The Montreal-based company's extremely low valuation could prompt bargain hunters from around the world to kick its tires, said Maxim Sytchev of Alta Corp Capital.
"A company could be looking to step in and be opportunistic," he said in an interview.
SNC-Lavalin's (TSX:SNC) shares slipped a little Monday on the heels of the arrest of its former head of construction, who was dismissed from the company earlier this year, and reports about a corruption investigation in Tunisia.
The stock lost 23 cents to $36.74 in afternoon trading on the Toronto Stock Exchange. Over the past year, its shares have plummeted from $59.97.
At the current price, investors are giving about a $10 per-share value to its core engineering operations, which is a third to half its historic worth, he said.
That reflects a huge discrepancy with the value of its peers.
Sytchev said SNC's current valuation isn't tenable and it could be only a matter of time before strategic or other investors chase its value, including its stake in lucrative toll road and other concession investments.
"I think over time something has to give and whether there could be people potentially getting involved in this name - an activist hedge fund or whatever ... we still think there's definitely a lot of value in the name."
Investors have been fleeing SNC-Lavalin's shares as it faces damaging reports about RMCP raids of its offices and allegations of corruption.
It has parted ways with several senior executives over $56 million of payments to unknown agents, presumably in North Africa.
The former head of construction sits in a Swiss jail. He hasn't been charged but is being held on suspicion of corrupting a public official, fraud and money laundering tied to his dealings in North Africa.
Justice officials said former SNC executive vice-president Riadh Ben Aissa has been in custody since mid-April.
Ben Aissa, who parted ways with SNC-Lavalin in February, was in charge of business dealings in his native Tunisia as well as Libya, where the company won lucrative contracts with the former regime of Moammar Gadhafi.
On Monday, a Montreal newspaper also reported that SNC-Lavalin is facing a corruption investigation in Tunisia over a $320 million contract it was awarded with an Italian partner.
Montreal's La Presse said the North African country's commission of inquiry into corruption and embezzlement has opened a file on the awarding of the 2010 contract with Ansaldo Energia.
La Presse said the commission has found a document incriminating the embattled engineering giant in the palace archives of ousted president Zine el-Abidine Ben Ali, who fled the country in January 2011.
SNC hasn't responded yet to a request for comment on the article.
Neil Linsdell of Versant Partners said investors will be closely watching SNC-Lavalin's first-quarter results on Thursday for signs that the alleged wrongdoing isn't scaring off clients.
The company's earnings are expected to increase more than six per cent to 52 cents per share on $1.84 billion of revenues, according to analysts polled by Thomson Reuters.
Linsdell said the company needs to produce good results that show no drag on backlog, orders and financial charges.
"If they can do that again in the second quarter, that's when you're going to see the majority of the recovery in the share price," he said in an interview.
=News of contracts will give people hope that the business is not unravelling, added Sytchev.
The biggest push back he's getting from institutional investors is the belief that SNC-Lavalin will be permanently impaired, leaving it unable to compete.
Notwithstanding all the negative news about the company, he said it remains a strong, profitable company that is entrusted around the world because of its ability to complete large projects.
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