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Computer Modelling Group is a “Strong Buy”, says Industrial Alliance

Computer Modelling Group price target
Ken Dedeluk, President and CEO of Computer Modelling Group
Ken Dedeluk, President and CEO of Computer Modelling Group

Fourth quarter financials from Computer Modelling Group (Computer Modelling Group Stock Quote, Chart TSX:CMG) have gotten a positive review from analyst Elias Foscolos of Industrial Alliance Securities.

The analyst’s take was delivered in a client update on Thursday which reiterated his “Strong Buy” rating, citing significant improvement in the company’s deferred revenue.

Calgary-based CMG, a reservoir modelling and simulation software business, released its fourth quarter and fiscal 2019 year end results on Thursday, reporting revenue of $21.1 million and Adjusted EBITDA of $9.3 million, both of which were above Foscolos’ estimates at $17.6 million and $7.2 million, respectively. The analyst says that the EBITDA beat was primarily due to increased revenue offset partially by higher costs.

CMG finished the year with $35 million in deferred revenue, on par with the deferred revenue of fiscal 2018. The company maintained its dividend at $0.10 per share per quarter, while its cash balance fell approximately $9.5 million on a year-over-year basis.

Computer Modelling Group beat the analyst’s forecast

“CMG reported Q4/F19 revenue of $21.1 million which exceeded both our forecast and the consensus projection,” says Foscolos. “This revenue beat led to EBITDA of $9.3 million, also bettering our forecast and consensus.”

“Most important, deferred revenue sharply rebounded from Q3/F18 which bodes well for Core Maintenance and Annuity revenue for F2020 and CMG reported two additional CoFlow sales. Finally, CMG maintained its $0.10 per share quarterly dividend despite a minor shortfall in FFO. Weighing all the news, particularly the rebound in deferred revenue and the additional CoFlow sales, we classify the results as Positive,” he says.

Computer Modelling Group Company Profile via Industrial Alliance Securities

Computer Modelling Group is a software engineering and consulting firm that develops and licences dynamic reservoir modelling and simulation software. CMG provides reservoir licenses on on a ” rental” and sales basis to ~600 organizations. The majority of the Company’s sales are outside Canada.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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