After attending the company’s user conference, National Bank Financial analyst Richard Tse says Altus Group (TSX:AIF) is making an even harder pivot to tech than he first thought.
Last week, Tse attended Argus Connect 2017 in Phoenix, Arizona. He notes that Altus has added a lot of technology with recent acquisitions, and says this is a development he thinks will continue as management sees a clear opportunity to deploy tech into a space that has been bereft of it.
“What was more than clear to us was that Altus is taking an even more aggressive stance in its pivot towards technology than we’ve given credit for,” says the analyst. “In our view, it appears that pivot to technology continues to dominate the strategy for Altus as a whole and it’s no surprise why. While we’ve been hearing from Altus for some years that technology adoption in commercial real estate (CRE) lags other sectors, our “on the ground” discussions and anecdotes with Altus’ existing and prospective customers more than validated that notion. The fact is that ARGUS Enterprise (AE), Altus’ reporting, planning, and budgeting software is the standard in the CRE market, which means it provides a Trojan Horse for Altus to upsell related technology products into that existing base. As investors following our research will recall, that shift towards technology revenue should drive a valuation re-rating in this name. If that weren’t enough, we believe an expansion of technology products would also make Altus an M&A target on its own as ARGUS DCF / Enterprise is an admired asset within the CRE service provider community.”
In a research update to clients today, Tse maintained his “Outperform” rating and one-year price target of $39.00 on Altus Group, implying a return of 29 per cent at the time of publication.
Tse thinks Altus Group will generate EBITDA of $83.2-million on revenue of $473.6-million in fiscal 2017. He expects these numbers will improve to EBITDA of $97.5-million on a topline of $512.4-million the following year.