Calian Group Limited

Record Revenue for the Eighth Consecutive Quarter: Calian Group Limited (TSX: CGY) operates through four segments namely Advanced Technologies, Health, Learning and Information Technology. As on 17 August 2020, the market capitalization of the company stood at ~CAD 607.39 million.

Quarterly Performance (For the Period Ended 30 June 2020): During the quarter ended 30 June 2020, the company reported record revenue for the eighth consecutive quarter, which stood at CAD 106 million. In the same time span, the company reported an increase of 34% in adjusted EBITDA to CAD 9.0 million and an increase in adjusted NPAT to CAD 5.6 million, up from CAD 5.0 million in the same period of the previous year. Despite the turbulent market environment, the company successfully executed its growth strategies and adapted the rapid changes quickly. CGY continued to retain its balance sheet strength with cash balance of CAD 46 million. Positive growth and financial results in the Health, Advanced Technologies and Information Technology segments offset a year-over-year quarterly revenue decline for the Learning business. During the quarter, the sales efforts continued to show momentum with the announcement of multiple large contract renewals and new wins.

Quarterly Financial Highlights (Source: Company Reports)

Guidance: The company has provided guidance and expects revenue to be in the range of CAD 415k to CAD 435k and adjusted EBITDA in between CAD 36k to CAD 38k. The company also anticpates adjusted net profit to be in between CAD 22.6k to CAD 24.6k.

Key Risks: The company is susceptible to risks, including the impact of price competition; scarce number of qualified professionals; the impact of rapid technological and market change; loss of business or credit risk with major customers; technical risks on fixed price projects; general industry and market conditions and growth rates; international growth and global economic conditions.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The diversified business of the company demonstrated strong consilidated results and anticipates that the impacts of COVID-19 to be significantly reduced in upcoming quarters. As per TSX, the stock of CGY is trading very close to its 52-weeks’ high level of CAD 63.5 but retains potential for further growth. The stock of CGY gave a return of 37.17% in the past three months and a return of 6.26% in the past one month. The company will pay its interim dividend of CAD 0.28 on 08 September 2020. We have valued the stock using the EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target upside of middle single-digit (in percentage terms). Considering the current trading levels, decent returns in the past three months, resilient financial performance and decent long-term outlook, we recommend a ‘Hold’ rating on the stock at the closing market price of CAD 62.51, down by 0.94% on 17 August 2020.

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

GDI Integrated Facility Services Inc.

Healthy Balance Sheet and Strong Financial Position: GDI Integrated Facility Services Inc. (TSX: GDI) is engaged in the facility services sector. The company's operating segment includes Janitorial Canada, Janitorial USA, Technical services, and complementary services. As on 17 August 2020, the market capitalization of the company stood at ~CAD 472.82 million.

Quarterly Performance (For the Period Ended 30 June 2020): During the quarter ended 30 June 2020, the company delivered decent performance recording a growth of 4.4% in revenue to CAD 326.7 million and an increase of 21.3% in adjusted EBITDA of CAD 22.5 million. In the same time span, net income of the company stood at CAD 13.5 million as compared to the net income of CAD 2.1 million in the pcp. During the quarter, the company decreased its net debt by CAD 23.2 million from CAD 264.4 million to CAD 241.2 million.

Quarterly Financial Highlights (Source: Company Reports)

Outlook: The company believes that the challenging part of the virus has been dealt with and with the reopening of the economy and rising occupancy rates, the base level of services required by the clients may also rise. With the high level of uncertainty surrounding COVID-19, the company seems to be well-positioned to preserve profitability and ensure financial health.

Key Risks: The company is susceptible to risks related to the general economic conditions, impact related to COVID-19, liquidity, market risks, etc.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company reported a healthy balance sheet and retains a strong financial position. Despite the challenging market conditions, the profitability was positively impacted and saw a rebound in services. As per TSX, the stock of GDI is trading very close to its 52-weeks’ high level of CAD 38.01 but retains potential for further growth. The stock of GDI gave a return of 20.74% in the past three months and a return of 26.53% in the past one month. We have valued the stock using the EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target upside of lower double-digit (in percentage terms). Considering the current trading levels, decent returns in the past three months, positive long-term outlook and decent financial performance, we recommend a ‘Hold’ rating on the stock at the closing market price of CAD 37.67, down by 0.76% on 17 August 2020.

GDI 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.