CGI Group: Acquisitions Key To Revenue Aspirations

| About: CGI Group (GIB)

CGI Group Inc. (NYSE:GIB) says it expects to double its revenue base over the next three to five years through a mix of organic growth and acquisitions.

"CGI continues to have the strategic appetite and balance sheet capacity to execute a range of possible acquisitions, to expand its metro market model and/or achieve a more desirable revenue mix (in terms of geography and/or service offerings)," UBS analyst Jason Kupferberg said in a research note following the IT service provider's first-ever analyst meeting in the U.S.

Mr. Kupferberg said CGI could be willing to buy publicly-traded companies, private firms, or even an IT services or BPO operation that is part of a larger corporation, as long as earnings per share accretion is achieved in year one after the purchase.

He told clients the company's stock, which has increased 57% year to date, still has some room to climb in the near term and left his US$12 price target and "neutral" rating unchanged.

The analyst added that while CGI shares trade at a multiple comparable or even discounted to some of its peers, he advises some caution regarding the company's future value. He said the company is faced with increased levels of uncertainty in the macro spending environment for IT services, a lack of near-term catalysts and much tougher year-over-year comparables in fiscal 2008.

GIB 1-yr chart: