Fiera Capital Corporation (TSX: FSZ) is a Canadian asset management company and deals with traditional and alternative investment products. The Group operates in investment advisory and related services, which is used by institutional investors, private wealth clients and retail investors. Fiera Capital offers a complete range of traditional and alternative investment strategies through specialized and balanced mandates to institutional clients.

The Board of Directors declared a dividend of CAD 0.21 per to both Class A subordinate voting share and Class B special voting share, payable on June 25, 2020.

Q1FY20 Financial Highlight: FSZ impresses with its first-quarter results, wherein the Company reported total revenue of CAD 161.65 million, as compared to CAD 142.78 million in pcp, led by a higher base management fees due to the positive impact from acquisition along with organic growth from institutional markets. The Company has reported higher SG&A expenses while a decline in other net expenses. Net earnings for the first quarter of FY20 was reported at CAD 12.02 million, as compared to a net loss of CAD 6.58 million in Q1FY19. The Group reported its assets under Management (AUM) at CAD 158.12 billion, lower than CAD 169.67 million recorded in Q4FY19. The decrease was primarily attributable to volatility in the global equity markets followed by a negative investor’s sentiment due to the COVID-19 pandemic, offset by a favorable foreign exchange rate. Gross redemptions stood at CAD 4.9 billion, which was partly offset by CAD 1.7 billion of new mandates won.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Valuation Methodology: Price to Earnings Based Relative Valuation (Illustrative)

Price to Book Multiple Based Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of FSZ corrected ~20% so far this year as investors choose to stay out of the equity markets on account of COVID 19 pandemic and the broader market witnessed a huge panic selling. Despite the ongoing economic downturn and nervous equity markets, the Group reported a decent quarterly result, which is commendable. The Company reported an improved bottom-line with higher operational efficiency. Meanwhile, the Company managed to secure CAD 1.7 billion in new mandates, which is worth mentioning, looking at the current macros. Going forwards, we expect new flows to come in as the equity market is recovering from the lows witnessed in the recent past. The stock is trading above its 20-days and 50-days Simple Moving Average (SMA) of CAD 8.78 and CAD 7.59, respectively, which indicates a short-term bullish trend. The stock is offering a dividend yield of ~9%, which is lucrative amid the current interest rate environment. We have valued the stock using Price to Earnings based relative valuation method and have arrived at a target upside of double-digit (in percentage terms). For the said purposes, we have considered CI Financial Corp (TSX: CIX), IGM Financial Inc (TSX: IGM) and AGF Management Ltd (TSX: AGF.B) etc., as a peer group. Hence, we recommend a ‘Buy’ rating on the stock at the closing market price of CAD 9.33 on June 1, 2020.

FSZ Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Guardian Capital Group Ltd.

Guardian Capital Group Ltd. (TSX: GCG.A) is a financial service company, which is engaged in providing investment management services to private wealth clients. The group’s offerings include pension plan sponsors, third-party broker-dealer platforms, closed-end funds, Exchange Traded Funds and mutual funds, endowment funds, and foundations.

The Board of Directors declared a quarterly eligible dividend of CAD 0.16 per share, payable on July 17, 2020.

Q1FY20 Financial Highlights: The group reported its quarterly result, wherein the Company posted a ~13% y-o-y growth in its revenue to CAD 49.90 million, as compared to CAD 44.29 million Q1FY19. The increase was driven by higher management fee along with an increase in net commissions, partially offset by a negative impact due to COVID 19. The quarter was marked by a healthy inflow of new assets into the Fundamental Global Equity strategy, partially offset by a small portion of redemption. Operating earnings stood at CAD 10.81 million, slide from CAD 11.17 million in the previous corresponding period. EBITDA, during the quarter, stood at CAD 14.4 million, against CAD 14.5 million in pcp. Adjusted cash flow from operations came in at CAD 13.3 million, versus CAD 10.5 million in the previous corresponding period.

The Company’s total assets under management stood at CAD 27.5 billion at the end of Q1FY20, lower than CAD 31.14 billion Q4FY19, majorly due to the broader market correction on account of COVID 19 pandemic.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock of GCG.A corrected ~23% so far this year, due to a major correction in the global equities on account of the ongoing pandemic. The diversification of the Company’s revenue sources acted as a hedge protected operating earnings from the full impact of the pandemic. The group has mentioned that the pandemic has affected the group’s operation in the second quarter. The stock made a pull back during the last five trading sessions and generated a ~4% return and currently trading above its 20-days and 50-days Simple Moving average (SMA) of CAD 20.14 and 20.10, respectively, indicating a short-term bullish pattern. With a gradual opening of businesses across the globe, we expect a revival of the Global Equity market which will ultimately result in improvement of client base and would ultimately support the commission and the cash flows of the company. At the current price level, the stock seems to be fairly priced as it is trading at a price to book value of 1.0x, as compared to the industry (Financial) median of 1.0x. Hence, we recommend, a ‘Watch’ stance on the stock at the closing market price of CAD 20.88 on June 1, 2020.

GCG.A Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.