COMPUTER MODELLING GROUP $16.07 - Toronto symbol CMG

COMPUTER MODELLING GROUP $16.07 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 37.1 million; Market cap: $596.2 million; Dividend yield: 3.2%) sells consulting services and software that help oil and gas producers use advanced recovery techniques to get more out of their existing wells. The company has customers in over 50 countries.

In the three months ended December 31, 2011, Computer Modelling’s revenue rose 31.8%, to $15.9 million from $12.1 million a year earlier. Software licence sales rose 39.1%, while consulting and professional services revenue declined 12.1%, mainly because Computer Modelling consulted on some large one-time projects in the year-earlier quarter.

Earnings jumped 62.5%, to $5.8 million, or $0.16 a share, from $3.6 million, or $0.10 a share.

Rising dividend adds appeal

The company holds cash of $47.6 million, or $1.26 a share, and has no debt. It spent $2.7 million, or 17.3% of its revenue, on research in the latest quarter.

Computer Modelling raised its dividend by 18.2% with the March 2012 payment. The shares now yield 3.2%.

The company makes mostly recurring revenue from software licences and maintenance contracts for its products. That gives it long-term stability.

Computer Modelling is already a leader in complex heavy oil and oil sands simulations. It should profit further as producers continue to develop other unconventional sources, like shale gas and coalbed methane.

Computer Modelling is a buy.

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