COMPUTER MODELLING GROUP $14.88 - Toronto symbol CMG

COMPUTER MODELLING GROUP $14.88 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 78.6 million; Market cap: $1.2 billion; Dividend yield: 2.7%) (all figures split 2-for-1) 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.

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.

Already a leader in complex heavy oil and oil sands simulations, Computer Modelling should profit further as oil and natural gas producers continue to develop other unconventional sources, such as shale gas, coalbed methane and stranded gas.

Computer Modelling is a buy.

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