The main business groups for this outsourcing provider continue to generate rising revenue with the help of new, large government contracts.
Although the company’s revenue fluctuates depending on the timing of its work, its strong balance sheet and 12.8 p/e (based on forward earnings) bolster its appeal. It also offers a sound 3.6% dividend yield.
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CALIAN GROUP (Toronto symbol CGY; www.calian.com) has two main businesses: Business and Technology Services (contributing 70% of the company’s revenue) provides engineers, health-care workers and other skilled professionals on a contract basis; and Systems Engineering (30% of revenue) sells hardware and software for testing, operating and managing satellite and other communications systems.
In the three months ended December 31, 2018, Calian’s revenue rose 4.9%, to $79.9 million from $76.2 million a year earlier. The company earned $3.4 million, or $0.43 a share. That was down 19.7% from $4.2 million, or $0.54, a year earlier. The decline was mostly due to higher costs. They include increased marketing expenses to win big new contracts as well as additional costs to improve and expand the company’s facilities.
Calian’s Business and Technology operations continue to service repeat orders from several Canadian federal departments. They include the Department of National Defence and the RCMP. Overall, revenue for this business rose 13%.
Revenue at the Systems Engineering business fell 16%, mostly due to the timing of several large projects. The operation continues to win contracts with the Canadian Space Agency to provide support for its satellite operations.
For example, the company recently won an IT services contract with General Dynamics Mission Systems Canada. That firm has been contracted to deliver Land C4ISR systems support for the Canadian Army.
More specifically, U.S.-based General Dynamics was awarded three contracts by the Government of Canada to support its Land Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) systems. These Land C4ISR systems help the Canadian Army protect its communications and information systems.
The amount of Calian’s contract has yet to be disclosed, but it reinforces and expands on the company’s more-than-20-year partnership with the Department of National Defence.
Dividend Stocks: Contracts business continues to support a 3.6% dividend
Another Canada Border Services Agency (CBSA) contract is for a site in Laval, Quebec. The deal comes after Calian’s health services unit recently re-won a similar contract to supply on-site health solutions at a CBSA holding centre in Toronto.
Factoring in extensions, the two agreements have terms of up to five years. Combined, the deals extended to the fullest possible term also have a total value of more than $10 million.
Calian holds cash of $20.4 million, or $2.62 a share, and has no debt. The stock trades at 12.8 times the forecast 2019 earnings a share of $2.30. The shares yield 3.6%.
Thanks for your comment. Stocks that are “Buys” or “Still Buys” are both ones that we recommend as a “Buy.” But we might use the term “Still a Buy” if, perhaps, the stock fell in price, or had some negative news, and we wanted to reaffirm our recommendation in the face of those developments.
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I am always a little concerned when a stock is given a glowing report but you say “still” a buy!
Thanks for your comment. Stocks that are “Buys” or “Still Buys” are both ones that we recommend as a “Buy.” But we might use the term “Still a Buy” if, perhaps, the stock fell in price, or had some negative news, and we wanted to reaffirm our recommendation in the face of those developments.