COMPUTER MODELLING GROUP $21.63 - Toronto symbol CMG

COMPUTER MODELLING GROUP $21.63 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 38.1 million; Market cap: $820.0 million; Dividend yield: 3.0%) 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 and offices in Calgary, Houston, London, Caracas and Dubai.

In the three months ended December 31, 2012, Computer Modelling’s revenue rose 5.7%, to $16.8 million from $15.9 million a year earlier. Software licence sales increased, which offset a decline in consulting and professional services revenue. Earnings also rose 5.7%, to $6.2 million from $5.8 million. Earnings per share were unchanged at $0.16 on more shares outstanding.

Computer Modelling holds cash of $52.2 million, or $1.38 a share, and has no debt. It spent $3.1 million, or a high 18.7% of its revenue, on research in the latest quarter. The shares yield 3.0%.

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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