iA Financial Corporation Inc.

iA Financial Corporation Inc. (TSX: IAG) is a life and health insurance company and offers products like life and health insurance, savings and retirement plans, mutual funds, securities, auto and home insurance, mortgages, and others.

Key Highlights:

• Robust Quarterly growth: The company recorded a robust 25% y-o-y growth in premiums and deposits at CAD 4.4 billion in Q1FY21. The Group reported strong traction from the segments like individual insurance (grew 29% y-o-y basis) and individual wealth management. Within the wealth service segment, the segregated funds grew 58% on a y-o-y basis, while the group derived a 36% increase in performance from the mutual funds segment. Notably, in Q1FY21, segregated and mutual funds recorded strong net inflows of CAD 972.3 million and CAD 377.8 million, respectively. We expect the momentum to continue within the Individual Insurance sector in the coming days, which is likely to support the upcoming performance.

• Solid AUM growth continues amidst the economic turbulence: The group reported asset under management (AUM) at CAD 201.3 billion, up 15% on y-o-y basis and 19% on a q-o-q basis. The company’s operations are resilient in nature and reported constant y-o-y growth over the years. Notably, AUM grew at a CAGR of ~11% from FY10 to FY20, which is encouraging.
  

Source: Company Presentations 

• Unifies MFDA wealth management division with Investia: Recently, the company reported the merger of its FundEX Investments Inc. with Investia Financial Services Inc The merger unifies iA Wealth's MFDA division under the Investia brand and solidifies its position as a leading Canadian provider of independent, holistic wealth management solutions.

Q1FY21 Financial Highlights:

• iA Financial Corporation Inc. declared its quarterly year result, wherein the group reported net premium earned at 3,375 million compared to 2755 million in the previous corresponding period.
• Income before income taxes stood at CAD 233 million, jumped from CAD 44 million in pcp. The increase was driven by the significant decrease in insurance contract liabilities of CAD 3,820 million, v/s CAD 702 million in pcp. Meanwhile, gross benefits and claims on contracts stood higher at CAD 2,624 million compared to CAD 1,613 million in pcp. The period was marked by a higher commissions expense (CAD 529 million v/s CAD 441 million in pcp), combined with a surge in general expenses (CAD 438 million v/s CAD 412 million in pcp).
• Net income stood at CAD 174 million, surged from CAD 46 million in Q1FY20.

Q1FY21 Income Statement Highlights (Source: Company Report)

Risks: The operations are directly correlated with the capital market and interest rate movements, and volatility would dampen the performance of the group.

Valuation Methodology (Illustrative): Price to Book Value

Stock Recommendation:

The Stock of IAG carries a decent dividend yield of ~2.9% amid low interest rate environment. The company is focusing on improving digital tools in order to enhance customer satisfaction. Moreover, the group would leverage its new innovative product offerings in order to cater to the changing customer needs. The company further aims at annual sales growth of 5% to 8% in current year. We have valued the stock using the Price to Book based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Laurentian Bank of Canada, Sun Life Financial Inc etc. Considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock at the last closing price of CAD 66.11 on July 27, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on July 27, 2021). Analysis by Kalkine Group 

Evertz Technologies Limited

Evertz Technologies Limited (TSX: ET) is a Canadian company engaged in providing telecommunications equipment and technology solutions to the television broadcast and new-media segment.

Key Highlights:

• An Income Play: Over the years, the company reported stable dividend payment amidst the economic cycles, supported by stable cash flows. Notably, the stock carries a dividend yield of ~5.0%, which looks is impressive considering the persisting interest rate scenario.

Ten years dividend history, Source: REFINITIV

• Hint of Revival: The management believes that the economic jolt is temporary in nature, while its operations witnessed a revival in the recent past. Moreover, the company expects gradual improvement from the sector supported by the benefit from an economic revival and the industry transition to IP and Cloud-based solutions. We believe the company is highly poised to take advantage arising from the industry.

• Rise in Cash Balance: At the end of April 30, 2021, the company reported a cash balance of CAD 108.771 million, surged from CAD 75.025 million a year ago. This is impressive as it would enhance the company’s liquidity position.

Q4 FY21 Financial Highlights:

• ET announces its quarterly result, wherein the group reported revenue of CAD 93.293 million, marginally higher from CAD 92.167 million a year ago. The improvement was supported by higher income from the United States/Canada region (CAD 63.6 million v/s CAD 58.7 million in Q1 FY20), partially offset by a slide from the international region (CAD 29.7 million v/s CAD 33.5 million in pcp).
• Gross margin increased to CAD 55.558 million, from CAD 52.053 million in pcp. The increase was supported by higher income coupled with a lower cost of goods sold.
• Total Expenses stood at CAD 41.503 million, higher than CAD 30.653 million in the previous corresponding period (pcp). The quarter was marked by higher general expense, slightly higher research and development costs combined with a foreign exchange loss, partially offset by a lower selling and administrative expense.
• Net earnings stood lower at CAD 9.810 million, as compared to CAD 16.038 million in pcp. The decline was primarily due to higher expenses, as mentioned above.

Q4FY21 Income Statement Highlights (Source: Company Report)

Risks: Postponement or cancellation of sporting events or other live events due to the restrictions imposed on account of the pandemic, would have an adverse effect on the overall performance of the company due to lower orders from its clientele.

Valuation Methodology (Illustrative): Price to Cash Flow

Stock Recommendation:

The company has outperformed the industry median on various financial parameters. EBITDA margin and Operating margin stood at 25.7% and 15.10%, respectively, in Q4FY21, higher than the industry median of 15.4% and 9.3%, respectively. Moreover, the company’s net margin stood at 10.5% compared to the industry median of 5.3% in Q4FY21. The company manufactures and sells video and audio infrastructure solutions for the production, post-production and transmission of television content, and its services are categorized under the essential segment. We have valued the stock using the Price to CF-based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered the industry (Technology) median on the next twelve months basis. Considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock at the closing price of CAD 14.35 on July 27, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on July 27, 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.