Cohen & Steers Inc

CNS Details

Cohen & Steers Inc (NYSE: CNS) is an investment management firm dealing in real estate securities, listed infrastructure, natural resource equities, and preferred securities. The company operates in three types of investment vehicles i.e., institutional accounts, open-end funds, and close end-funds. The company’s revenue comes from the fees for managing or sub advising client accounts, investment advisory, distribution, and service fees received from the company’s open-end and close-end funds. As of April 26^th 2021, the company’s market capitalization stood at USD 3.29 billion.

Launches new Private Real Estate group: As of April 19^th, 2021, the company announced the formation of a Private Real Estate Group, a team specially built for real estate investing activities. This new capability will enhance the firm’s real estate strategies to provide the clients with tailor-made investment solutions. The group will have a value-oriented approach to directly invests in properties, private investments in public equities (PIPEs), and pre-IPO securities.

Q1FY21 Results: The company reported an 8.90% increase in assets under management to USD 87.04 billion in Q1FY21 as compared to USD 79.90 billion in Q4FY20. This increase was driven by net inflows of USD 3.8 billion and market appreciation of USD 4.00 billion, partially offset by distributions of USD 690 million. The company reported an 8% increase in revenue to USD 125.74 million in Q1FY21 as compared to USD116.46 million in Q4FY20. This change was mainly due to an increase in investment advisory and administration fees of USD 9.00 million. The company reported an increase in net income to USD 48.85 million in Q1FY21 as compared to the loss of USD 4.41 million in Q4FY20. As of March 31^st 2021, the company reported the stockholder’s equity as 189.20 million with no debt.

Revenue Drivers (Source: Company’s earnings presentation, Q1FY21)

Key Risks: The company’s largest institutional client, Daiwa Asset Management, held majority of its assets in U.S. REIT strategies in Japan. It represents 6.7% of the company’s total revenue for FY20. The company manages 27.90% of the institutional assets and approximately 11.60% of its total assets under management were derived from Daiwa Asset Management. Any change in the distribution rate could decrease investor’s demand for the products, resulting in an outflow of assets sub-advised by the company. This could negatively impact the company’s revenue and have an adverse effect on the financial health of the company. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CNS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: CNS has declined by 5.34% in the past three months and is currently leaning toward the mid-point of the 52-week range of USD 53.39 to USD 78.82. We have valued the stock using the EV/Sales based relative valuation methodology and arrived at a target price of USD 78.29. Considering the correction in the stock price in the past three months, current appealing trading levels, increase in Assets Under Management (AUM) and surge in fundamental growth, we recommend a “Buy” rating on the stock at the closing price of USD 68.18, down by 1.06% as of 26^th April 2021.

Simulations Plus, Inc.

SLP Details

Simulations Plus, Inc. (NASDAQ: SLP) is the developer of modeling and simulation software for drug discovery and development by predicting the properties of molecules using artificial intelligence and machine learning-based technologies. It also provides consulting services ranging from the early drug discovery processes to the regulatory agency submission for product approval. The company’s software business and consulting business contributes 59% and 41% of the total revenue during the first six months of FY21, respectively. As of April 26th, 2021, the company’s market capitalization stood at USD 1.37 billion.

Posted successful results from AIDD technology: As of April 7^th, 2021, the company has received the experimental result from its collaborative research agreement with a large pharmaceutical company, entered in mid-2020. The scientists have progressed the quantitative structure-activity relationship (QSAR) models for the specific drug target and defined a set of predicted endpoints to evaluate virtual lead molecule within the AIDD molecule. It was found that 80% of the primary molecules tested are exhibiting sub-micromolar activity and have acceptable ADME properties. The company states that this is a remarkable accomplishment for any drug design program.

Enters agreement with distributor in China: As of February 2^nd, 2021, the company has announced that it has entered distribution with Mosim, one of China’s leading biopharmaceutical service companies, to supply MonolixSuite, the Lixoft division’s modeling platform. This distribution agreement will complement the existing contract between Simulations Plus and PharmaGo Co. Limited, a China-based distributor of the company’s software products.  Thus, expanding the company’s reach across discovery, pre-clinical, and clinical research processes.

Strong Q2FY21 Results: The company reported a 20.74% rise in total revenue to USD 23.84 million in the first six months of FY21 as compared to USD 19.75 million in the first six months of FY20. The software licenses contribute USD 13.97 million while the consulting services contribute USD 9.87 million of the total revenue for the first six months of FY21. The company reported a 35.21% increase in net income to USD 5.69 million in the first six months of FY21 as compared to that of USD 4.20 million in the first six months of FY20.

Key Risks: The company faces strong competition for its software products in the life-sciences market. Some of the company’s competitors have longer operating history and produce lower-cost software products. The company also faces competition from the open-source software initiatives, in which developers post the software and intellectual property free over the internet. Any decrease in demand for the company’s technology products and services may have an adverse effect on the operational and financial affairs of the company.

Outlook:

FY21 Guidance (Sources; Earnings call presentation. April 12^th, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

SLP Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: SLP has already surged 13.98% in the past one months and is currently trading at a slightly higher end of the 52-week range of USD 36.15 to USD 90.92. The stock is currently trading above the 200 DMA levels. We have valued the stock using the EV/Sales based relative valuation methodology and arrived at a target price of USD 62.72. Considering the significant rise in the stock price in the past one-month, operating at higher multiple than the entire industry, and fundamental growth, we recommend a “Expensive” rating on the stock at the closing price of USD 68.46, down by 0.73% as of 26^th April 2021.