On Wednesday, Scotiabank updated its outlook on Altus Group (AIF:CN) (OTC: ASGTF), increasing the price target to C$59.00 from the previous C$53.00. The firm maintained a Sector Perform rating on the company's stock. The adjustment follows Altus Group's announcement of its intent to sell its Property Tax business to Ryan, LLC for a net proceed of approximately $600 million.
The sale of the Property Tax division is seen as a strategic move for Altus Group, allowing it to concentrate on its core business as a pure-play commercial real estate (CRE) software, data, and analytics platform. The company anticipates this focus will drive double-digit revenue growth and approximately 35% adjusted EBITDA margins in its Altus Analytics segment by the calendar year 2026.
Scotiabank's updated price target is based on a revised valuation multiple of approximately 5.5 times the calendar year 2025 estimated sales for the Analytics division, up from the previous multiple of 5.0 times. This change reflects Altus Group's strengthened financial position following the divestiture. The target multiple now implies about 16.0 times the projected fiscal year 2025 EBITDA, an increase from the former estimate of 12.0 times.
The sale also improves Altus Group's financial and operational flexibility, transitioning the company to a net cash position. This enhanced financial standing is expected to benefit shareholders, as evidenced by the expansion of the company's buyback program to $250 million.
Scotiabank's Sector Perform rating remains unchanged as the firm looks for more concrete indicators of a recovery in the commercial real estate market before altering its stance on Altus Group's shares.
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