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Gold/Mining/Energy : 2000 millennium problem: investment opportunities -- Ignore unavailable to you. Want to Upgrade?

To: sibe who wrote (108)	2/22/1998 12:41:00 AM
From: BM	Read Replies (1) \| Respond to of 222

CGI Group - analyst report by Scotia Capital Markets [Note - in Investor's Digest of Feb 27, 1998 but undoubtedly written in January] Report by analyst Ralph Garcia and associate Paul Danesi Revenue, earnings at CGI to grow at 30-35% a year *This information technology specialist is recommended as a strong buy.* Its shares should hit $45 in a year. With strong growth expected in the near future, an aggressive acquisition program, and strategic partnerships with BCE, Bell Canada, and IBM Canada, CGI Group (GIB.A-TSE, M, $27.60, 514-841-3200) is a strong buy with moderate risk. The 12month target is $45. CGI is the largest Canadian-owned publicly-traded information technology company in Canada, serving more than 2,000 clients throughout North America and internationally. CGI operates in consulting, systems integration and outsourcing, which is the fastest growing segment. CGl's outsourcing services include managing computer data centres, and helping companies convert from outdated mainframe computers to modem client-server and intranet systems. Most large companies now outsource much of these functions. The Gartner Group in Stamford, Conn., estimates that every 25 personal computers installed requires one full-time support employee. This is a burdensome cost and many companies find it difficult for an in-house support team to keep up with the pace of changing computer technology. The global information technology market is estimated at 575 billion, $8 million of which is generated in Canada, with a growth late of 10 to 15 per cent over the next three to five years. The systems integration and outsourcing sectors in North America should grow at a rate of 20 to 30 per cent. CGI poses an interesting valuation with revenues growing at more than 90 per cent and earnings at more than 100 per cent. We expect strong growth over the next three to five years. A price to earnings ratio of 35 times on 1999 fiscal year earnings per share of 51.17 yields a one-year target of $41. A conservative price to sales multiple of 2.5 times fiscal 1999 sales per share of $19.63 yields a one year target of $49. CGI's revenues have increased from $70 million in fiscal 1992 to $232 million in 1997. Net earnings have also increased from $1.1 million or $0.04 per share in 1995 to 57.8 million, $0.20 per share in 1993. The company is led by a nucleus of three people -- Serge Godin, Andre Imbeau and lean Brassard --who have been with the company since the beginning. CGl has several competitive advantages, including a critical mass and a strong financial position, a team of 7,000 professionals, access to the most extensive telecommunications network in Ontario and Quebec. CGI recently signed a five-year $100 million agreement with Credit Union Central of Canada to provide financial switching and telecommunications services. In early January, BCE agreed to buy $138 million worth of CGI shares from Teleglobe Inc., while CGI issued $198 million of its shares to BCE in exchange for BCE subsidiaries Bell Telecom Solutions and Bell Sygma International. This increases BCE's stake in CGI to 43 per cent from 23.8 per cent. The agreement also gives BCE the option to increase its position to 56 per cent in six years. Along with the transfer of subsidiaries, CGI also signed a l0-year agreement with Bell Canada to continue providing Bell's systems development work and maintenance. This should generating revenues of more than $500 million for the first year, declining to about $275 million per year until year 10. FINANCIAL STATISTICS AND KEY RATIOS ..............................1996......1997....1998E...1999E Revenue($M)..........122.0.....231.9...673.9...1,288.9 Net income($M).......2.718.....7.765...33.746..76.861 Earnings/share($)....0.08......0.20....0.58....1.17 Cash flow/share($)...0.23......0.51....1.18....2.02 Sales/share($).......3.56......5.97....11.59...19.63