Toronto Stock Exchange, Toronto (Photo credit: Wikipedia)
AIF : TSX : C$8.21
BUY
Target: C$11.00
COMPANY DESCRIPTION:
Altus Group is a national provider of real estate consulting and advisory services in Canada. Services include property tax appeals, property valuation for acquisitions and public reporting purposes, provision of cost estimates for major development projects, and land surveying.
All amounts in C$
Investment recommendation
We reiterate our BUY rating and C$11.00 target price on Altus shares after GE Capital Real Estate announced that it is now using ARGUS Enterprise (AE). In our view, Altus is well positioned to benefit from the secular trend towards desired independent real estate advice and improved transparency on behalf of asset managers. By leveraging its dominant market position in Canadian RVA and Tax, we believe Altus can post impressive organic growth in the US. The company has solid momentum following major contract signings with CalPERS, PRIM, and now GE in the last ten months.
Investment highlights
We view the deployment of AE by GE Capital Real Estate as a massive endorsement of the software’s value proposition to institutional asset
managers. With over $40 billion in global commercial real estate assets, we believe there could be further opportunities for Altus and ARGUS to
cross-sell consulting services and/or additional software packages to this major client.
Valuation
Altus shares trade at 6.3x 2014E EBITDA, in line with the professional services group despite Altus’ attractive growth profile. Our one-year target price is based on 7.0x 2014E EBITDA plus $0.75 per share for Altus’ 26% equity stake Real Matters.
We see room for Altus’ valuation multiple to expand over time as the recurring revenue nature of the ARGUS business is recognised by the market. For example, ARGUS comps trade at 15x 2014E EBITDA. While we wait for a potential multiple re-rating, investors enjoy a 7.3% yield.
Related articles
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