Desjardins Securities analyst Benoit Poirier said he’s “pleased” by Calian Group Ltd.’s deal for assets associated with MDA Ltd.’s ( nuclear services, calling it “another accretive acquisition in an attractive market that is benefiting from secular growth trends.”
“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.”
Mr. Poirier said the deal, announced Tuesday after the bell, clearly strengthens Calian’s nuclear capability and thinks an “attractive” multiple was paid.
“MDA has expertise in refurbishments and operational support, which is complementary to CGY’s consulting expertise,” he said. “MDA’s assets come with a specialized team of engineers providing system engineering and operations support for nuclear outage tooling and refurbishment projects (CGY has locked in MDA’s key employees). MDA’s nuclear team will be integrated into CGY’s existing nuclear business within the AT [Advanced Technologies] segment. The acquisition will close immediately.
“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).”
Reiterating his bullish stance and “buy” recommendation for Calian, he raised his target to $87 from $86 following increases to his revenue and earnings expectations through 2026. The average on the Street is $78.13.
“We encourage investors to revisit the CGY story given the potential for significant value creation associated with the company’s growth aspirations, recurring revenue and proven M&A strategy,” Mr. Poirier said.