COMPUTER MODELLING GROUP $12.53 - Toronto symbol CMG

COMPUTER MODELLING GROUP $12.53 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgl.ca; Shares outstanding: 79.0 million; Market cap: $976.3 million; Dividend yield: 3.2%) sells software and services that help conventional oil and gas producers create 3-D models of reservoirs. That lets them squeeze more out of those reservoirs using advanced recovery techniques, such as injecting steam or chemicals. Typically, only 25% to 30% of oil and gas is recovered during primary production.

Unconventional producers using hydraulic fracturing, or fracking, of oil and gas-bearing shale can also use Computer Modelling’s software to determine optimal drilling locations and depths.

In the three months ended June 30, 2015, the company’s revenue rose 9.7%, to $21.4 million from $19.6 million a year earlier. Software licensing revenue (90% of the total) rose 10.9%, while consulting and professional services revenue (10%) fell slightly.

Overall earnings gained 8.9%, to $6.8 million, or $0.09 a share, from $6.2 million, or $0.08.

The company makes mostly recurring revenue from software licences and maintenance contracts on its products. Its renewal rate is over 98%, and most of its clients are major oil and gas firms. That gives it longterm stability, even when oil and gas prices are falling.

Computer Modelling is a buy.

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