Last close As at 05/08/2026
CAD50.97
▲ −0.03 (−0.06%)
Market capitalisation
CAD956m
Research: Industrials
Despite prevailing macroeconomic headwinds and a subdued Canadian property market, Information Services Corporation (ISC) demonstrated year-on-year top-line and adjusted EBITDA growth in Q323. This was largely attributable to the MSA extension, augmented by sustained organic growth of the Services division. Net income was affected by heightened net finance costs, as a result of a rise in net debt from the C$150m upfront payment for the MSA extension. Nevertheless, ISC remains on a trajectory of securing new contracts and management reaffirms its FY23 revenue and adjusted EBITDA guidance. We maintain our forecasts and valuation of C$37, implying 79% upside.
Written by
Information Services Corporation |
Sustained growth with FY23 guidance reiterated |
Q323 results |
Industrial support services |
9 November 2023 |
Share price performance
Business description
Next events
Analysts
Information Services Corporation is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
Despite prevailing macroeconomic headwinds and a subdued Canadian property market, Information Services Corporation (ISC) demonstrated year-on-year top-line and adjusted EBITDA growth in Q323. This was largely attributable to the MSA extension, augmented by sustained organic growth of the Services division. Net income was affected by heightened net finance costs, as a result of a rise in net debt from the C$150m upfront payment for the MSA extension. Nevertheless, ISC remains on a trajectory of securing new contracts and management reaffirms its FY23 revenue and adjusted EBITDA guidance. We maintain our forecasts and valuation of C$37, implying 79% upside.
Year end |
Revenue (C$m) |
EBITDA (C$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/21 |
169.4 |
67.8 |
51.4 |
2.25 |
0.83 |
9.3 |
4.0 |
12/22 |
189.9 |
64.4 |
46.5 |
1.95 |
0.92 |
10.7 |
4.4 |
12/23e |
210.1 |
75.0 |
45.8 |
1.92 |
0.92 |
10.8 |
4.4 |
12/24e |
230.2 |
89.8 |
50.9 |
2.12 |
0.92 |
9.8 |
4.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Strong acceleration in Q323
Q323 revenue and adjusted EBITDA increased 12% and 13% to C$54.6m and C$19.2m. Both Registry Operations and Services demonstrated adjusted EBITDA growth of 11% and 29% to C$15.0m and C$5.1m, respectively. Registry Operations benefited from incremental earnings from Saskatchewan Land Registry fee adjustments which offset a 1% decline in its volumes. The Services division enjoyed heightened customer acquisition, boosted by an influx of customers in the financial sector continuing to focus on due diligence in a high interest rate environment. Net income declined 45% y-o-y to C$4.2m, largely due to a surge in finance expenses from the substantial net debt increase to C$165.8m (excl. leases) (Q223: C$24.5m), driven by the C$150m upfront payment for the MSA extension.
Progressing with contract wins
As highlighted in our recent initiation note, ISC has a strong track record of proficiently acquiring and innovating registries and related information services globally, which is exemplified by its recent Technology Solutions contract with the State of Michigan, worth C$4.5m over a five-year term (option to extend). The contract involves delivering an online Uniform Commercial Code system using ISC’s RegSys platform, which will enable 24/7 filing and searching of financial statements and various liens, enhancing customer flexibility. This not only supports Technology Solution’s return to profitability but also underscores ISC’s expertise in data authentication, furthering its expansion in the global registry market.
Valuation: Maintained DCF valuation of C$37/share
We maintain our forecasts and DCF valuation of C$37/share, implying 79% upside to the current share price. The stock trades at 9.8x FY24e P/E, representing a material discount not only to its own history but also to a selection of peers, despite its long-term, predictable cash flows bolstered by the MSA extension.
Exhibit 1: Financial summary
C$'m |
2019 |
2020 |
2021 |
2022 |
2023e |
2024e |
2025e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||||
Revenue |
|
|
133.0 |
136.7 |
169.4 |
189.9 |
210.1 |
230.2 |
240.5 |
Cost of Sales |
31.2 |
31.3 |
40.4 |
49.2 |
56.6 |
62.3 |
65.4 |
||
Gross Profit |
101.8 |
105.5 |
129.0 |
140.7 |
153.5 |
168.0 |
175.2 |
||
EBITDA |
|
|
40.0 |
49.2 |
67.8 |
64.4 |
75.0 |
89.8 |
92.8 |
Normalised operating profit |
|
|
28.6 |
36.5 |
54.0 |
49.7 |
54.6 |
63.7 |
66.0 |
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(0.2) |
(2.6) |
(1.2) |
(2.0) |
(2.5) |
(2.0) |
(2.0) |
||
Share-based payments |
(0.4) |
(3.0) |
(6.0) |
(1.5) |
(2.0) |
(2.0) |
(2.0) |
||
Impairment |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(0.5) |
(0.2) |
(0.1) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Reported operating profit |
27.6 |
30.7 |
46.8 |
46.2 |
50.1 |
59.7 |
62.0 |
||
Net Interest |
(1.2) |
(2.0) |
(2.7) |
(3.2) |
(8.8) |
(12.8) |
(11.8) |
||
Joint ventures & associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
27.4 |
34.4 |
51.4 |
46.5 |
45.8 |
50.9 |
54.2 |
Profit Before Tax (reported) |
|
|
26.4 |
28.6 |
44.1 |
43.0 |
41.3 |
46.9 |
50.3 |
Reported tax |
(7.0) |
(7.8) |
(12.0) |
(12.2) |
(11.8) |
(13.4) |
(14.3) |
||
Profit After Tax (norm) |
20.4 |
26.6 |
39.4 |
34.2 |
34.0 |
37.5 |
39.9 |
||
Profit After Tax (reported) |
19.4 |
20.8 |
32.1 |
30.8 |
29.5 |
33.6 |
35.9 |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Discontinued operations |
(0.5) |
0.7 |
(1.0) |
(0.0) |
(0.0) |
(0.0) |
(0.0) |
||
Net income (normalised) |
20.4 |
26.6 |
39.4 |
34.2 |
34.0 |
37.5 |
39.9 |
||
Net income (reported) |
19.4 |
20.8 |
32.1 |
30.8 |
29.5 |
33.6 |
35.9 |
||
Basic average number of shares outstanding (m) |
18 |
18 |
18 |
18 |
18 |
18 |
18 |
||
EPS - basic normalised (C$) |
|
|
1.167 |
1.520 |
2.249 |
1.946 |
1.922 |
2.121 |
2.255 |
EPS - diluted normalised (C$) |
|
|
1.17 |
1.51 |
2.18 |
1.91 |
1.89 |
2.09 |
2.22 |
EPS - basic reported (C$) |
|
|
1.11 |
1.19 |
1.83 |
1.75 |
1.67 |
1.90 |
2.03 |
DPS (C$) |
0.80 |
0.80 |
0.83 |
0.92 |
0.92 |
0.92 |
0.92 |
||
Revenue growth (%) |
- |
2.8 |
23.9 |
12.1 |
10.7 |
9.6 |
4.5 |
||
Gross Margin (%) |
76.6 |
77.1 |
76.2 |
74.1 |
73.1 |
73.0 |
72.8 |
||
EBITDA Margin (%) |
30.1 |
36.0 |
40.0 |
33.9 |
35.7 |
39.0 |
38.6 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
128.4 |
186.0 |
176.1 |
226.2 |
358.6 |
365.4 |
371.5 |
Intangible Assets |
40.0 |
70.0 |
61.1 |
89.0 |
222.3 |
230.0 |
237.0 |
||
Tangible Assets |
3.0 |
2.2 |
1.4 |
1.8 |
0.9 |
(0.0) |
(0.9) |
||
Investments & other |
85.4 |
113.9 |
113.6 |
135.4 |
135.4 |
135.4 |
135.4 |
||
Current Assets |
|
|
42.3 |
55.4 |
56.4 |
57.2 |
59.1 |
63.0 |
63.9 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
12.6 |
17.0 |
12.8 |
14.9 |
16.8 |
20.7 |
21.6 |
||
Cash & cash equivalents |
23.7 |
33.9 |
40.1 |
34.5 |
34.5 |
34.5 |
34.5 |
||
Other |
6.0 |
4.4 |
3.6 |
7.8 |
7.8 |
7.8 |
7.8 |
||
Current Liabilities |
|
|
24.7 |
27.3 |
36.9 |
39.6 |
43.6 |
49.5 |
51.5 |
Creditors |
18.1 |
21.9 |
26.5 |
33.9 |
37.8 |
43.7 |
45.7 |
||
Tax and social security |
0.8 |
1.2 |
7.0 |
0.7 |
0.7 |
0.7 |
0.7 |
||
Short term borrowings |
2.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
3.7 |
4.2 |
3.4 |
5.0 |
5.0 |
5.0 |
5.0 |
||
Long Term Liabilities |
|
|
32.7 |
93.0 |
57.9 |
88.2 |
205.2 |
192.6 |
178.0 |
Long term borrowings |
16.0 |
76.3 |
41.0 |
66.0 |
183.0 |
170.4 |
155.8 |
||
Other long term liabilities |
16.7 |
16.6 |
16.9 |
22.2 |
22.2 |
22.2 |
22.2 |
||
Net Assets |
|
|
113.4 |
121.1 |
137.7 |
155.6 |
168.9 |
186.3 |
206.1 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
113.4 |
121.1 |
137.7 |
155.6 |
168.9 |
186.3 |
206.1 |
CASH FLOW |
|||||||||
Op Cash Flow before WC and tax |
40.0 |
49.2 |
67.8 |
64.4 |
75.0 |
89.8 |
92.8 |
||
Working capital |
(9.2) |
3.5 |
14.2 |
(3.8) |
2.1 |
2.0 |
1.0 |
||
Exceptional & other |
(0.5) |
(5.6) |
(7.2) |
(3.5) |
(4.5) |
(4.0) |
(4.0) |
||
Tax |
(7.0) |
(7.8) |
(12.0) |
(12.2) |
(11.8) |
(13.4) |
(14.3) |
||
Other |
0.3 |
1.6 |
(1.6) |
(1.3) |
(1.0) |
(1.0) |
(1.0) |
||
Net operating cash flow |
|
|
23.6 |
41.0 |
61.2 |
43.5 |
59.8 |
73.4 |
74.5 |
Capex |
(2.8) |
(1.2) |
(2.2) |
(1.5) |
(1.6) |
(1.7) |
(1.8) |
||
Acquisitions/disposals |
(6.8) |
(70.2) |
1.7 |
(54.7) |
(150.0) |
(30.0) |
(30.0) |
||
Net interest |
(1.0) |
(1.6) |
(2.8) |
(2.8) |
(6.9) |
(10.9) |
(9.9) |
||
Equity financing |
(1.8) |
(1.9) |
(2.0) |
(2.1) |
(2.1) |
(2.1) |
(2.1) |
||
Dividends |
(14.0) |
(14.0) |
(14.0) |
(16.2) |
(16.2) |
(16.2) |
(16.2) |
||
Other |
0.0 |
0.0 |
(0.4) |
3.4 |
0.1 |
0.1 |
0.1 |
||
Net Cash Flow |
(2.8) |
(47.9) |
41.6 |
(30.3) |
(117.0) |
12.6 |
14.7 |
||
Opening net debt/(cash) |
|
|
(8.7) |
(5.7) |
42.4 |
0.9 |
31.6 |
148.6 |
136.0 |
FX |
(0.2) |
(0.2) |
(0.4) |
0.2 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
0.0 |
0.3 |
(0.6) |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(5.7) |
42.4 |
0.9 |
31.6 |
148.6 |
136.0 |
121.3 |
Source: Edison Investment Research
|
|
Research: TMT
With weaker end demand than originally expected in Q323, XP Power’s trading update confirmed a lower outlook for FY23 operating profit and a consequent rise in net debt. To mitigate the risk of hitting debt covenants, the company has initiated a series of cost and cash saving measures, renegotiated its debt covenants and undertaken a fundraise. With revised debt covenants in place and reduced gearing, we believe XP is now well positioned for growth as end market conditions improve.