whether long or short, do not exceed 1% of the outstanding securities of any class of

securities of the company mentioned in this report;(iii) the research analyst(s) who prepared this report receives compensation that is based, in part, upon the firm’s overall

investment banking revenues;(iv) Salman Partners Inc., including some or all of its officers, directors and employees, has provided underwriting services

to Enterprise Group Inc. during the past 24 months. Specifically, we acted as underwriter in a syndicate for a Cdn$27.60 million bought deal units offering that closed on March 25, 2014. Salman Partners Inc. may receive or may seekcompensation for investment banking services from the company herein within the next 3 months.other than what is disclosed above, Salman Partners Inc., including some or all of its officers, directors and employees,have not provided services, including investment banking services to the company/companies herein during the past 24months and may receive or seek compensation for investment banking services from the company/companies hereinwithin the next 3 months;

(v) Salman Partners Inc. does not make a market in the company’s/companies’ securities within the appropriate securitylaws;

(vi) no officer, director, employee or research analyst of the firm or a member of the research analyst’s household is an officer,director or employee of the company/companies, nor does any officer, director, employee or research analyst of the firmor a member of the research analyst’s household serve in any advisory capacity to the company/companies; and

(vii) other than what is disclosed above, Salman Partners Inc. is not aware of any actual, material conflicts of interest for theresearch analyst, of which the research analyst knows or has reason to know in the preparation of this report.

(viii) an analyst/associate has not visited some or all of the issuers' material operations.Payment or reimbursement has not been received, in part or in whole, from the issuer(s) for travel costs in the past 12months.

(ix) Analyst Certification: The views expressed in this report (which includes the rating assigned to the issuer’s shares as wellas the analytical substance and tone of the report) accurately reflect the personal views of the analyst(s) covering thesubject securities. No part of the analyst’s compensation was, is, or will be directly or indirectly related to the specificrecommendations.

For purposes of our research report, our rating system is defined as follows:Top Pick A recommendation to purchase a stock which represents the best risk/reward ratio within an analyst's

coverage list. The analyst expects to realize a minimum 12-month return of 10%, and also has positive near-term catalysts.

Buy A recommendation to purchase the stock at the current price.Hold A recommendation to maintain one’s current position in the company, given the current share price and the

outlook for the company, sector or underlying commodity.Sell A recommendation to reduce one’s share position, either in part or in whole.Speculative Buy A recommendation to purchase shares in a company which is considered speculative because of the risk

associated with owning shares. This added risk can be attributed to the company’s size, financial stability,liquidity, the outlook for a commodity or commodities or other factors beyond Salman Partners’ control.Suitable for risk-tolerant investors only.

Under Review Salman Partners is in the process of an update based on recently released information. The analyst’srecommendation and target price may or may not change upon completion of analysis.

Ratings Distribution & Investment Banking DisclosureCovered companies in each Category Within the last 12 months, Salman Partners has

provided investment banking services for:TOP PICK (TP) 3% TOP PICK (TP) 0%BUY (B) 24% BUY (B) 6%HOLD (H) 16% HOLD (H) 4%SELL (S) 1% SELL (S) 0%SPECULATIVE BUY (SB) 10% SPECULATIVE BUY (SB) 7%UNDER REVIEW (UR) 47% UNDER REVIEW (UR) 0%

http://www.salmanpartners.com?

RESEARCHTerry Salman, B.A., MBA, D. Tech., h.c. Co-Director of Research 604-685-2450

Mike Plaster, CFA Co-Director of Research 604-622-5295

Coal & Alternative EnergyMike Plaster, CFA Investment Analyst 604-622-5295

Mathieu Chevrier, CFA Research Associate 604-622-5287

Forest ProductsRajiv Mukhi, CFA Investment Analyst 604-622-5289

Mathieu Chevrier, CFA Research Associate 604-622-5287

IndustrialsKam Mangat, CFA Investment Analyst 416-360-4384

Mining, Fertilizers & ChemicalsRaymond Goldie, Ph.D., Geology Senior Analyst 416-214-2749

Ash Guglani, B.BA Investment Analyst 604-622-5293

Nik Rasskazovskiy, MBA Investment Analyst 416-261-8786

Oil & GasGordon Currie, CFA, ICD.D Senior Analyst 403-232-5747

Liam Goguen, B.BA Research Associate 403-444-4446

TechnologyNaser Iqbal, MBA, CFA Investment Analyst 416-861-1610

Daniel Wong, MBA Research Associate 416-861-9901

INSTITUTIONAL SALES & TRADING 1-800-877-7044Garry Rubacha, B.Com., CFA Co-Head Institutional Equity Sales 416-861-1639

Tom English, B.A. Econ Co-Head Institutional Equity Sales 416-861-1507

Ritu Gupte, B.Com., MBE Institutional Equity Sales 416-360-5539

John McBride, B.A. Institutional Equity Sales 416-861-1994

David Kwan, CFA Institutional Equity Sales 604-622-5277

Lana Bisset Institutional Equity Sales & Trading 604-685-9964

Colin Fraser Institutional Equity Trading 416-861-8783

Scott Proctor Institutional Equity Trading 416-861-1615

Suite 17001095 West Pender StreetVancouver, BC V6E 2M6

Tel: (604) 685-2450•Fax: (604) 685-2471

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Toronto, Ontario M5C 2W1Tel: (416) 861-1270•Fax: (416) 861-1935

Suite 504304-8th Ave SW

Calgary, Alberta T2P 1C2Tel: (403) 261-6065•Fax: (403) 261-6069

www.salmanpartners.com

The opinions, estimates and projections contained herein are those of Salman Partners Inc. as of the date hereof and are subjectto change without notice. Salman Partners makes every effort to ensure that the contents herein have been compiled or derivedfrom sources believed reliable and contain information and opinions which are accurate and complete. However, Salman Partnersmakes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissionswhich may be contained herein and accepts no liability whatsoever for any loss arising from any use of or reliance on this reportor its contents. Information may be available to Salman Partners which is not reflected herein. This report is not to be construedas, an offer to sell or solicitation for or an offer to buy, any securities. Salman Partners, its affiliates and/or their respective officers,directors or employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. SalmanPartners may act as financial advisor and/or underwriter for certain of the corporations mentioned herein and may receiveremuneration for same.Upon approval by the research department and once published in final form, Salman Partners Inc. disseminates its research toall institutional clients simultaneously in electronic form. The firm subsequently disseminates this research in hard copy to thoseclients who have requested to be on the firm’s distribution list. In addition, Salman Partners Inc. posts its research on the SalmanPartners Inc. website and on certain paid research services with which a contract of dissemination has been arranged. Access tothese websites is provided using a password provided by the administrator and is limited to Salman Partners Inc.’s institutionalclients. Reproduction of this report in part or in whole without permission is prohibited. All rights reserved. Salman Partners Inc.TO U.S. RESIDENTS:Salman Partners (USA) Inc., an affiliate of Salman Partners Inc., is furnishing this report to U.S. residents and accepts responsibilityfor the contents herein. Any U.S. person wishing to effect transactions in any security discussed herein should do so throughSalman Partners (USA) Inc.

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