Bullboard - Stock Discussion Forum Calian Group Ltd T.CGY

Alternate Symbol(s): CLNFF

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Calian Group Ltd. is a diverse solutions company. The Company is engaged in providing healthcare, communications, learning and cybersecurity products and services. It provides business services and solutions to both industry and government customers in the areas of health, learning, defense, security, aerospace, engineering, and information technology (IT). Its Advanced Technologies segment is... see more

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TSX:CGY - Post Discussion

Calian Group Ltd > RBC Report

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Post by retiredcf on Feb 18, 2024 10:07am

RBC Report

Their upside scenario target is $87.00. GLTA

February 16, 2024

Calian Group Ltd.
The four-piston consolidator drives forward

Our view: Calian reported a solid Q1 beat, with 21% Y/Y revenue growth and 37% Y/Y adj. EBITDA growth. Q1 upside reflects organic growth reaching a 2.5 year high, along with stronger contribution from recent acquisitions. Calian reiterated FY24 guidance, which calls for 15% revenue growth and 30% adj. EBITDA growth, and is targeting 15% CAGR over the next 3 years through M&A and organic growth. Maintain Outperform, price target moves from $65.00 to $72.00.

Key points:

• Solid Q1 beat. Q1 revenue was up 21% Y/Y to $179MM, above RBC/ consensus at $165MM/$170MM. On better than expected revenue, adj. EBITDA rose 37% Y/Y to $19.5MM, ahead of RBC/consensus at $18.2MM/ $18.5MM. As a result, Q1 adj. EPS was up 35% Y/Y to $1.01, slightly above RBC/consensus at $0.98/$0.99.

Organic growth reaches 2.5 year high. Organic growth was 12% Q1, up from 7% Q4, and above RBC at 7%. Q1 represents the highest quarterly organic growth since Q3/FY21 and above Calian’s 5-year average (8%). Solid organic growth reflects strong performance at both Health (24% organic) and Advanced Technologies (21% organic), along with a return to positive growth at ITCS (1% organic vs. -8% TTM average). Negatively, Learning saw only 3% organic growth, below its TTM average (16%), and total backlog declined 3% Q/Q (-11% Y/Y).
Recent acquisitions off to healthy starts. The HPT acquisition contributed $9.6MM revenue Q1, above the $4.5MM in our model. Higher revenue reflects one-time revenue related to a new project win. While we expect HPT revenue to drop back to an annual run-rate of $18MM revenue, the majority of HPT’s ongoing revenue is recurring. The Decisive acquisition contributed $4.2MM Q1, also above the $3.3MM in our model.
Shifting to larger acquisitions. Calian’s 3-year plan calls for 15% revenue CAGR through a combination of capital deployed on acquisitions and organic growth. Calian is targeting deploying $250-300MM capital at 6-8x EBITDA over the next 3 years. While targeted takeout multiples are higher than historical (5x), the company is likely to make larger acquisitions in new geographies, which may offer potential revenue and cost synergies. Leverage is likely to increase (Calian’s 3-year targets imply $125-175MM new debt), though the company is likely to stay below its 2.5x max leverage target (currently 0.5x net debt / NTM EBITDA).
Maintain Outperform. Our Outperform thesis on Calian reflects: 1) continued compounding of capital through acquisitions and organic growth; 2) valuation at 8.6x NTM EV/EBITDA is below peers; and 3) high consistency and low beta (0.67) due to Calian’s four business units, which reduce quarterly variability and broaden capital allocation opportunities. We are rolling forward our target valuation from CY24e to CY25e; our $72.00 price target is now based on 8.5x CY25e EV/EBITDA (previously 8.5x CY24e EV/EBITDA).