Colliers International Group Inc.

Colliers International Group Inc. (TSX: CIGI) is a leading global real estate service and investment management company. The group has presence across 67 countries and provides expert advice and services in order to increase the value of the property for real estate occupiers, owners and investors.

Key Updates:

• Strong Recuring revenue: The majority of the group’s business are recurring in nature and represents ~51% of revenue and 60% of Adjusted EBITDA, respectively in Q1FY21. This is encouraging, as it denotes business stability and indicates stable operational performance.
• Improved financial flexibility and prudent capital management: The group has successfully reduced its net debt to USD 404.9 million in Q1FY21, as compared to USD 638.1 million in Q1FY20, which is encouraging and indicates higher financial flexibility as well. The leverage ratio was recorded at 1.1x at the end of Q1FY21, improved from 1.8x in Q1FY20.

Q1FY21 Income Statement Highlights:

• CIGI announced is quarterly result, wherein the company posted revenues of USD 774.914 million, as compared to USD 630.628 million in the previous corresponding period (pcp). The 23% y-o-y growth was aided by strong momentum from capital market segment (USD 210.51 million v/s USD 143.003 million in pcp), coupled with higher income from Outsourcing & Advisory segment (USD 340.116 million v/s USD 227.290 million in pcp).
• Operating earnings soared to USD 39.956 million, from USD 18.537 million in Q1FY20, thanks to the higher revenue, partially offset by higher cost of revenues, selling general and administrative expenses.
• Adjusted EBITDA surged to USD 92.129 million, significantly higher than USD 54.454 million in pcp, due to a higher depreciation and amortization expense (USD 37.777 million v/s USD 24.891 million in pcp)
• The company reported net earnings of USD 24.807 million, significantly higher than USD 6.458 million in pcp. The increase was partially offset by higher net interest expense (USD 8.284 million v/s USD 7.585 million in pcp).

Q1FY21 Income Statement Highlights (Source: Company Report)

Risk: Due to the extented restrictions on account of COVID 19 pandemic, the economy might witness lower industrial activities, which might lead to a lower real estate transaction, and subsequently might  lead to a decline in the demand of the company’s products and services.

Stock Recommendation: For FY21, the company has upgraded its outlook and expects its revenue and adjusted EBITDA to grow in between 15% to 30% each, from its earlier mentioned growth rated of 10% to 25%. The company’s business is asset-light in nature and historically, it has generated consistent cash flows and has a strong balance sheet. Operating cash flow during FY15 to FY20 grew at a CAGR of 14%, while Adjusted EPS, during the above period grew at a CAGR of ~13%. On the valuation front, the stock is available at forward EV to Sales multiples of 1.7x, as compared to the industry (Real Estate Operations) median of 3.7x. Hence, considering the aforesaid facts, we give a ‘Hold’ rating on the stock of CIGI at the closing price of CAD 134.23 on May 28, 2021.

One-Year Technical Price Chart (as on May 28, 2021). Analysis by Kalkine Group

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

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.