CIBCHave a $28.00 target. GLTA
EQUITY RESEARCH
May 12, 2022 Flash Research
CI FINANCIAL CORP.
Initial Take On Q1/22
Our take: Headline adjusted EPS in Q1 were in line with our estimate and
the consensus average. Net flows were pre-reported and reverted to
negative territory in Q1. The update on flows for the month of April was
discouraging, with net redemptions exceeding the level of outflows
experienced in the entire first quarter. Conference call at 9 a.m. ET.
Key Metrics
Headline earnings appear in line: CI reported adjusted EPS of $0.85,
in line with our estimate and very modestly above the consensus
average at $0.84.
Net flows were pre-reported for Q1, but update for the month of
April looks discouraging: Net flows were negative in Q1, amounting to
$1.2 billion. Of total net redemptions in the quarter, $0.9 billion were
driven by Canadian retail. This was a discouraging result, in our view,
given that Q1 tends to be the high-water mark for the year from a
seasonality perspective for retail fund flows (owing to RSP contributions).
Furthermore, industry net sales remained in positive territory for the
quarter, albeit at reduced levels from a year ago. In April, net
redemptions amounted to $1.4 billion, exceeding the level of outflows
experienced in the entire first quarter.
Continues to advance the M&A strategy: In Q1 the company
announced agreements to acquire three RIAs that will add $22 billion in
AUA to the U.S. platform, as well as the Northwood Family Office in
Canada.
Remaining active on buybacks in Q1: CI repurchased 4.5 million
shares in Q1, representing 2.2% of total shares outstanding. This follows
the repurchase of 17.4 million shares in 2021. The company also
reiterated its quarterly dividend of $0.18, reflecting a yield of 4.9%. Over
the LTM period, total dividend payments and share repurchases
amounted to $488 million, representing ~67% of free cash flow.
New reporting format introduced: CI expanded its segmented
reporting in Q1 and changed the structure of its income statement
format. We intend to update our model accordingly and publish our
revised estimates when we have worked through the changes.
Screening as deep value: CI continues to screen inexpensively on
measures of relative value. The stock trades at 4.1x P/E (based on the
NTM consensus EPS estimate).
Conference call at 9:00 a.m. ET; 1-833-950-0062