Laurentian Bank of Canada

Laurentian Bank of Canada (TSX: LB) is a provider diversified financial services. The Group’s operations are divided into three reportable segments being Institutional, Business Services and Personal. The Personal business looks into financial needs of retail customers. The Business Services segment looks into the financial needs across the US and Canada. The Institutional segment offers multiple services like - market analysis, advisory services, research, administrative services and corporate underwriting.

Recent News

On 29^th May 2020, Laurentian Bank reduced its dividend by 40 per cent and announced a pay cut for the first time in almost three decades.

Financial Highlights – Q2 and H1 of Financial Year 2020 (30^th April 2020, CAD, thousand)

(Source: Quarterly Report, Company Website) 

In the first half of the financial year 2020, the total revenue declined to CAD 478,861 thousand as against CAD 482,219 thousand in H1 FY2019. The total revenue from Q2 FY2020 stood at CAD 240,148 thousand versus CAD 239,881 thousand in Q2 FY2019. The PBT (Profit before tax) declined significantly to CAD 36,232 thousand in the first half of the financial year 2020 versus PBT (Profit before tax) of CAD 93,880 thousand in H1 FY2019, reflecting increased non-interest expenses and Provision for credit losses. The PBT (Profit before tax) declined to CAD 1,553 thousand in the second quarter of the financial year 2020 versus PBT (Profit before tax) of CAD 47,160 thousand in Q2 FY2019. The net income attributable to shareholders stood at CAD 34,663 thousand in H1 FY2020 versus CAD 77,056 thousand in H1 FY2019. The net income attributable to shareholders declined to CAD 5,688 thousand in Q2 FY2020 from CAD 40,057 thousand in Q2 FY2019. The diluted earnings for H1 FY2020 stood at C$0.81 versus diluted earnings of C$1.83 in H1 FY2019.

Share Price Performance

Daily Chart as of 29^th May 2020, after the market closed (Source: Refinitiv, Thomson Reuters)

Laurentian Bank of Canada shares closed at CAD 28.44 at the time of writing after the market close on 29^th May 2020. Stock's 52 weeks High is CAD 46.99 and Low is CAD 26.83.

Conclusion

The market conditions in which the Company operates is full of challenges and might impact the operational performance and reduce financial performance as well. Any change in regulations and Government policies could affect the overall business of the group. The Company has shown a decline in financial performance in the first half of the financial year 2020. Both the top-line and the bottom-line performance have declined for the period. The earnings have declined significantly; as a result, the bank has reduced its dividend by 40 per cent and announced a pay cut for the first time in almost three decades. The Group’s operations were impacted by the global trade tensions in late 2019 and in early 2020. The ongoing covid-19 pandemic resulted in deterioration of financial conditions and the global economy in the second quarter of the FY2020, which resulted in a decline in real GDP of the US and Canada at a faster pace. The government, regulators and central banks are announcing measures to ease financial stress and promote liquidity to support a rebound in equity markets.

Based on the factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of CAD 28.44 (as on 29^th May 2020), with support from few catalysts needs to be evaluated at a later stage.

Colliers International Group Inc.

Colliers International Group Inc. (TSX: CIGI) is a leading global real estate service and investment management company. The Company operates in 68 countries and provides expert advice and services to maximize the value of the property for real estate occupiers, owners and investors.

The Group confirmed the issuance of 4.00% convertible senior subordinated notes due 2025 for a total consideration of US$230 million, which will be used for repaying a part of revolving credit facility. The Group announced a half-yearly dividend of USD 0.05 per common share, payable on July 13, 2020.

Outlook: Due to the ongoing COVID 19 crisis, the Company expects a significantly lower income from Brokerage revenues in the second quarter of the current financial year, while expects the scenario to improve gradually during the latter part of the financial period. However, the Outsourcing & Advisory and Investment Management is expected to remain relatively stable in the coming quarters.

Q1FY20 Financial Highlights: For the period ended March 31, 2020, CIGI reported a revenue of USD 630.63 million, as compared to USD 635.12 million in pcp. The quarter was marked by 7% y-o-y growth in outsourcing & advisory segment, while lease brokerage and sales brokerage reported sluggish numbers and posted a 10% and 6% decline, respectively. Operating earnings stood higher at USD 18.53 million compared to USD 13.39 million in the previous corresponding period, thanks to a lower cost of revenues along with decrease in selling, general and administrative expenses and lower acquisition-related items. Net earnings were higher at USD 6.45 million, from USD 5.46, primarily driven by a higher operating profit. The Company exited the quarter with cash and cash equivalent of USD 103.09 million and a total asset of USD 2,735.83 million in pcp.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock was hammered in the recent past and corrected ~35% in the last three months. The Group derives the majority of its revenue from real estates and due to the sector is struggling with lower customer demand across Asia and EMEA regions, we believe the company’s performance to deteriorate going forward. The management is expecting revenue to decline and consequently EBITDA to take hit in the coming quarters. The company has taken significant steps to lower down its costs across all service lines. The company has ample liquidity and reported CAD 478.0 million of available revolving credit facility. Due to the ongoing pandemic, the real estate sector is likely to bear the heat on account of lower spending power available to the corporates and retail customers. We expect the company to struggle to retain its top line in the near-term, and hence we prefer to remain on the sidelines. The stock is available at a price to cash flow of 8.7x on a TTM basis, higher than the industry (Real-estate Operations) median of 3.7. We recommend a ‘Watch’ stance on the stock at the current closing price of CAD 73.80 on May 27, 2020.

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

Disclaimer

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