Following a second quarter he describes as “well above expectations”, National Bank Financial analyst Richard Tse has raised his price target on Altus Group (Altus Group Stock Quote, Chart, News TSX:AIF).
On Thursday, Altus Group reported its Q2, 2019 results. The company earned $13.32-million on revenue of $153.7-million, a topline that was up 14.5 per cent over the same period last year.
“The record performance in our global Property Tax business drove consolidated adjusted EBITDA to $31-million, the strongest quarter in our history,” CEO Robert Courteau said. “This performance reflects our past investments in this business, along with excellent execution. In parallel, our Altus Analytics business posted healthy growth as we launch our ARGUS Enterprise solution to the cloud and build out a global asset and investment management platform for the CRE industry.”
Tse summarized the quarter, which he saw as primarily positive.
“Following a number of quarters of variability, Altus posted a solid beat on both revenue and profitability,” the analyst writes. “The big driver was outperformance in the Company’s CRE Consulting segment (Tax) care of an accelerated pace of case settlements as outlined in our recent preview. Our diligence suggests the momentum will continue well into the H2/F19 with a continued pickup in case settlement volume in both the UK and Ontario. With respect to Altus Analytics, the results were a touch light to our expectations. That said, we did see a sequential increase of recurring revenue to 76% (vs. our estimate of 74%), a positive in reinforcing the focus on recurring revenue.”
Altus Group gets price target raised by analyst Richard Tse
In a research note to clients today, Tse maintained his “Outperform” rating on Altus Group, but raised his one-year price target from $35.00 to $40.00, implying a return of 18 per cent at the time of publication.
Tse thinks AIF will post EBITDA of $87.7-million on revenue of $568.3-million in fiscal 2019. He expects those numbers will improve to EBITDA of $96.0-million on a topline of $617.5-million the following year.
Tse thinks Altus’s balance sheet gives it flexibility.
“Altus exited the quarter with positive CFO and a cash balance of $52 mln,” he notes. “For a Company that’s in transition, a solid balance sheet could provide flexibility to fund the Company’s transition plan as well as acquisition. Post the quarter, the Company acquired One11 Advisors for US$11 mln. One11 Advisors is a U.S.-based real estate software consulting firm that provides integrated advisory and managed services for real estate organizations’ front to back office strategies, processes and technology.”
The analyst suspects there could be even more upside awaiting the stock.
“As AA makes progress towards its goal of achieving $400 mln in revenue with 90% recurring revenue paired with 30% adj. EBITDA margins by 2023, we believe incremental progress towards that target will drive a commensurate re-rating in the stock (higher),” he adds. “Bottom line, Tax is helping drive the outlook through F2019 and into F2021/22.”
At press time, shares of Altus Group were up 8.72 per cent to $37.51 on volume of 295,617. The stock closed 2018 at $23.67, giving it a year-to-date gain of 58.5 per cent.
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