Calian Group Ltd. is “starting 2021 on a strong note” with the $22-million acquisition of Quebec-based antenna solutions provider InterTronic, said Desjardins Securities’ Benoit Poirier, who expects more deals to come.
“With its large, full-motion antenna technology, InterTronic brings synergies to CGY: (1) capability to bid on bigger opportunities; (2) strengthens CGY’s relationship in Europe with the European Space Agency (ESA) and SatService; and (3) complements CGY’s new carbon fibre antenna offering,” the analyst said. “CGY paid an attractive 4 times EV/EBITDA multiple for this strategic transaction.”
Mr. Poirier called it “another attractive M&A transaction that demonstrates management’s disciplined approach” and sees the company will “lots of dry powder for seizing additional attractive M&A opportunities.”
Reiterating his bullish stance on Calian and maintaining a “buy” recommendation, he increased his target to $70 from $68. The average is $72.50.
“This transaction is a testament to CGY’s disciplined and strategic M&A playbook—a key pillar of our investment thesis on the name,” he said.
Elsewhere, Echelon Capital analyst Amr Ezzat raised his target to $77 from $75 with a “buy” rating (unchanged).
Mr. Ezzat said: “Calian is a quality diversified operation with a deep bench, an underleveraged balance sheet, and a solid track record of value creation through acquisition and innovation. CGY has all the bells and whistles an investor would seek out in a quality company. The stock has tripled in the last three years, as management transitioned its philosophy and growth strategy from what was a “steady Eddie” operator with stable revenues/earnings, to one seeking to capitalize on growth in a more aggressive fashion. We argue that the Street has consistently underestimated valuation by failing to recognize the accretion potential of M&A on Calian’s earnings and more importantly on its valuation. We believe using an EBITDA/earnings multiple on short-term earnings estimates significantly (and incorrectly) undervalues Calian’s shares as it gives no recognition to the Company’s inorganic growth activity (and indeed, its underleveraged balance sheet). Admittedly, we recognize the difficulty in modelling M&A contribution in forecasts (predicting size and timing is throwing darts in the dark), but we still believe it sensible to reflect M&A in our valuation. As such, our DCF derived target price incorporates capital deployment into M&A. We are comfortable enough with the Company’s track record of executing accretive transactions to give CGY some future inorganic growth benefit.”