GDI Integrated Facility Services Inc. (TSX:GDI) shares have returned 23% annually, on average, over the past five years
Capital Ideas Media | October 9, 2020 | SmallCapPower: We first featured GDI Integrated Facility Services Inc. (TSX:GDI) back in October 2017, when its stock price was $15.26 (it has surged about 150% since). Today, we still think new shareholders of Canada’s largest janitorial services company have a chance to ‘clean up’ on their investment.
(Originally published on Capital Ideas Media on August 18, 2020)
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GDI provides services such as commercial janitorial and building maintenance, the installation, maintenance and repair of HVAC-R, mechanical, electrical and building automation systems, as well as other complementary services such as janitorial products manufacturing and distribution in Canada and the United States.
Since the COVID-19 outbreak began in North America, the Company has ramped up its high-touch cleaning and decontamination services. As well, demand for its Food Plant Sanitation Services and Healthcare Cleaning Services should continue to grow in a post COVID-19 world.
After reporting better-than-expected Q2 financial results recently, Industrial Alliance Securities analyst Neil Linsdell raised his target price on GDI stock to $43 per share from $40, while maintaining a “Strong Buy” rating, citing the expectation for increased demand for cleaning services in the “foreseeable” future as well as the Company’s dominant position in the industry.
“Q2 was impacted as many businesses and buildings went into lockdown mode in mid-March, although many governments and organizations are continuing to work through plans to re-open,” Mr. Linsdell wrote.
“Seemingly without exception, these plans include increased cleaning – not just for appearance, but now also for health. GDI is working with its partners to offer enhanced cleaning packages and services, and has launched a new website (cleanforhealth.com) as part of this marketing strategy. As we look at Q3 and Q4, we expect to see a gradual return to normal business levels, with additional services and revenue layered on top, depending on the client and market. We believe that relatively little business will be lost due to clients shutting down or scaling back operations enough that entire floors or buildings will be shut down. Offices operating at reduced staffing levels will still need to be cleaned more in the new environment than did a fully-staffed office prior to this pandemic.”
Even though GDI completed seven acquisitions last year, the Industrial Alliance Securities analyst sees its “active” M&A strategy complimenting organic growth.
The Company saw its second-quarter revenue rise just 4.4% year over year to $326.7 million, due to the impact of COVID-19, yet its net income for the period soared more than 500% to $13.5 million.
GDI has managed to grow with little dilution to existing shareholders, as the Company has about 23 million shares outstanding. And, CEO Claude Bigras has a 13.8% equity stake in GDI. As at June 30, 2020, the Company had $241.2 million in long-term debt, a $23.2 million decrease from the end of Q1.
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