Fiera Capital Corp

Fiera Capital Corp (TSX: FSZ) is a Canada-based independent, full-service, multi-product investment company. It provides investment advisory and related services to institutional investors, private wealth clients and retail investors. The group operates in investment management services segment in Canada and the United States.

Key highlights 

• Increase in Assets under management (AUM): At the end of Q3 2020, the company’s reported total AUM stood at CAD 177.7 billion, increased by CAD 13 billion or 7.9%, compared to CAD 164.6 billion in Q3 2019. The increase was primarily due to market appreciation of CAD 14.1 billion, gross new mandates of CAD 12.5 billion, partially offset by lost mandates of CAD 9.7 billion and redemptions from existing clients of CAD 4.0 billion.

Source: Company

• An income play:The company has a strong history of dividend payment, which establishes the fact that the company’s business is resilient in nature and has generated stable cash flows over the years. The company declared a dividend of CAD0.21/share on November 12, 2020, payable in December 2020. The stock of FSZ carries an attractive dividend yield of 7.69% amid a low-interest-rate environment.

Source: Company  

Financial overview of Q3 2020 In thousands of Canadian dollars, except per share data)

Source: Company

• In Q3 2020 the company posted Revenues of CAD 170.7 million, increased by 6.7% as compared to CAD 160.0 million in the previous corresponding period. The increase was primarily due to higher base management fees driven by higher average AUM, partially offset by the sale of Fiera Investments LP’s retail mutual funds in the second quarter of 2020.

Source: Company 

• The Company reported net earnings attributable to the Company’s shareholders of CAD 4.7 million, as against a net loss of CAD 4.7 million in the previous corresponding period. The profits were primarily due to increased revenue, lower accretion and change in fair value of purchase price obligations, partially offset by an increase in selling, general and admin expenses along with higher income tax expenses.

Source: Company

Risk associated with investment

The company is susceptible to a variety of risks and uncertainties, including the risk from the capital market, general economic conditions, and volatility in currencies. A further outbreak of COVID-19 might hinder the disposable income of the consumers, which might lead to higher redemption and lower inflows. 

Valuation Methodology (illustrative): Price to Book Value 

(Note: All forecasted figures and peers have been taken from Thomson Reuters).  

Stock recommendation

The group continues to demonstrate its financial strength through the pandemic mainly because of the depth and diversity of investment strategies, and commitment to delivering outstanding services. The company expect to continue this positive momentum by maintaining its focus and executing its 2022 Strategic Plan. Further, the stock is a friend of income investors’ as it has a decent history of dividend distribution. At the last traded price, the stock was offering a dividend yield of 7.69%, which is lucrative considering the current interest rate environment.

Therefore, based on the above rationale and valuation, we have given a ‘Hold’ recommendation at the closing price of CAD 10.92 on November 25, 2020. We have considered First National Financial Corp, AGF Management Ltd, TMX Group Ltd, etc. as the peer group for the comparison.

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

Canada Goose Holdings Inc.

Canada Goose Holdings Inc. (TSX: GOOS) is a Canada-based company primarily engaged in designing, manufacturing, and selling premium outdoor apparel for men, women, youth, children and babies. The Company operates through two segments: Wholesale and Direct to Consumer.  

Key highlights

• Planning new products launch: The company is continuously investing in innovation, development, and introduction of new products across styles, uses, and climates. The group is planning to develop a Canada Goose footwear, leveraging Baffin’s infrastructure, processes, and technology.

• Ample liquidity: The company has ample liquidity with cash balance of CAD 156.3 million as on 27th Sep 2020. The company also has a revolving credit facility of CAD 417.5 million, this facility can increase up to CAD 467.5 million during the peak season.

• eCommerce is driving the top line: The company saw a surge in the global eCommerce revenue, which increased by over 10%, and DTC revenue in Mainland China increased by over 30% as compared to the previous corresponding period.

Financial overview of Q2 2021 (in millions of Canadian dollars, except share and per share amounts)

Source: Company

• The company posted revenue of CAD 194.8 million in Q2 2021, significantly lower than CAD 294 million in the previous corresponding period. Primarily due to lower retail traffic, reduced store operating hours under the DTC segment, and requests from partners and international distributors for later shipments under Wholesale segment, because of COVID-19 disruptions.

Source: Company

• Operating income reported by the company in Q2 2021, stood at CAD 15.1 million as against CAD 75.4 million in Q2 2020, primarily due to low revenue in the reported quarter, rise in SG&A expenses as % to revenue and higher depreciation cost.

• Net income reported by the company in Q2 2021, was CAD10.4 million as compared to CAD 60.6 million in the previous corresponding period, due to reasons discussed above.

Geographical distribution of revenue

Source: Company

Risk associated with investment

Because of COVID-19 pandemic, the unemployment rate is likely to increase, which might change consumer spending behaviour. There is a possibility that consumers might cut down on discretionary spending. Such a scenario would affect the company’s business. 

Valuation Methodology (Illustrative): Price to Cash Flow

(Note: All forecasted figures and peers have been taken from Thomson Reuters). 

Stock recommendation

The company is focussing on higher digital adoption as a result of; it saw a surge in revenue from the e-commerce business. The company is also experiencing decent consumer traction across china as they reported over 30% increase in revenue. With a plan for introducing new products, the company is trying to catch more attention among the customers. Therefore, based on the above rationale and valuation, we have given a “Hold” rating at the closing price of CAD 46.24 on November 25, 2020. We have considered Nike Inc, Lululemon Athletica Inc, Under Armour Inc, etc. as the peer group for the comparison.

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

Calian Group Ltd

Calian Group Ltd (TSX: CGY) is a Canada-based company which delivers innovative solutions that help the world communicate, learn, lead healthy lives and stay safe. The Company operates in four segments including, Advanced Technologies, Health, Learning and Information Technology.

Key highlights

• Management is bullish on the future: The management pours their full confidence in maintaining a growth profile. The group believe that its diversified segments with a mix of domestic and global customers position the group well to navigate through the challenges created by COVID-19. The company has provided the following guidance.
• Revenue to be in a range of CAD 450 – 490 million.
• Adjusted EBITDA to be in a range of CAD 38.5 – 42 million
• Adjusted net profit to be in a range of CAD 25.2 – 28.3 million

• Substantial realizable backlog: The Company’s realizable backlog as on September 30, 2020 stood at CAD 1,307 million with terms extending to fiscal 2030. Contracted backlog represents maximum potential revenues remaining to be earned on signed contracts. This realizable backlog provides a cushion to the company.

Source: Company

• Consistent dividend: The company has a strong history of dividend payment, which establishes the fact that the company’s business is resilient in nature and has generated a stable cash flows over the years. The group declared a dividend of CAD 0.28 on November 24, 2020, payable on December 22, 2020, to shareholders with a record date of December 8, 2020.

Source: Company

Financial overview

Source: Company

• The Company experienced substantial growth in revenue in its fourth quarter and fiscal year. Revenue increased by 35% to CAD 123 million in Q4 2020 as against CAD 91 million in Q4 2019 and CAD 432.3 million for FY 2020, increased by 26% as compared to the previous corresponding period. Primarily due to organic growth and acquisitions made by the Company last year.

• The Company posted an Adjusted EBITDA of CAD 36.8 million in the fiscal year 2020, increased by 36% as against CAD 27.1 million reported in the previous corresponding period, the increase in Adjusted EBITDA is primarily due to rose in revenue. 

• Net profit posted by the Company in the fiscal year 2020 stood flat at CAD 20.3 million, as against CAD19.9 million in the previous corresponding period primarily due to depreciation and amortization on acquired intangible assets.

Revenue bifurcation (Canadian dollars in thousands)

Source: Company

Risks associated with investment

The company is vulnerable to many risks, including the impact of price competition, the low number of qualified professionals, the result of rapid technological and market change, loss of business or credit risk with significant customers, technical risks on fixed price projects, general industry and market conditions. 

Valuation Methodology (Illustrative): Price to Earnings 

(Note: All forecasted figures and peers have been taken from Thomson Reuters).

Stock recommendation

The Company diversified its customer base and grew its non-government business by 90%; the group’s organic growth in FY20 was 21%. The group would continue to invest in research and development and sales capacity to support further organic growth. With no debt in the book, a fair amount of realizable backlog along with healthy dividend distribution, the company has sufficient liquidity to meet all operating requirements for the foreseeable future. Therefore, based on the above rationale and valuation, we have given a “Hold” recommendation at the closing price of CAD 55.8 on November 25, 2020. We have considered Photon Control Inc, IBI Group Inc, Computer Modelling Group Ltd, etc. as the peer group for the comparison.

CGY 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.