CIBT Education Group Inc. (TSX: MBA) is one of the largest educations and student housing investment companies in Canada focused on the domestic and the global education market since 1994.

Key Highlights:

• Strong foothold in education industry - Since 1994, CIBT has developed a growing network of business, technical, and language colleges in both North America and Asia; annual student enrollment as most recently reported was ~13,000 students for FY19. The Company would continue driving the top line on the education side of the business through increased student enrollment via concentrated marketing efforts and continued management of the current global health and economic conditions.
• CIBT continues to show signs of a steady recovery: During Q1 2021, the group experienced significant growth in several areas, the company reported total revenue of approximately CAD 14 million despite the COVID-19 pandemic having a huge impact on the global economy. SSCC net income before inter-segment transactions increased by 18% from CAD 1.1 million to CAD 1.3 million. In addition, development fees revenues increased by 395% from CAD 0.4 million to CAD 1.98 million. Most importantly, the company’s consolidated net income for Q1 increased by 288% from CAD 0.283 million to CAD 1.099 million, while EBITDA increased by 24% from CAD 4.084 million to CAD 5.054 million. The group reported a gain in fair value of investment properties, which increased by 327% from a loss of CAD 0.298 million in Q1 2020 to a gain of CAD 0.677 million in Q1 2021. On top of that, the company’s total asset value surpassed CAD 0.5 billion, and the company’s book value per share grew from CAD 0.69 to CAD 0.71 as of November 30, 2020, compared to August 31, 2020.

Source: Company Filing.

Financial Highlights:

Source: Company Filing

• Total revenue slipped by 16% to CAD 14.4 million as compared to CAD 17.1 million reported in the same quarter of the previous financial year.
• The company reported a fair value gain on investment properties of CAD 0.67 million against a loss of CAD 0.29 million in the same quarter of the previous financial year.
• Net Income bolstered by 288% to CAD 1.99 million.

Risk: The education industry is highly competitive as well as highly fragmented. In this post-secondary education market, CIBT faces competition for students from more traditional public and private colleges and universities, on-line learning programs, as well as not-for-profit schools. Further, The Company is highly susceptible to real estate market fluctuations. Interest rates and current real estate valuations can influence the cost of capital for development projects, and progress with construction can be delayed due to permitting and costs. 

Stock Recommendation

In the first quarter of 2021, the company experienced significant growth in several areas, and the company reported a total revenue of approximately CAD 14 million despite the COVID-19 pandemic having a huge impact on the global economy. While EBITDA increased by 24% from CAD 4.084 million to CAD 5.054 million.

Also, its shares registered a pull-back after touching its long-term crucial support level of 200-day SMA and now traded above the 200-day SMA level over the last three consecutive sessions, which implies a trend reversal in the stock. Moreover, RSI is also rising and mostly tilted towards the overbought zone. Therefore, based on the decent performance of the company in the first quarter of 2021 and a bullish trend reversal in the stock, we recommend a “Speculative Buy” rating at the closing price of CAD 0.60 (as on February 02, 2021), with a lower double digit upside potential.

Technical Chart (as on February 02, 2021). Source: Refinitiv (Thomson Reuters)

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