FIRSTSERVICE CORP. $28.40 - Toronto symbol FSV

FIRSTSERVICE CORP. $28.40 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 30.5 million; Market cap: $866.2 million; No dividends paid) serves the following areas of the real estate market: commercial real estate, residential property management, and property improvement. FirstService has more than 20,000 employees worldwide.

FirstService’s revenue rose 10.4% in the three months ended September 30, 2011, to $585.4 million from $530.5 million a year earlier (all figures except share price in U.S. dollars). Excluding one-time items, earnings per share were unchanged at $0.61. Cash flow rose 22.6%, to $1.03 a share from $0.84.

Revenue increased at two of FirstService’s three divisions: commercial real estate (up 14%) and residential property management (up 15%).

Property services revenue fell 2%. That’s because increased U.S. government regulations continue to slow the rate at which banks and other mortgage providers can foreclose on homeowners who are behind on their payments. As a result, there were fewer newly foreclosed properties for the property services division to manage in the latest quarter.

The company’s total debt of $388.2 million is a manageable 44.8% of its $866.2-million market cap.
FirstService needs a sustained recovery in global real estate markets for its shares to move higher. Meanwhile, the stock trades at a low 12.6 times this year’s forecast earnings of $2.25 a share.

FirstService is a hold.

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