Unique Product Offerings and Premium Clientele to Drive Business Growth: Calian Group Ltd. (TSX: CGY) offers innovative healthcare technology products to the private sector, government and defence customers across North American and global markets. The company operates through four segments, namely, Advanced Technologies, Health, Learning and Information Technology.

Investors should note that the stock has performed handsomely in the recent past and generated more than ~26% during last one year and currently trading at above 200-day SMA of CAD 37.59, driven by its resilient operating model.

The company paid a quarterly dividend of CAD 0.28 per share, which is at par with the earlier distributions. Earlier, in January 2020, the company acquired two health companies, namely Allphase Clinical Research Services Inc. and Alio Health Services Inc. at a price consideration of CAD 14.5 million. The acquisitions would help the company to diversify its customer base through innovative clinical development products.

Q1FY20 Financial Highlights: For the period ended December 31, 2020, CGY reported a decent set of number wherein revenue stood at CAD 99.2 million, representing a solid growth of 24% y-o-y. The increase was driven by stellar growth from Advanced Technologies and decent contribution from other segments. Adjusted EBITDA stood at CAD 8.4 million, as compared to CAD 5.7 million in pcp. The increase was driven by higher revenue and gross profit. Net profit stood at CAD 4.33 million, as compared to CAD 3.36 million. The company exited the quarter with cash and cash equivalent of CAD 14.4 million as compared to CAD 17.13 million in the previous quarter. As on December 31, 2020, the company reported total assets of CAD 229.60 million.

Q1FY20 Income Statement highlights (Source: Company Reports)

Stock Recommendation: The stock has generated a ~13% and ~26% return during the last one month and six months, respectively. The stock is offering a dividend yield of ~2.6%, which looks attractive amidst lower interest rate environment. The business is immune to the economic cycle, and we believe the premium valuation is justified. The company has a strong network of 1800 health care professionals and an impressive clientele within the North American and global markets. The company derives more than two-thirds of its revenue from Advanced Technologies services and Health services, which caters to sectors like satellite communications, aerospace, defence etc. The stock is quoting at a discount to the industry average (Forward EV/EBITDA – 9.9x vs Industry 11.8x and Forward EV/Sales 0.9x vs Industry average 2.3x) which suggest that the stock has potential upside. We believe, the performance of the company will be dependent on multiple factors like new contract additions, expanding the scope of existing contracts, focusing on innovations and acquisitions. Hence, we recommend a ‘Speculative BUY’ rating on the stock at the closing market price of CAD 43.32 as on April 16, 2020.

CGY One-Year Daily Price Chart (Source: Thomson Reuters)

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