Canadian General Investments — Recent performance affected by top-down events

Canadian General Investments (TSX: CGI)

Currency in CAD

Last close As at 03/02/2023

CAD34.06

0.81 (2.44%)

Market capitalisation

CAD711m

Research: Investment Companies

Canadian General Investments — Recent performance affected by top-down events

Canadian General Investments (CGI) is managed by Greg Eckel at Morgan Meighen & Associates (MMA). He explains that in 2022, the stock market has been driven by macroeconomic events and investors have essentially ignored company fundamentals, which are the long-term drivers of share prices. The manager is sticking to his principles and continuing to focus on stock selection – a strategy that has led to a very commendable long-term record of outperformance. Eckel believes that stock market volatility is likely to persist as central banks need to further tighten monetary policy to combat higher inflation; he does not anticipate a repeat of the V-shaped market recovery seen during the COVID-19 pandemic. If the macroeconomic backdrop improves, the manager expects quality companies to outperform, so for now he is ‘weathering the storm’ and looking forward to sunnier times.

Melanie Jenner

Written by

Mel Jenner

Director, Investment Trusts

Investment Companies

Canadian General Investments

Recent performance affected by top-down events

Investment companies
North American equities

15 November 2022

Price

C$33.56

Market cap

C$700m

AUM

C$1,206m

NAV*

C$50.62

Discount to NAV

33.7%

*Including income. At 14 November 2022.

Yield

2.7%

Ordinary shares in issue

20.9m

Code/ISIN

CGI/CA1358251074

Primary exchange

TSX

Secondary exchange

LSE

AIC sector

North America

52-week high/low

C$45.00

C$28.85

NAV* high/low

C$63.67

C$44.65

*Including income

Gross gearing*

14.8%

Net gearing*

14.1%

*At 31 October 2022.

Fund objective

Canadian General Investments’ objective is to provide better-than-average returns to shareholders by investing in a diversified portfolio of primarily Canadian equities. It aims to achieve this through prudent security selection, timely recognition of capital gains/losses and appropriate use of income-generating instruments. CGI’s performance is measured against the S&P/TSX Composite Index.

Bull points

Diversified portfolio of North American equities.

Very long-term record of outperformance versus the benchmark.

Rising regular quarterly dividends.

Bear points

Discount remains consistently wide.

High level of family ownership.

The relatively high level of gearing will amplify capital losses during a market sell-off.

Analyst

Mel Jenner

+44 (0)20 3077 5720

Canadian General Investments is a research client of Edison Investment Research Limited

Canadian General Investments (CGI) is managed by Greg Eckel at Morgan Meighen & Associates (MMA). He explains that in 2022, the stock market has been driven by macroeconomic events and investors have essentially ignored company fundamentals, which are the long-term drivers of share prices. The manager is sticking to his principles and continuing to focus on stock selection – a strategy that has led to a very commendable long-term record of outperformance. Eckel believes that stock market volatility is likely to persist as central banks need to further tighten monetary policy to combat higher inflation; he does not anticipate a repeat of the V-shaped market recovery seen during the COVID-19 pandemic. If the macroeconomic backdrop improves, the manager expects quality companies to outperform, so for now he is ‘weathering the storm’ and looking forward to sunnier times.

Long-term NAV outperformance versus benchmark but tricky 2022 to date

Source: Refinitiv, Edison Investment Research

The analyst’s view

While investors hope that central banks are close to the end of their interest rate tightening cycles and the economic impacts of higher rates are modest, the macroeconomic environment is very uncertain and is yet to be fully reflected in corporate earnings. Hence, further stock market volatility is likely, and investors could benefit from considering a carefully managed portfolio of high-quality businesses that are held for the long term. CGI has certainly proved its credentials as data from MMA show that over the last 50 years to the end of 2021, the fund generated an annual share price total return of +12.1%, versus the benchmark’s +9.6% annual total return. A C$100k investment, with dividends reinvested, would have grown to c C$30.2m over this period.

Discount wider than historical averages

In an environment of heightened investor risk aversion, CGI’s 33.7% discount is wider than the 29.9% to 31.7% range of average discounts over the last one, three, five and 10 years. The company pays regular quarterly dividends, and its annual distribution grows steadily (+4.5% in respect of FY22). Based on its current share price, CGI offers a 2.7% dividend yield.

Market outlook: Tighter monetary policy

While the Canadian stock market sector leadership has started to broaden out, as at end-October 2022, there were three sectors in positive territory this year; energy really has been ‘the only game in town’ (Exhibit 1). Investors have had to navigate a tricky macroeconomic backdrop characterised by higher inflation and rising interest rates, while shifting expectations about the pace of tighter US monetary policy have caused very sharp short-term moves in share prices. In Canada, the base interest rate has increased from 0.25% to 3.75% and more hikes are anticipated as the central bank seeks to combat higher prices.

While Canada can be overlooked by global investors, it has some favourable attributes that may warrant attention. The International Monetary Fund’s GDP growth forecasts are meaningfully higher for Canada compared with the United States (3.3% versus 1.6% for 2022 and 1.5% versus 1.0% for 2023). Also, Canadian stocks remain relatively attractively valued with the Datastream Canada Index trading on a 12.3x forward P/E multiple, which is a 30.5% discount to the Datastream US Index. This margin is much wider than the 21.9% five-year and 14.3% 10-year average discounts. While financials and energy make up around half of the bellwether S&P/TSX Composite Index, they contain less than 30% of the index constituents.

Exhibit 1: S&P/TSX Composite Index data and valuation

S&P/TSX Composite Index data (at 31 October 2022)

Valuation of DS Canada Index versus DS US Index (last five years)

Number of companies

Weight
(%)

10M22 total return (%)

2021 total return (%)

Financials

29

30.6

(9.6)

36.6

Energy

38

19.1

36.7

49.0

Industrials

27

13.3

1.1

16.5

Materials

51

11.3

(6.6)

4.1

Info technology

14

5.6

(52.8)

18.5

Comm’n services

7

4.9

(3.7)

24.7

Utilities

16

4.7

(5.7)

11.7

Consumer staples

11

4.1

7.1

22.4

Cons discretionary

14

3.6

(6.6)

18.5

Real estate

22

2.5

(24.6)

37.5

Healthcare

7

0.4

(53.8)

(19.6)

Index

236

100

(6.1)

25.2

Source: Refinitiv, Bloomberg, Edison Investment Research. Note: Performance in Canadian dollar terms. Numbers subject to rounding. Valuation data at 14 November 2022.

The fund manager: Greg Eckel

The manager’s view: More interest rate hikes to come

Eckel comments that ‘we are all facing the same demons’ with higher inflation and rising interest rates, while the war in Ukraine is affecting commodity prices, especially in the oil complex. The manager reports that the Canadian economy is benefiting from higher energy prices, but these are eating into corporate margins and leading to higher interest rates. While the Canadian Consumer Price Index has moderated from 8.1% in June to 6.9% in September, the Bank of Canada and the US Federal Reserve will continue to increase interest rates, seeking to combat higher prices. In October 2022, the Canadian base rate was increased by a further 50bp to 3.75%, which was less aggressive than the consensus forecast for a 75bp increase. The manager says that food price inflation is running at a low double-digit rate, but gasoline prices have moderated from their peaks. In Canada, the labour market is tight, and the unemployment rate has declined from 5.4% to 5.2%. However, Eckel notes there are signs of softening in the Canadian housing market as sales have declined but pricing is sticky, although the rental market is very tight, which is adding to inflation. He suggests that given the lag between raising interest rates and the impact on the economy there is a risk that the central bank overshoots and causes a recession; currently the consensus is for a terminal base rate of 4.25–4.50%. On a brighter note, however, Eckel highlights that the Canadian economy is ‘coming from a good place’ given the country’s commodity exposure and the fact that consumers built up their savings during the pandemic; albeit part of which has since been spent. The manager opines that while we ‘could be on a tightening interest rate journey for a while, we are likely to be closer to the end than the beginning’. He comments that so far there has not been a significant increase in the number of corporate profit warnings and while there is talk of a recession this is not yet evident. However, Eckel is expecting a greater number of downgrades as over the last two earnings seasons some companies have highlighted labour and supply chain constraints. As an example, recreational vehicle manufacturer BRP was building units and shipping them to dealerships but was then having to install semiconductor components later when they became available. The manager comments that, so far, demand within the economy has generally held up well but ‘inflation is starting to bite’, especially as mortgage rates are rising.

Current portfolio positioning

At end-October 2022, CGI’s top 10 positions made up 37.5% of the fund, which was not dissimilar to 38.1% 12 months earlier; seven positions were common to both periods.

Exhibit 2: Top 10 holdings (at 31 October 2022)

Portfolio weight %

Company

Country

Industry

31 October 2022

31 October 2021*

Canadian Pacific Railway

Canada

Railroads

5.0

3.8

West Fraser Timber

Canada

Forest products

4.5

3.4

Franco-Nevada Corp

Canada

Gold mining

4.2

3.5

Apple

US

Technology

3.8

N/A

TFI International

Canada

Transport & logistics

3.7

3.3

First Quantum Minerals

Canada

Metals & mining

3.7

3.6

WSP Global

Canada

Business services

3.4

2.7

The Descartes Systems Group

Canada

Logistics software

3.2

2.8

Mastercard

US

Financial transaction processing

3.0

N/A

Bank of Montreal

Canada

Banks

3.0

N/A

Top 10 (% of portfolio)

37.5

38.1

Source: CGI, Edison Investment Research. Note: *N/A where not in end-October 2021 top 10.

Considering CGI’s sector exposure, which is shown in Exhibit 3, over the 12 months to end-October 2022, the notable changes are a lower technology weighting (-10.5pp) and a higher allocation to energy stocks (+6.2pp). The fund’s structure remains largely unchanged with a large 19.4pp underweight position in financials stocks and overweight exposures to the consumer discretionary (+8.7pp) and industrials (+8.0pp) sectors.

CGI’s reduced technology exposure is a mix of share price performance and active selling. Eckel explains that high-multiple, long-duration stocks remain under pressure in an environment of rising interest rates, and semiconductor stocks are facing a headwind from the US restricting higher-end exports to China. While not looking to increase CGI’s technology exposure now, the manager anticipates there will be opportunities in the future; it should be remembered that technology stocks were an important positive contributor to the fund’s significant outperformance in 2020 and 2021.

Eckel has been underweight energy stocks since 2001 but is more positive on the outlook for the sector than he has been in a long time. This is based on improved industry demand and supply dynamics, and major oil companies are now more disciplined in terms of capital allocation and returning cash to shareholders. However, the energy sector can be volatile; it is not unusual for it to be the best performing of the 11 sectors one year and the worst performing the next. Eckel explains that he increased CGI’s energy exposure earlier in 2022 but had to hold off as the sector rallied in response to spiking commodity prices. Within the sector, higher product prices have led to stronger balance sheets, allowing companies to resume dividend payments and undertake share repurchases.

Exhibit 3: Portfolio sector exposure versus benchmark (% unless stated)

Portfolio end
October 2022

Portfolio end
October 2021

Change (pp)

Index weight

Active weight
vs index (pp)

Fund weight/
index weight (x)

Industrials

21.2

20.9

0.3

13.3

8.0

1.6

Information technology

17.5

28.0

(10.5)

5.6

11.9

3.1

Materials

16.0

16.1

(0.1)

11.3

4.7

1.4

Energy

12.4

6.2

6.2

19.1

(6.7)

0.6

Consumer discretionary

12.3

10.9

1.4

3.6

8.7

3.4

Financials

11.2

10.5

0.7

30.6

(19.4)

0.4

Real estate

5.2

4.1

1.1

2.5

2.8

2.1

Communication services

2.3

1.8

0.5

4.9

(2.6)

0.5

Healthcare

1.1

1.2

(0.1)

0.4

0.7

2.5

Consumer staples

0.0

0.0

0.0

4.1

(4.1)

0.0

Utilities

0.0

0.0

0.0

4.7

(4.7)

0.0

Cash & cash equivalents

0.8

0.3

0.5

0.0

0.8

N/A

100.0

100.0

100.0

Source: CGI, Edison Investment Research. Note: Numbers subject to rounding.

CGI has a new position in Baytex Energy, which is a junior exploration and production company with production guidance of 83–85k barrels of oil equivalent (BOE) per day (83% is oil) growing at around 5% a year. Approximately one-third of Baytex’s production comes from the prolific Eagle Ford shale area in Texas and the company has accelerated development in a relatively new play called Clearwater in Canada, which is an area that has been attracting attention due to strong drilling success. Debt reduction has been Baytex’s primary focus of utilising free cash flow, but given its stronger balance sheet, attention has now shifted towards higher returns to shareholders via dividends and share repurchases.

Eckel has been adding to CGI’s position in Canadian Natural Resources (ticker: CNQ), which is a large-cap oil and natural gas firm with a highly respected management team. The company has a production base of c 1.2m BOE per day that is growing at 7–8% a year. CNQ’s production mix is diverse, split broadly: 34% oil sands mining and upgrading (synthetic crude oil, SCO); 28% heavy crude oil; 27% natural gas; and 11% light crude oil and natural gas liquids. The company can upgrade its own heavy oil to SCO, which trades at a premium to the benchmark oil price. CNQ has a long-life reserve base of more than 30 years and has paid down debt, thereby providing flexibility for mergers and acquisitions. The company has been returning cash to shareholders; it has increased its quarterly distributions and paid a special dividend in August 2022, and has also been buying back its shares.

CGI’s position in Cargojet was sold. It is the largest overnight cargo operator in Canada and was a pandemic beneficiary. The company has a 90% market share, so is expanding outside of Canada and has made a couple of acquisitions that have not been favoured by investors. Also, airlines are reintroducing flights, so industry capacity is increasing.

Eckel has consolidated CGI’s base metals exposure by selling the holdings in Copper Mountain Mining Corporation, Lundin Mining Corporation and Hudbay Minerals. All three companies have growth projects underway, which the manager considers is not ideal given higher financing costs and development risks. Part of the sale proceeds were used to increase CGI’s holding in Teck Resources. This company is bringing on new production in Q422, so should reap the benefits of higher cash flow going forward. Teck Resources is returning a meaningful amount of cash to shareholders and its ESG profile is improving as its business mix shifts in favour of copper at the expense of metallurgical coal. The manager considers that the company remains inexpensively valued and he expects its shares to re-rate as he believes that Teck Resources should be the ‘go-to’ name for base metal exposure.

Performance: This year is somewhat challenging

Exhibit 4: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

S&P/TSX Composite (%)

MSCI Canada
(%)

MSCI World
(%)

31/10/18

2.2

3.1

(3.4)

(3.4)

3.6

31/10/19

8.3

10.6

13.2

12.5

13.4

31/10/20

20.0

21.3

(2.3)

(3.9)

6.4

31/10/21

46.0

51.9

38.8

39.5

31.1

31/10/22

(18.2)

(19.8)

(4.9)

(4.5)

(9.9)

Source: Refinitiv. Note: All % on a total return basis in Canadian dollars.

While CGI’s absolute and relative performance over the last year has been disappointing, it is important to consider the fund’s very commendable long-term record of outperformance.

Data from MMA show that over the 25 years to the end of December 2021, the fund generated a +10.5% annual total return versus the benchmark’s +7.9% annual total return; with dividends reinvested, a C$100k investment in CGI would have grown to c C$1.2m.

Over the 50 years to the end of 2021, the fund generated a +12.1% per year annual total return versus the benchmark’s +9.6% annual total return; with dividends reinvested, a C$100k investment in CGI would have grown to c C$30.2m.

Exhibit 5: Investment company performance to 31 October 2022

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised.

CGI’s relative performance is shown in Exhibit 6. While the one-year numbers are disappointing, its NAV total return is meaningfully ahead of that of the S&P/TSX Composite Index over the last three, five and 10 years.

Exhibit 6: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to S&P/TSX Composite

0.0

(4.2)

(14.2)

(14.0)

11.0

12.4

38.5

NAV relative to S&P/TSX Composite

1.5

(1.3)

(1.9)

(15.7)

14.5

19.4

34.6

Price relative to MSCI Canada

(0.3)

(4.5)

(14.6)

(14.3)

11.8

13.9

38.3

NAV relative to MSCI Canada

1.2

(1.6)

(2.4)

(16.0)

15.3

21.0

34.4

Price relative to MSCI World

(0.8)

(4.1)

(17.0)

(9.3)

13.8

7.2

(13.7)

NAV relative to MSCI World

0.6

(1.1)

(5.2)

(11.1)

17.4

13.9

(16.1)

Source: Refinitiv, Edison Investment Research. Note: Data to end-October 2022. Geometric calculation.

Eckel explains that CGI’s performance this year has been hurt by its underweight energy and overweight technology exposures. The manager also expresses his frustration about share prices declining despite company fundamentals remaining robust; he explains that investors have been selling lower-quality names and have progressed to disposing of higher-quality businesses. Eckel highlights CGI’s meaningful outperformance in 2020 and 2021 and considers 2022 ‘a bit of a reversion to the mean’. He comments that around a quarter of the shares of CGI’s portfolio companies are in positive territory this year, which is broadly in line with the market, but unfortunately these companies do not make up a large enough part of the fund.

Positive contributors to CGI’s performance this year include Baytex Energy (oil and gas production), Dollarama (low-end retail), Teck Resources (copper, zinc and metallurgical coal mining) and Waste Connections (waste management). Detractors to the fund’s performance are a diverse mix including BRP (recreational products), Boyd Group Services (collision repair centres), FirstService Corp (real estate management), goeasy (alternative financial services) and WSP Global (professional services). Eckel stresses the need to ‘keep the faith’ in high-quality names in the portfolio during periods of share price weakness.

Exhibit 7: NAV total return performance relative to benchmark over three years

Source: Refinitiv, Edison Investment Research

Peer group comparison

Exhibit 8: Selected peer group at 14 November 2022 (C$)*

% unless stated

Market cap (C$m)

NAV TR
one year

NAV TR
three year

NAV TR
five year

NAV TR
10 year

Discount
(cum-fair)

Ongoing charge

Perf.
fee

Net
gearing

Dividend
yield

Canadian General Investments

700.1

(17.4)

51.3

75.4

205.8

(33.7)

1.4

No

114

2.7

Middlefield Canadian Income

208.5

(0.1)

31.1

47.4

126.0

(10.2)

1.2

No

118

4.0

Average

454.3

(8.7)

41.2

61.4

165.9

(21.9)

1.3

116

3.4

Fund rank in sector

1

2

1

1

1

2

1

2

2

Source: Morningstar, Edison Investment Research. Note: *Performance to 11 November 2022 based on ex-par NAV. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

There are just two funds in the AIC North America sector with significant Canadian exposure and CGI is by far the largest. The two companies follow different investment mandates – CGI has a total-return focus, while, as its name suggests, Middlefield Canadian Income has an income bias. Both funds have an allocation to US equities, but CGI’s is larger at c 20% compared with c 5% at Middlefield Canadian Income. CGI has a lower NAV total return over the last 12 months but has significantly outperformed its peer over the last three, five and 10 years. It has a lower level of gearing and the fund’s discount is considerably wider, perhaps reflecting its limited free float. CGI has a higher fee structure and a lower dividend yield, which is unsurprising given focus on total-return rather than income.

Dividends: Steadily growing annual payments

Regular quarterly dividends are paid in March, June, September and December, and as shown in Exhibit 9, no special dividends have been paid since FY17. The C$0.92 per share annual dividend declared in respect of FY22 is made up of four regular taxable dividends of C$0.23 per share and is 4.5% higher than the $0.88 per share FY21 annual dividend (made up of two regular taxable dividends and two capital gains dividends of C$0.22 per share). Based on its current share price, CGI offers a 2.7% dividend yield.

Exhibit 9: Dividend history since FY15

Source: Bloomberg, Edison Investment Research

Valuation: Discount affected by higher risk aversion

CGI’s 33.7% share price discount to NAV is towards the wider end of the 22.7% to 36.1% range of discounts over the last 12 months. It is also wider than the 30.4%, 31.7%, 31.0% and 29.9% average discounts over the last one, three, five and 10 years, respectively. This is unsurprising given a heightened level of investor risk aversion due to the uncertain macroeconomic environment.

Exhibit 10: Share price discount to NAV (including income) over three years (%)

Source: Refinitiv, Edison Investment Research

The board is unable to repurchase shares to help manage the discount as this would invalidate the company’s favourable Canadian investment corporation tax status. There have been brief periods when CGI’s shares traded at a premium to NAV; the last time was in 1998, while they traded very close to par in 2006, a period when CGI outperformed its benchmark and there was a commodities super-cycle and rising oil price.

Fund profile: North American equity specialist

CGI was established in 1930 and is North America’s second-oldest closed-end fund. It has been listed on the Toronto Stock Exchange since 1962 and on the London Stock Exchange since 1995. MMA took over management of CGI in 1956; the firm has c C$2.5bn of assets under management for both private and institutional clients. Eckel has managed CGI’s portfolio since 2009, aiming to generate a better-than-average total return from a diversified portfolio of North American equities via prudent stock selection and timely recognition of capital gains and losses. While most of the fund is invested in Canadian companies, up to 25% may be held in US-listed businesses. The manager has an unconstrained approach, within the remit that a maximum 35% of the portfolio may be held in a single sector and he invests without reference to the sector weightings of its benchmark, meaning CGI’s performance may differ meaningfully from that of the S&P/TSX Composite Index. Eckel has a medium- to long-term view, so some of the fund’s holdings have been in the portfolio for many years.

The company is designated as an investment corporation under the Income Tax Act (Canada). This eliminates a layer of taxation, as capital gains are only taxed at the shareholder level, allowing them to be paid as dividends to shareholders. However, to maintain this favourable tax status, CGI is unable to repurchase its shares to help manage the share price discount to NAV. A maximum 25% of its gross revenue may come from interest income and at least 85% of gross revenue must be from Canadian sources.

Investment process: Bottom-up stock selection

Eckel’s stock selection process is primarily bottom up, although he does take the macroeconomic environment into account. The manager aims to generate an above-average total return for investors, seeking reasonably valued companies with favourable fundamentals and strong management teams; he also takes firms’ economic social and governance credentials into account. While most of CGI’s portfolio is invested in Canadian companies, up to 25% of the fund may be held in US equities, which are primarily in niche operations or business areas that are under-represented in the Canadian market. The broad exposures at the end of October 2022 were 80% Canada, 19% US and 1% cash/equivalents.

There are 56 holdings in the portfolio with a bias to large- and mid-sized stocks. Some of these are higher yielding, such as the Canadian banks, helping to support CGI’s own dividend payments. Eckel has a long-term focus; over the last five financial years, portfolio turnover has averaged c 7.4% pa (range of 2.3–10.4%), which implies a c 13.5-year average holding period. However, positions are reassessed regularly to ensure they are sized correctly and investment cases are still valid. The manager has a history of successively backing good management teams that may move companies due to mergers and acquisitions.

Gearing: Preference shares and margin borrowing

CGI has employed a leveraged strategy since its first issue of preference shares in 1998. Since then, its total return has averaged 6.24% per year above its cost of debt. The company has a C$100m margin borrowing facility via a prime brokerage services agreement with a Canadian chartered bank, at a one-month Canadian dollar offer interest rate plus 0.6% per year (C$75m is being used). CGI also has C$75m of 3.75% cumulative Series 4 preference shares, which are redeemable, at par, on or after 15 June 2023. At end-October 2022, CGI’s net gearing was 14.1%.

Fees and charges

MMA is paid a management fee that is calculated and paid monthly at 1.0% per year of the market value of CGI’s investments, adjusted for cash, portfolio accounts receivable and portfolio accounts payable; no performance fee is payable. In H122, the annualised management expense ratio (MER) including leverage costs was 1.80%, which was 8bp higher than 1.72% in FY21. Excluding leverage costs, which make the MER more comparable with the ongoing charge figure used in the UK, in H122 it was 1.38%, which was broadly in line with 1.37% in FY21.

Exhibit 11: Management expense ratio since FY16

Source: CGI, Edison Investment Research. Note: Leverage costs include preference share dividends, interest and financing charges.

Capital structure

CGI has 20.9m ordinary shares in issue, 52.5% of which are directly or indirectly owned by two of the company’s directors, Jonathan Morgan and Vanessa Morgan. Hence, CGI has a free float of 9.9m shares (47.5% of the total) with these holders located in Canada (c 50%), UK (c 30%), Europe ex-UK (c 10%) and other (c 10%). The company has an average daily trading volume of c 5.0k shares on the Toronto Stock Exchange.

Exhibit 12: Major shareholders

Exhibit 13: Average daily volume

Source: CGI. Note: At 31 October 2022.

Source: Refinitiv. Note: 12 months to 14 November 2022.

Exhibit 12: Major shareholders

Source: CGI. Note: At 31 October 2022.

Exhibit 13: Average daily volume

Source: Refinitiv. Note: 12 months to 14 November 2022.

The board

CGI’s board has three non-independent and four independent directors, who collectively have an average tenure of c 18 years. Vanessa Morgan is chair of CGI and president and CEO of MMA; she joined CGI’s board in 1997. Jonathan Morgan, president and CEO of CGI and executive vice-president and COO of MMA, joined the board in 2001. Michael Smedley is CGI’s longest-serving director, having been appointed in 1989; he is a director of MMA. The four independent directors and their years of appointment are Neil Raymond (2002), James Billett (2005), Michelle Lally (2015) and Marcia Lewis Brown (2020).

General disclaimer and copyright

This report has been commissioned by Canadian General Investments and prepared and issued by Edison, in consideration of a fee payable by Canadian General Investments. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Canadian General Investments and prepared and issued by Edison, in consideration of a fee payable by Canadian General Investments. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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bet-at-home — Navigating challenges in 2022

bet-at-home’s (BAH’s) interim results were consistent with the view in our May 2022 outlook note that 2022 would be a challenging year, as the group continues to navigate the regulatory landscape in its key markets. Full year guidance was lowered in June given legal and regulatory changes in Germany and Switzerland, and BAH exited the UK market in July following a licence review. Management continues to look forward to a potential new licence in the Netherlands, which would provide a new growth opportunity. Given the significant fall in BAH’s share price in the year to date, the group’s June 2022 net cash position (excluding client money) of €28.3m would represent 92% of its current market capitalisation.

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