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Inside the Market Wednesday’s TSX breakouts: This company has announced 11 dividend hikes and paid 4 special dividends since 2012

Headline suggestion: This company has announced 11 dividend hikes and paid 4 special dividends since 2012

On today’s TSX Breakouts report, there are just 14 stocks on the positive breakouts list (stocks with positive price momentum), many of which are marijuana stocks, while the negative breakouts list (stocks with negative price momentum) has expanded to 79 stocks.

Discussed today is an outperforming stock whose share price is up 26 per cent year-to-date. Management is committed to returning capital to its shareholders announcing 11 dividend hikes since 2012 as well as special dividends for the past three consecutive years. Discussed below is Sylogist Ltd. (SYZ-X).

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A brief outline is provided below that may serve as a springboard for further fundamental research.

The company

Calgary-based Sylogist is a software and services provider, providing ERP (enterprise resource planning) software solutions to over 1,000 customers worldwide. Its ERP solutions include financial accounting, budget management, grant management and payroll administration to public service organizations such as school boards and nonprofit organizations.

In terms of a geographical revenue breakdown, during the first nine months of fiscal 2018, 71 per cent of the company’s revenue was from the U.S., 27 per cent stemmed from Canada, and 2 per cent was from the U.K. and other regions. Given the large U.S. exposure, the company faces currency risk with an appreciating Canadian dollar relative to the U.S. dollar negatively impacting the company’s revenues.

In terms of the company’s revenue mix, during the first nine months of fiscal 2018, subscription and maintenance revenue accounted for 65 per cent of total revenue, professional services represented 24 per cent, product revenue was 8 per cent, and licenses represented 5 per cent of total revenue.

On Aug. 13, the company reported strong third-quarter fiscal 2018 financial results (the company’s fiscal year-end is Sept. 30) that sent the share price spiking 5 per cent that day and soaring an additional 6 per cent the following trading day. Revenue came in at $11-million, up 23 per cent from $8.9-million reported during the same period last year. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $4.9-million, up 20 per cent year-over-year. Earnings per share was 14 cents, up from 10 cents per share reported last year. The company had $30-million in cash and cash equivalents on its balance sheet at quarter-end and does not have any long-term debt.

Acquisition growth is a core company objective with management focused on strategically expanding its public sector business. In Oct. 2017, the company announced the acquisition of K12 Enterprise and Sunpac Systems, a provider of ERP software solutions to over 70 U.S. school boards that provide education to students enrolled in kindergarten through to grade 12.

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This small-cap stock is listed on the TSX Venture Exchange.

Returning capital to shareholders

Since 2012, the company has announced 11 dividend increases. Most recently, in November, the company announced a 14 per cent dividend hike raising the quarterly dividend to 8 cents per share from 7 cents per share, rising to 32 cents per share yearly. This equates to an annualized dividend yield of 2.5 per cent.

In addition, since 2012, the company has paid its shareholders four special dividends. In 2017, the company paid its shareholders a special dividend of 5 cents per share. In 2016, 2015, and 2012, special dividends of 5 cents per share, 10 cents per share and 7.5 cents per share, respectively, were paid to shareholders.

During the third-quarter, the company repurchased 67,000 shares at an average price per share of $10.98. During the first nine months of fiscal 2018, the company has repurchased a total of 196,500 shares at an average price per share of $10.35.

In the recent Management’s Discussion and Analysis, the company stated its commitment to returning capital to its shareholders, “Sylogist has a long-term vision that focuses on total economic return to its shareholders. That return is a balance of rewarding its shareholders through regular and special dividends, a profitable growing enterprise and, when the market value is appropriate, repurchasing its common shares in the market.”

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Analysts’ recommendations

There is only one analyst that covers this small-cap stock with a market capitalization of $283-million. Gavin Fairweather, the analyst from Cormark Securities, has a ‘buy’ recommendation on the stock.

Financial forecasts

Cormark Securities analyst Gavin Fairweather is expecting the company to report revenue of $38.5-million in fiscal 2018 and $39.3-million in fiscal 2019. He is forecasting EBITDA of $18.1-million in fiscal 2018 rising to $19.5-million in fiscal 2019. His earnings per share estimates are 56 in fiscal 2018 and 49 cents in fiscal 2019.

In recent months, earnings expectations have increased. For instance, two months ago, Mr. Fairweather was forecasting revenue of $36.9-million in fiscal 2018 and $39.1-million in fiscal 2019, EBITDA of $17.7-million for fiscal 2018 and $19.4-million for fiscal 2019, and his earnings per share expectations were 48 cents for fiscal 2018 and 46 cents for the following fiscal year.

Valuation

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According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 13 times the fiscal 2019 estimate. On a price-to-earnings basis, the stock is trading at 26 times the fiscal 2019 estimate.

Mr. Fairweather has a one-year target price of $16, implying the share price has 26 per cent upside potential over the next 12 months.

Insider transaction activity

Most recently, on Aug. 1, chairman, president and chief executive officer Jim Wilson purchased 5,000 shares at a price per share of $12.05, lifting his portfolio’s holdings to 410,000 shares. The previous week, on July 25, Mr. Wilson bought 5,000 shares at a cost per share of $12.30.

On June 29, director, executive vice-president and corporate secretary Dave Elder acquired 300 shares at a price per share of $11.71.

Chart watch

Year-to-date, Sylogist’s share price has rallied 26 per cent.

In terms of key resistance and support levels, the share price has a ceiling of resistance around $14. Looking at the downside, there is technical support around $12. Failing that, there is strong support around $11, near its 200-day moving average (at $11.02).

This small-stock is thinly traded, which can increase volatility in the share price. The three-month historical daily average trading volume is approximately 14,000 shares.

The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

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APH-T Aphria Inc. $18.55
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Negative Breakouts
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AEM-T Agnico Eagle Mines Ltd $43.75
ALA-T AltaGas Ltd $23.95
USA-T Americas Silver Corp $2.90
AX.UN-T Artis Real Estate Investment Trust $12.24
AKG-T Asanko Gold Inc $1.04
ACO.X-T Atco Ltd $38.57
BAD-T Badger Daylighting Ltd $28.74
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BCE-T BCE Inc $52.57
BLN-T Blackline Safety Corp. $5.28
BBD.B-T Bombardier Inc $4.20
BNP-T Bonavista Energy Corp $1.37
BPF.UN-T Boston Pizza Royalties Income Fund $17.47
CBL-T Callidus Capital Corp $1.72
CF-T Canaccord Genuity Group Inc $6.93
CU-T Canadian Utilities Ltd $31.47
CG-T Centerra Gold Inc $5.43
CIX-T CI Financial Corp $20.98
CCA-T Cogeco Communications Inc $63.76
CUF.UN-T Cominar Real Estate Investment Trust $12.09
CNL-T Continental Gold Inc $3.31
CJR.B-T Corus Entertainment Inc $3.69
CPG-T Crescent Point Energy Corp $7.82
CR-T Crew Energy Inc $1.78
DHX-T DHX Media Ltd $2.30
DRM-T DREAM Unlimited Corp $7.65
DPM-T Dundee Precious Metals Inc $2.77
EMP.A-T Empire Co Ltd $24.32
FM-T First Quantum Minerals Ltd $15.29
FNV-T Franco-Nevada Corp $81.88
FRU-T Freehold Royalties Ltd $11.38
WN-T George Weston Ltd $99.87
GMP-T GMP Capital Inc $2.46
G-T Goldcorp Inc $13.46
GWO-T Great-West Lifeco Inc $31.14
GUY-T Guyana Goldfields Inc $3.43
HBM-T HudBay Minerals Inc $5.91
IBG-T IBI Group Inc. $4.85
IGM-T IGM Financial Inc $36.24
IMO-T Imperial Oil Ltd $40.35
IPL-T Inter Pipeline Ltd $23.53
KEY-T Keyera Corp $35.39
LB-T Laurentian Bank of Canada $43.63
LUN-T Lundin Mining Corp $6.15
MAXR-T Maxar Technologies Ltd. $38.75
MRU-T Metro Inc $40.19
NGD-T New Gold Inc $1.17
PDL-T North American Palladium Ltd $9.25
NPI-T Northland Power Inc $21.64
NVU.UN-T Northview Apartment REIT $25.34
NVO-T Novo Resources Corp. $3.58
ONEX-T Onex Corp $92.09
OR-T Osisko Gold Royalties Ltd $10.10
PAAS-T Pan American Silver Corp $19.50
PPL-T Pembina Pipeline Corp $44.01
PTG-T Pivot Technology Solutions Inc. $1.60
PZA-T Pizza Pizza Royalty Corp $9.83
PIF-T Polaris Infrastructure Inc. $11.46
POW-T Power Corp of Canada $28.64
PWF-T Power Financial Corp $29.83
PG-T Premier Gold Mines Ltd $1.84
PBH-T Premium Brands Holdings Corp $96.26
RME-T Rocky Mountain Dealerships Inc $10.04
SAP-T Saputo Inc $38.77
SJR.B-T Shaw Communications Inc $25.50
SNC-T SNC-Lavalin Group Inc $51.90
TOY-T Spin Master Corp. $51.07
SSRM-T SSR Mining Inc. $11.05
STEP-T STEP Energy Services Ltd. $6.54
SOX-T Stuart Olson Inc $5.65
THO-T Tahoe Resources Inc $3.61
TSGI-T The Stars Group Inc. $33.99
TOG-T TORC Oil & Gas Ltd $6.75
TOU-T Tourmaline Oil Corp $20.48
TRQ-T Turquoise Hill Resources Ltd $3.02
VNR-T Valener Inc $19.86
WPM-T Wheaton Precious Metals Corp. $21.60
WCP-T Whitecap Resources Inc $7.91

Source: Bloomberg

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