Canaccord Genuity Group Inc. (CF:TSX) reported its financial results from Q1 of fiscal year 2025 (FY25), which were notable for increasing revenues, reported Ventum Capital Markets analyst Rob Goff in an August 12 research note.
"We are encouraged by the improving performance trends where we look for more robust capital markets," Goff wrote.
The global firm provides an array of financial services, including investment banking, advisory, sales and trading, equity research and fixed income, to corporate and institutional clients.
Stock Undervalued, Buy Rated
Over the past 52 weeks, Canaccord Genuity traded between CA$6.50 and CA$9.63 per share. At the time of the report, its price was about CA$7.71 per share, a discount when compared to Wealth Management peers and Capital Markets peers, noted Goff. While the company's shares are up 12% year to date, they are down 10% year over year (YOY).
The return to Ventum Capital's target price on the company, CA$10.25 per share, is 33%.
Canaccord Genuity remains a Buy.
Overall Revenue on the Rise
Goff reviewed the company's Q1 FY25 financials, highlighting the "positive revenue trend" shown.
Specifically, overall revenue was CA$428.2 million (CA$428.2M), a beat all around. It surpassed Ventum and consensus' estimates of CA$385M and CA$427M, respectively.
Also, Q1 FY25 revenue was 24.9% higher YOY, then CA$343.3M, and 4.9% higher quarter over quarter (QOQ), previously CA$409MM.
Canaccord Genuity reported pretax net income for Q1 FY25 of CA$23.5M. This exceeded Ventum's projection of CA$20M but fell short of consensus' estimate of CA$49M.
Similarly, earnings per share (EPS) for the quarter was CA$0.13, below the previous quarter's EPS of CA$0.20. This was above Ventum's forecast of CA$0.11 but below consensus' estimate of CA$0.21.
Positive Gains by Capital Markets
One of the company's best-performing segments during Q1 FY25 was Capital Markets, Goff pointed out.
Capital Markets revenue during the quarter was CA$205.6M, up 41.1% YOY and 1.4% QOQ. Capital Markets contributed CA$0.01 to EPS, in line with the previous quarter.
"This segment benefited from the improvements in mid-market activities, which were reflected in the investment banking and advisory fees revenues at CA$65.3M and CA$66.8N, respectively, where they each represented ~32% of overall Capital Markets revenues," wrote Goff.
Wealth Management Stands Out, Too
Canaccord's Wealth Management segment also did well in Q1 FY25, the analyst reported.
Its revenues in the quarter amounted to CA$215.9M, higher than Ventum's forecast of CA$206M. Revenues were up 13% YOY and 7.9% QOQ.
Wealth Management's contribution to EPS was CA$0.13, in line with Ventum's estimate but just under EPS of CA$0.14 in the prior quarter.
"In this segment, Client assets advanced 2.2% QOQ to $106 billion with solid advisory retention, rising equity markets, and positive flows in its managed portfolio of products," Goff wrote.
The analyst noted that the Wealth Management division in the United Kingdom will be integrating teams acquired from Intelligent Capital and, pending regulatory approval, will complete its acquisition of Cantab Asset Management in the next three months.
Some Expenses Higher
Non-compensation expenses in Q1 FY25 were 33.3% higher QOQ, Goff pointed out, but the company expects more than half of these to be one-time costs.
One driver of these costs was greater investments in compliance infrastructure in each business segment, and management expects these to rise as the company continues to bolster compliance efforts, Goff reported.
The other contributor was development costs, tied to professional fees, recruitment/retention, and client engagement activities such as through the upcoming Global Growth Conference.
Assumptions Revised
Ventum adjusted its model on Canaccord Genuity based on strong revenue during Q1 FY25 and improving macroeconomic factors, Goff said. Ventum raised its full FY25 overall revenues forecast to CA$1,814.10M and lowered its EPS projection to CA$0.81.
For the next quarter, Q2 FY25, Ventum's estimates are CA$447.2M for revenue and CA$0.18 for EPS.
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Disclosures for Ventum Capital Markets, Canaccord Genuity Group Inc., August 12, 2024
Analyst Certification
I, Rob Goff, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this report. I am the research analyst primarily responsible for preparing this report.
Research Disclosures
- Ventum Financial and/or its affiliates expect to receive or intend to seek compensation for investment banking services from the subject company.
- Company has partially funded previous analyst visits to its projects.
General Disclosure
The affiliates of Ventum Financial Corp. are Ventum Financial (US) Corp., Ventum Financial Services Corp., and Ventum Capital Corp.
Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is amongst other factors determined by revenue generated directly or indirectly from various departments including Investment Banking. Evaluation is largely on an activity-based system that includes some of the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and investment guidance, and client feedback. Analysts and all other Research staff are not directly compensated for specific Investment Banking transactions.
None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of Ventum Financial Corp.
Ventum Financial Corp.’s policies and procedures regarding dissemination of research, stock rating and target price changes can be reviewed on our corporate website at www.ventumfinancial.com (Research: Research and Conflict Disclosure).
