CIBT Education Group Inc. (TSX: MBA) is one of Canada's largest education services and academic real estate companies. With a global presence since 1994 it has 45 business locations and operates a global network of 2,500 recruitment agents.

Key Highlights

• Improving macros: The government of British Columbia has eased numerous restrictions on travel and social gatherings, as part of its efforts to kick-start the economy. Fortunately, the company's foreign education divisions have seen an increase in students signing up for the Winter semesters. In addition, Management expects revenues to continue to increase as reservations increase accompanied by a higher daily room rate.

• Rising college enrollments: As Canada reopens its borders to international students, Sprott Shaw College and Sprott Shaw Language College have witnessed a steady increase in registrations and enrollments for the fall 2021 and spring 2022 semesters. The majority of domestic students are also returning to university across the province, bringing a constant stream of rental tenants to GEC® buildings.

• looking forward to higher occupancy rates: Throughout Fiscal 2022, the Company expects occupancy rates at GEC® Granville to return to pre-COVID-19 levels, as pent-up demand for business, leisure, and study travels drives an increase in occupancy. Furthermore, the Company's hotel and rental apartment occupancy rates have been approaching full capacity since September 2021.

• Improving infrastructure at GEC® King Edward: The increase in real estate property prices has increased the market value of the student housing portfolio and, as a result, the company's book value. To capitalize on this trend, the firm recently began construction on GEC® King Edward, which is expected to be finished in time for the fall 2022 school term, adding 180 beds and 46,000 gross buildable square feet to the portfolio.
  

Financial overview of FY 2021 (Expressed in thousands of CAD)

Source: Company 

• In FY 2021, the company posted slight lower revenues at CAD 60.86 million compared to CAD 62.5 million in the previous corresponding period. The fall in revenue was attributable to lower performance from rental and development fees segment.

• In the reported period the group witnessed direct cost at CAD 25.6 million and other expenses rose slightly to CAD 33.9 million against CAD 32.7 million in pcp.

• On the back of net gain on fair value changes in investment properties the company managed to post income before income tax of CAD 5.7 million against a loss of CAD 4.4 million in pcp, which was partially offset by higher finance cost at CAD 12.5 million.

• Net income in the reported period stood at CAD 5.1 million against a loss of CAD 4.7 million in pcp.
  

Risks associated with investment

The business's operations and cash flows are clouded by the return of Delta variant occurrences, and the company is severely leveraged, implying pressure on its net margin and increased balance sheet concerns.

Stock recommendation

Despite a full year of COVID-19 restrictions, the company's gross revenue was largely saved in Fiscal 2021, with total revenue of CAD 60.87 million. In addition, as part of its efforts to jump-start the economy, the government of British Columbia has loosened a number of restrictions on travel and social gatherings. Fortunately, the company's international education divisions have experienced an uptick in students enrolling for the Winter semesters, which is a significant plus. Additionally, it anticipates that occupancy rates at GEC® Granville will continue to recover to pre-COVID-19 levels during Fiscal 2022, driven by pent-up demand for business, leisure, and study travels. As a result, the company anticipates increased revenue in the future.

On the valuation front, the stock is available at a TTM P/Cash Flow multiple of 2.6x against an industry (Professional & Commercial Services) median of 6.3x. Hence, considering the aforesaid rationales, we recommend a “Speculative buy” rating in the stock at the closing price of CAD 0.61 on December 3, 2021, with lower double-digit (percentage term) upside potential. 

Technical Analysis Summary

One-Year Technical Price Chart (as on December 3, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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