CAE’s largest shareholder has just increased its investment in the Montreal manufacturer of flight simulators to become the only one to hold a stake greater than 10%.
Mackenzie Financial Corporation paid more than $130 million last month to buy just over 4.7 million shares of CAE. These purchase transactions triggered the requirement to disclose to authorities this month that the firm’s stake in CAE exceeded the 10% mark in early July.
Mackenzie thus began the month of July with 31.9 million shares of CAE in its portfolio for its clients.
Mackenzie bought shares of CAE massively last month after the stock fell 7% on May 31, the day the year-end financial performance was released.
It has not been possible to obtain a comment from Mackenzie to explain the decision to invest tens of millions of additional dollars in CAE at this time.
At the current stock price, Mackenzie’s stake in CAE is worth over $920 million.
Up about 10% since the start of the year, CAE stock closed Tuesday’s session at $29.41 on the Toronto Stock Exchange. The stock had risen as high as $42 in November 2021.
The quarterly results released at the end of May were relatively in line with expectations. Management said it maintained a positive view of business growth potential and long-term trends for its three business segments (civil aviation, defense and healthcare).
In civil aviation – the company’s largest sector – CAE management said in the spring that growth continued to outpace the market thanks to the final stages of the cyclical recovery in Asia and the high level and sustained demand for pilots and pilot training.
The leaders added that the defense sector is in the early stages of a prolonged bull cycle, spurred by geopolitical tensions and increased government commitments to defense modernization and readiness.
In healthcare – CAE’s smallest business unit – the demand for nurses and business opportunities in medical simulation are giving bosses confidence.
Ottawa announced this week that the bid from CAE and its partners is the winning bid for the future aircrew training program in support of the Royal Canadian Air Force.
According to analyst Benoit Poirier, at Desjardins Securities, this federal decision suggests a contribution of approximately $50 million per year to CAE’s turnover for the next 20 years.
“This is exactly what CAE’s defense business needed,” he said.
His colleague Cameron Doerksen, of the National Bank Financial, underlines for his part that obtaining this contract represents indeed an important victory for CAE. “It gives me comfort that CAE’s defense revenues will see solid growth over a multi-year period,” he said in a note sent to customers.
Ten of the twelve analysts who officially follow CAE’s activities recommend buying the stock. Their 12-month average target for the stock is $35.75, suggesting a return of nearly 25%.