COMPUTER MODELLING GROUP $24.00 - Toronto symbol CMG

COMPUTER MODELLING GROUP $24.00 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 38.5 million; Market cap: $943.5 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. It has customers in over 50 countries and offices in Calgary, Houston, London, Caracas, Bogota, Kuala Lumpur and Dubai.

In the three months ended June 30, 2013, Computer Modelling’s revenue rose 10.0%, to $18.1 million from $16.5 million a year earlier. Software licence sales increased, as did consulting and professional services revenue. Earnings rose 16.3%, to $7.1 million from $6.1 million. Per-share earnings gained 18.8%, to $0.19 from $0.16, on fewer shares outstanding.

Computer Modelling holds cash of $63.1 million, or $1.66 a share, and has no debt. It spent $3.5 million, or a high 19.2% of its revenue, on research in the latest quarter.

The company raised its dividend by 12.5% with the June 2013 payment, to $0.18 a share from $0.16. The stock yields 3.0%. Computer Modelling also paid a special dividend of $0.05 a share in June 2013.

Already a leader in complex heavy oil and oil sands simulations, Computer Modelling should profit further as oil and 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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