COMPUTER MODELLING GROUP (Toronto symbol CMG; www.cmgroup.com) sells software and consulting services that help oil and gas producers use advanced recovery techniques to get more out of their wells. It has customers in over 50 countries and offices in Calgary, Houston, London, Caracas, Bogota, Kuala Lumpur and Dubai. The company is a leader in complex heavy oil and oil sands simulations.
In the quarter ended March 31, 2014, Computer Modelling’s revenue rose 3.6%, to $20.0 million from $19.3 million a year earlier. Software licence sales (89% of total revenue) rose slightly, but consulting and professional services (11%) jumped 39.1%, thanks to new projects and a large consulting agreement.
Earnings gained 6.7%, to $7.7 million from $7.25 million. Per-share earnings jumped 18.8%, to $0.095 from $0.08, on fewer shares outstanding.
Computer Modelling holds cash of $72.4 million, or $0.92 a share, and has no debt. It spent $3.9 million, or a high 19.6% of its revenue, on research in the latest quarter.
The company has raised its quarterly dividend by 5.3%, to $0.10 a share from $0.095. The stock now yields 2.7%. Computer Modelling also split its shares on a 2-for-1 basis effective June 23, 2014.
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Tech stocks: Fewer defense orders cut into Calian revenues in latest quarter
CALIAN TECHNOLOGIES (Toronto symbol CTY; www.calian.com) operates in two areas: the business and technology services division (which supplies 70% of Calian’s revenue) provides engineers, health care workers and other skilled professionals to clients on a contract basis. The systems engineering division (30% of revenue) sells hardware and software for testing, operating and managing satellite and other communication systems.
In the three months ended March 31, 2014, the company earned $2.4 million, or $0.32 a share. That’s down 29.5% from $3.4 million, or $0.44 a share, a year ago. Revenue declined 13.1%, to $51.2 million from $58.9 million.
The business and technology services division continues to benefit from recurring orders from Canadian federal government departments, including the Department of National Defence. However, these clients placed fewer orders in the latest quarter, cutting the division’s revenue by 9.5%. Meanwhile, revenue at the systems engineering division fell 22.8%.
The company holds cash of $23.1 million, or $3.12 a share, and has no debt. It pays a quarterly dividend of $0.28 a share. That gives the stock a high 6.0% yield.
In the latest edition of Stock Pickers Digest, we look at whether Computer Modelling Group can match its success in oil sands simulation with other unconventional energy sources like shale gas and stranded gas. We also consider Calian’s earnings prospects in light of lower spending by the Canadian defense department and U.S. military contractors. We conclude with our clear buy-hold-sell advice on these two stocks.
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