Colliers International Group Inc.

Colliers International Group Inc. (TSX: CIGI) is a leading global real estate service and investment management company. The group has a presence across 67 countries and provides expert advice and services in order to increase the value of the property for real estate occupiers, owners and investors.

Key Highlights:

• Impressive Guidance: For FY21, the company expects its revenue to grow by 15% to 30% over FY20, while adjusted EBITDA is also expected to grow by 15% to 30% from FY20. The group expects that its FY21 operations to remain robust, supported by the acquisition of new clients.                

Source: Company Presentation

• Collaboration with Blue Skyre IBE, LLC: The company recently announced its agreement with  Blue Skyre IBE, LLC. It would boost the company’s innovative Facilities Management Advisory segment. Through the above segment, the group offers several advisory and consulting service, which are meant to improve their internal FM capabilities and would enhance supply chain performance by utilizing multiple FM service providers. The above collaboration is expected to improve the client satisfaction levels and would subsequently lead to improved business prospects.

Q1FY21 Income Statement Highlights:

• CIGI announced its first quarter result, wherein the group reported its revenues of USD 774.914 million, up from USD 630.628 million in the previous corresponding period (pcp). The 23% y-o-y growth was aided by strong performance from the capital market segment (USD 210.51 million v/s USD 143.003 million in pcp), coupled with higher income from Outsourcing & Advisory segment (USD 340.116 million v/s USD 227.290 million in pcp).
• Operating earnings were reported at USD 39.956 million, surged from USD 18.537 million in Q1FY20. The increase was supported by a higher revenue, partially offset by higher cost of revenues, and higher selling general and administrative expenses.
• Adjusted EBITDA surged to USD 92.129 million from USD 54.454 million in pcp, mainly due to higher Net earnings and acquisition related items.
• CIGI posted its net earnings at USD 24.807 million, up from USD 6.458 million in pcp. The increase was due to higher operating income, partially offset by higher net interest expense (USD 8.284 million v/s USD 7.585 million in pcp).

Q1FY21 Income Statement Highlights (Source: Company Report)

Risk: Due to the extended restrictions on account of COVID 19 pandemic, the economy might witness lower industrial activities, which might lead to a lower real estate transaction, and subsequently might  lead to a decline in the demand of the company’s products and services.

Stock Recommendation:

At the end of Q1FY21, the company reported its net debt of USD 404.9 million, down from USD 638.1 million in Q1FY20. A lower net debt is a healthy sign and indicates higher financial flexibility. The group has a stable business model wherein ~51% and ~60% of revenue and Adjusted EBITDA are recurring in nature. This above is impressive, as it provides stability in income and profitability.  On the valuation front, the stock is available at and EV to Sales multiple of 1.7x on an NTM basis, as compared to the industry (Real Estate Operations) median of 3.7x. Hence considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock at the closing pricing of CAD 139.72 on July 06, 2021.

One-Year Technical Price Chart (as on July 06, 2021). Source: REFINITIV, Analysis by Kalkine Group 

Copper Mountain Mining Corp

Copper Mountain Mining Corp (TSX: CMMC) is a copper producer, developer and explorer. The company’s flagship asset is the Copper Mountain mine is located in southern British Columbia near the town of Princeton.

Key highlights

• Robust production with declining cash cost:The company has shown resilience in maintaining its production. In Q1 2021, production stood at 30.4 million pounds of copper equivalent (comprised of 25.5 million pounds of copper, 8,187 ounces of gold, and 160,484 ounces of silver). On the back of some prudent steps taken by the management, the company brought down the cost. The cash cost in Q1 2021, stood at USD 1.15/lb copper produced V/s USD 2.01/lb in the previous corresponding quarter.

• Robust operating matrix: Despite the turmoiled environment, the Company maintained its pace and witnessed spirited performance across its gross margin, EBITDA margin, operating margin and net margin. The Company is continuously working closely to carry this winning momentum as it witnessed higher scale in Q1 2021, which is appreciable.

• Rising cash flows from operations: Through agile management, robust production, operational efficiency and higher average realization price of the metals, the company is continuously increasing its operating cash flow, which is appreciable. During the three months ended March 31, 2021, the Company generated CAD 79.6 million of positive cash flow from operations compared to CAD 16.3 million in the previous corresponding period.

• Outlook for FY2021: On the back of strong Q1 2021 production results, the company expects to achieve the upper end of its annual guidance range of 85 to 95 million pounds of copper, where the AIC cost would be on a lower side in a range of USD 1.80 - 2.00 per pound. The group expects production to normalize from Q1 2021 levels to levels similar to Q4 2020, with the fourth quarter of 2021 planned to be higher with the commissioning of the Ball Mill 3 Expansion Project.

Financial overview of Q1 2021

Source: Company

• In Q1 2021, the company posted revenue of CAD 162.2 million, against CAD 49.6 million in the previous corresponding period. Revenue increased significantly because of higher production and higher metal prices.
• Gross profit in the reported period increased to CAD 96.3 million compared to a loss of CAD 14.9 million in the pcp, although, the cost of sales increased to CAD 65.9 million V/s 64.5 million in Q1 2020.
• Net income in Q1 2021 stood at CAD 52.1 million compared to a net loss of CAD 43.4 million in pcp. Increased sales and higher realized metal prices were the reasons behind this turnaround, whereas the company reported higher income tax.
  

Risks associated with investment

The company’s financial performance is mostly dependent on the price of copper and gold, which directly affects the company’s profitability, margins and cash flows. The prices of these commodities are subject to volatility. It is affected by various factors, such as the strength of the US dollar, Interest rates, Inflation rates, demand and supply, all of which are beyond the company’s control. 

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

The firm began the year on a high note, hitting record quarterly output in Q1 2021. The company mined primarily from Phase 3, which has higher quality ore, therefore production was greater in the first quarter. The organization expects output to be towards the higher end of its annual production range of 85 to 95 million pounds of copper, which is noteworthy, as a consequence of its record first quarter and projected sustained good production throughout the year. Furthermore, copper prices are projected to remain stable since most governments across the world removed shutdown restrictions, allowing for the restoration of industrial activity. Therefore, based on the above rationale and valuation, we recommend a “Hold” rating on the stock at the closing price of CAD 3.57 on July 06, 2021. We have considered Hudbay Minerals Inc, Capstone Mining Corp, Lundin Mining Corp, etc. as the peer group for the comparison.

One-Year Technical Price Chart (as on July 07, 2021). Source: REFINITIV, 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.