CGY stock wins price target raise at Desjardins

Following its most recent acquisition, Desjardins analyst Benoit Poirier has raised his price target on Calian Group (Calian Group Stock Quote, Chart, News, Analysts, Financials TSX:CGY)

On March 5, Calian announced that it had purchased assets from MDA related to nuclear power generation.

“The MDA nuclear team will add new capabilities and services to Calian’s existing nuclear business,” Calian CEO Kevin Ford said. “The Calian Nuclear team is growing, with new projects and opportunities across Canada and globally, and we’re thrilled to accelerate our growth through this powerful addition to our team.”

As reported by The Globe and Mail, Poirier March 6 maintained his “Buy” rating by raised his price target on CGY from $86.00 to $87.00. The analyst provided a little more detail on the acquisition than the company did.

“Subsequent to a follow-up with management, we understand that historically the business generates $2.5-million of annual EBITDA from $8.0-million of annual revenue, which implies an attractive margin of 31 per cent (vs CGY at 10–11 per cent). When considering closing costs, CGY paid $8.0-million for the asset carve-out, which implies an attractive multiple paid of 3.2 times EBITDA (vs CGY trading at 8.2 times),” he reported.

But the analyst says this is a great business for Calian to grow.

“While the size of this acquisition is not overly material (contribution represents only 3.5 per cent of CGY’s TTM [trailing 12-month] EBITDA), we believe CGY could scale the business up (see early success of the HPT acquisition),” he said. “Combined with Decisive, this latest deal means CGY has already executed on more than 25 per cent of its three-year M&A EBITDA target ($36–43-million) released at its investor day,” he added.