Colliers International Group Inc.
(CIGI-N, CIGI-T) US$154.55 | C$196.29
Solid 2022 Outlook; Business Mix Shifting to a League of its Own Event
CIGI reported Q4/21 adj. EBITDA of $192.0mm, 13% above TD's $169.3mm (consensus: $169.1mm), reflecting strong revenue growth partially offset by higher- than-expected incentive compensation (EBITDA margins: 14.3% vs. TD's 15.3%).
Impact: POSITIVE
Q4/21 was another terrific quarter with 46% y/y organic growth and all business lines/geographies topping revenue expectations. Brokerage continued to be a highlight, with capital markets and leasing 60% and 12% above pre-pandemic levels, respectively. Investment Management ("IM") was also very strong with EBITDA increasing 53% y/y to $28.3mm (TD: $22.6mm) reflecting management fee growth, with CIGI raising >$6bn of AUM in 2021 (+29% y/y to $51.0bn). Including the recently announced acquisitions of Basalt and Antirion, Colliers will have >$60.0bn of AUM and derive ~20-25% of consolidated EBITDA from its IM business. In our view, this sizable and differentiated IM platform bolsters Colliers' sum-of-the-parts valuation and supports the decoupling of its valuation from the diversified global CRE players.
Strong 2022 outlook: 2022 guidance for high-single-digit consolidated revenue growth at EBITDA margins of 13.7%-13.9%, was strong and implied revenue/ EBITDA ~7%/~5% above consensus, respectively. However, given Colliers' very strong balance sheet, we are optimistic that it could surpass this guidance with additional acquisitions. In terms of the organic growth drivers, we expect IM fundraising to shoulder the load, with Colliers' alternative investment strategies in vogue; Harrison Street has already closed an €800mm fund in 2022, its largest ever in Europe and Basalt will begin fundraising imminently for its largest ever fund. Furthermore, we believe that the cross-sell potential between Harrison Street and Basalt's LP relationships could bolster fundraising. However, based on management's commentary it appears Colliers O&A segment is also hitting its stride as a derivative benefit from the robust IM growth, which could see another boost from the diversification to infrastructure brought by Basalt. We expect engineering services momentum to continue in 2022, with the U.S. platform rapidly being assembled and see potential for an international acquisition as management reiterated the global scalability of the service.
TD Investment Conclusion
We are attracted to Colliers' large and highly fragmented markets, demonstrated ability to add value through M&A, and improving mix of recurring revenues