IBI Group Inc. (TSX:IBG) is growing both organically and through acquisitions without excessive shareholder dilution
Capital Ideas Media | June 1, 2021 | SmallCapPower: Last week, we wrote about how infrastructure spending in North America is expected to ramp up, especially after U.S. President Biden’s more than $2 trillion proposed spending plan to upgrade everything from roads and bridges to schools and high-speed broadband.
(Originally published on Capital Ideas Media on April 13, 2021)
One Canada-listed stock that should benefit from this trend is IBI Group Inc. (TSX:IBG). IBI is a global technology-driven design company that provides architecture, engineering, planning, systems and technology services. It currently has 7,000 active projects in six continents.
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Simply put, IBI Group is one company that will help design our ‘smart’ cities of the future.
What we like most about IBI as an investment is the Company is growing both organically and through acquisitions without excessive shareholder dilution – it has just 37.5 million shares outstanding.
In late 2020, IBI Group acquired Cole Engineering Group, one of the largest independent civil engineering firms in Ontario, which added water and wastewater infrastructure services to IBI’s portfolio of expertise.
Desjardins Securities analyst Benoit Poirier estimates the acquisition will add $0.02 of earnings per share accretion to IBI in 2021 as well as net revenue of $23 million to $27 million per year.
“Bottom line, we are very pleased with the resumption of M&A, which should enable IBI to solidify its expertise in urban centres with Cole’s strong water expertise while opening new cross-selling opportunities for its Intelligence practice,” Mr. Poirier said.
“We expect the stock to be re-rated as the SaaS business grows and management continues to strategically deploy capital toward M&A over the mid-term.”
For the past eight years, IBI Group has been growing its revenue at a compound annual growth rate (CAGR) of 6% along with a 12% CAGR in Adjusted EBITDA. The Company generated $393.2 million in net revenue during 2020 and that figure is expected to grow to $422 million in 2021.
Also, IBI Group insiders own about 36% of the Company’s stock, which is a big vote of confidence in its future prospects.
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