A quarter that beat street expectations across the board has Echelon Wealth Partners analyst Ralph Garcea raising his price target on Calian Group (TSX:CGY).
On Wednesday, Calian Group reported its Q1, 2018 results. The company earned $4.07-million on revenue of $75.8-million, a topline that was up 10.3 per cent over the same period last year.
“The results for this quarter continue to show the benefit of the combined strength of our five service offerings,” CFO Jacqueline Gauthier said. “The increase in revenues this quarter from both organic and acquisitive means allowed the company to report record quarterly revenues. In addition, with significant improvement in gross margin percentages, the company was able to increase its EBITDA levels at a higher pace than its revenue growth, while at the same time continue investments in its business development and delivery capabilities, therefore providing for a solid return to shareholders.”
Garcea summarized the quarter, explaining his second target raise in just a few months.
“CGY reported revenue of $75.7M (EWP: $74.2M; Cons: $72.9M) (+10% y/y), EBITDA of $6.4M (EWP: $5.6M; Cons: $5.8M), and EPS of $0.52 (EWP: $0.47; Cons: $0.48). Gross margin came in at 19.4% versus our 19.0% estimate. The mix of revenues in the quarter helped the margin beat on gross margin and EBITDA, especially in BTS where EBIT margins were a record 7.1%. CFOPS excluding working capital was $6.7M (EWP: $5.2M) with FCF of ($8.3M) due to a working capital build of $12.6M. Book-to-bill of -0.1 is not an accurate reflection due to the distorted nature of FQ417 when the Company signed $932M worth of contracts. Backlog as at quarter end was $1,181M, down from $1,261M q/q. CGY upped its credit facility two quarters ago from $10M to $40M to facilitate organic and inorganic growth with comfort levering up to 2x EBITDA. F2018 guidance was reiterated with revenue expected between $290-310M and EPS between $1.90-2.20. Continued execution by prudent management give us confidence in margin profiles going forward and further justifies our recent upgrade in November 2017.
In a research update to clients today, Garcea maintained his “Buy” rating, but raised his one-year price target on Calian Group from $40.00 to $41.00, implying a return of 33.3 per cent at the time of publication.
Garcea thinks Calian Group will generate EBITDA of $25.0-million on revenue of $301.0-million in fiscal 2018. He expects those numbers will improve to EBITDA of $27.0-million on a topline of $314.0-million the following year.