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The Smart Money real estate investment for TODAY

For 13 years, excessively low-interest rates fueled an unprecedented boom – and…
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For 13 years, excessively low-interest rates fueled an unprecedented boom – and bubble – in the residential real estate markets of major urban centers. Canada’s housing boom started even earlier.

Now the party has come to an end. Recent, grim headlines paint a dire picture.

Canada housing crash: Fast-rising borrowing costs predicted to deepen slumpReal estate: Canada’s housing crisis is just beginning, economist says

The timing of this crash in residential real estate could not be worse. Equity markets have collapsed. So have bond markets. Rising interest rates threaten to plunge economies into a deep recession.

In times of such financial stress and uncertainty, investors typically look to real estate and/or gold for security. But even gold is well off of its previous highs.

Can savvy investors still find shelter in real estate? Yes. Introducing CIBT Education Group Inc. (TSXV:MBA / OTC:MBAIF).

For many readers of The Market Herald, this is already a familiar name. We most recently covered this company in a full-length feature article.

CIBT Education offers small-cap GROWTH and STABILITY

We highlighted how, as an investment, CIBT has outperformed most other small caps over both longer and shorter terms. We also connected the dots and how/why the company looks very likely to continue to be a strong performer going forward.

The Market Herald had the opportunity to speak with CIBT’s President, CEO and Chairman, Toby Chu. Among the insights he offered in that previous conversation:

When CEO Toby Chu was talking about his recent interactions with investors (in investor road shows and industry events), he remarked to The Market Herald how he was seeing an increasing interest from institutional investors.

Why is Smart Money sniffing around CIBT Education Group with increasing interest?

The company has generated consistent, long-term growth in its operations. Its future growth prospects are very strong – and look like money in the bank.

However, is CIBT’s biggest attraction to Smart Money due to what’s going on externally? More on that later.

CIBT’s unique, recession-proof real estate niche

Most (all?) other real estate sub-sectors are under enormous strain from soaring interest rates. CIBT is forecasting continued robust growth.

What separates this company from other real estate investments? CIBT Education Group occupies a unique real estate niche. It’s all about “education.”

CIBT’s market is student housing. This is an education services company, operator of Sprott Shaw College, Sprott Shaw Language College, and Vancouver International College Career Campus. CIBT subsidiaries provide educational programs in healthcare, eCommerce, trades, technology & language to nearly 10,000 domestic and international students annually. This is complemented by rental housing and a full array of related student housing services.

A fully integrated business model. Deep experience in education.

CIBT’s student housing specialty is a nearly recession-proof business. Education is one of the last expenditures to be reduced in any economic downturn.

Even better (for CIBT investors) are the demographics of CIBT’s student housing population. Roughly 75% of these students are international students.

International students generally have more-affluent parents. Parents are even less likely to make cuts in education spending on their children, especially when they are studying abroad – no matter how serious economic conditions get.

CIBT’s market focus is the Canadian student housing market, in general, and the Metro Vancouver market, in particular.

Canada has become the preferred destination for international students. And Metro Vancouver hosts a disproportionately large share of Canada’s international student population based on province size.

Vancouver student housing alone is a very robust CAD$1.6 billion market. CIBT Education is the largest provider of off-campus housing in this market.

Why CIBT offers the best investment shelter in “shelter”

Student housing is generally a bellwether market. Housing international students are especially recession-proof. And the Canadian student housing market is the strongest of all.

CIBT’s market positioning could not be better. The company’s financial strength is reflected in its corporate results.

1 EBITDA and Adjusted EBITDA are non-IFRS Financial Measures as further described at the end of this article. Information on non-IFRS Financial Measures is incorporated by reference to the company’s Management Discussion and Analysis (“MD&A) for the applicable fiscal years ended August 31, as presented in the above table, located under CIBT’s profile on SEDAR (www.sedar.com). Reconciliation of EBITDA and Adjusted EBITDA to the most comparable IFRS measure is generally located under the title “Non-IFRS Financial Measures” near the end of each respective MD&A.

CIBT Education Group’s annual audited financial statements for the year ended August 31, 2022 (fiscal 2022) are available under CIBT’s profile on SEDAR (www.sedar.com).

All GEC® rental projects performed well despite the pandemic, reflecting that the company’s student rental and education businesses are counter-cyclical to the economic cycles and complementary to each other. Rental revenues increased by 88% in fiscal 2022 compared to fiscal 2021.

CEO Toby Chu addressed an issue reflected in the fiscal 2022 results when speaking with The Market Herald.

“One of our development projects in Richmond, British Columbia, where a GEC® limited partnership paid a deposit for the future purchase of two towers from a local developer, encountered an unfortunate setback. According to the developer’s filed court documents in the Companies’ Creditors Arrangement Act (the “CCAA”), the developer’s lender ceased funding in March 2020 which led to the developer filing for creditor protection under the CCAA in April 2022.

Based on facts and circumstances and the best information available on August 31, 2022, certain balances associated with these deposits and related assets were impaired, resulting in a non-cash charge of $66.94 million, which impacted net income (loss). Without this non-cash charge, net income for fiscal 2022 was $11.17 million 1.

At the end of each reporting period, the company will assess if any portion of this impairment may be reversed. There is no debt owed by GECH associated with this project. We are pursuing legal action against the lender for damages and other relief.”

Many businesses wilted due to the difficult economic conditions during the Covid-19 pandemic. Some were literally driven out of business.

CIBT derives the bulk of its revenues from its education business and 25% from its (occupied) rental housing units via its real estate subsidiary Global Education City Holdings Inc. (GECH). Despite the impact of the pandemic, which was most prominent in the first six months of fiscal 2022, revenues increased by 20%.

As the economy re-emerges from Covid, many businesses are struggling to equal their pre-pandemic performance level. Not CIBT.

Investors will note the company’s exceptional financial performance in 2018. CEO Toby Chu explained that CIBT’s revenues do not grow in a straight line.

Adding incremental rental units requires bringing new student housing facilities online. Each new facility produces a strong bump in revenues. The company added significant projects in 2018, generating robust gains on both the top and bottom lines.

CIBT Education is preparing to bring its next student housing facility online at the beginning of 2023: GEC King Edward.

This will add 190 additional beds (units) and 46,408 Gross Buildable square feet to CIBT’s inventory of student housing. Prospects for more top-line and bottom-line growth in 2023.

CIBT Education offers counter-cyclical strength with demonstrated stability

With its real estate revenues coming from rental housing, CIBT has lower exposure than conventional developers because the future rental rate adjustments to the renters will reflect all the increased costs. Combine this with the recession-proof nature of this business, and CIBT Education offers investors a countercyclical bellwether in real estate.

Investment icon Warren Buffett once famously remarked, “It’s only when the tide goes out that you learn who’s been swimming naked.”

In Canada’s once unstoppable real estate juggernaut, the tide is now going out – quickly. Many real estate investments are about to be exposed (as overvalued), especially those connected to the residential real estate bubble.

In comparison, CIBT remains finely attired to a foundation of financial stability decorated with strong growth potential.

The company’s $500+ million property portfolio is comprised of 7 off-campus student housing facilities currently in operation, with 8 more under development. The best is literally yet to come.

And the Smart Money is taking notice.

CEO Chu elaborated on what was being discussed as increasing numbers of institutional investors have been approaching him at investor events.

“During my recent roadshow visiting overseas institutional and accredited investors, the stock markets were impacted by geo-political issues, inflations, volatilities and depressed stock prices, forcing smart investors to look at other investment opportunities. I was able to introduce a niche market in the real estate sector that will provide stable cash flow income, long-term capital gain, and “real” estate that is tangible. Several institutional investors have identified Canada’s student housing as their next biggest opportunity.”

The basic investment proposition here is more than enough to generate interest in CIBT among institutional investors. But that’s only the beginning of the company’s attraction to the Smart Money.

The Smart Money real estate play for today

Readers of The Market Herald have already seen the 10-year chart for CIBT Education Group. It’s a pretty picture.

The long-term charts of most public companies look like they have fallen off a cliff, either during the pandemic, afterward, or both. CIBT is trading below the $40 million market cap as of November 28, 2022, a small-cap company with the chart of a blue-chip stock.

But should this chart look much better?

Consider this. Over those last 10 years, CIBT Education Group was competing for investor dollars with all the high-flying stocks in real estate. As good as CIBT has performed, it would have looked second-best versus all of the other (now) excessively valued real estate stocks.

As the tide goes out in real estate, CIBT stands virtually alone.

CIBT produced strong long-term returns over the past decade in heavy competition for investor dollars. Now that competition for investor dollars is evaporating.

Instead of being “a second-best real estate investment,” the company is now “the counter-cyclical real estate bellwether” as a large bubble in other real estate markets unwinds.

A Smart Money real estate investment.

But that still doesn’t fully present the strength of the investment fundamentals here.

Huge market, huge growth potential, huge barriers to entry

CIBT Education Group reported annual revenues for the year ended August 31, 2022 (fiscal 2022) of CAD$73.2 million. The company is the largest off-campus student housing provider in the CAD$1.6 billion Vancouver student housing market.

As noted in our previous feature, CIBT’s largest competitor in this market is the federal government. And the federal government wants to have as little market share here as possible – to minimize the tax dollars required for these capital investments.

As far as private sector competitors go, the barriers to entry into student housing were large. Today, they are virtually prohibitive.

Real estate prices remain near top dollar. Yet the explosion in interest rates has sent the costs of financing these capital investments into orbit.

CIBT Education Group has rental revenues for fiscal 2022 of CAD$18.55 million in a $1.6 billion market and near-zero competition as it expands its market share. Enough to make institutional investors salivate.

As investors contemplate the growth multiples here, don’t forget CIBT’s current market cap: below CAD$40 million.

Add the future growth potential, the barriers to entry that lock in this growth potential, and the counter-cyclical strength to prosper during a major downturn in real estate. This is a company that should be trading at a higher premium than its current state.

It is the sort of investment setup that institutional investors dream about: huge growth potential, minimal competition, and a fabulous entry point.

Institutional investors are also gravitating towards ESG-friendly stocks. CIBT Education puts the “G” in ESG. The company’s corporate accolades are simply too numerous to list.

The Smart Money real estate investment for 2022.

For retail investors worried they might forget about this “smart money” investment opportunity, CIBT Education Group makes it easy for investors. Just remember the company’s symbol: “MBA.”

Is your portfolio ready to graduate to this Smart Money real estate stock?

DISCLOSURE: This is a paid article by The Market Herald. Financial results included in the article are deemed to be from CIBT Education Group Inc.

The post The Smart Money real estate investment for TODAY appeared first on The Market Herald.

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Four burning questions about the future of the $16.5B Novo-Catalent deal

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.
Beyond spending billions of dollars to expand…

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To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.

Beyond spending billions of dollars to expand its own production capacity for its weight loss drugs, the Danish drugmaker said Monday it will pay $11 billion to acquire three manufacturing plants from Catalent. It’s part of a broader $16.5 billion deal with Novo Holdings, the investment arm of the pharma’s parent group, which agreed to acquire the contract manufacturer and take it private.

It’s a big deal for all parties, with potential ripple effects across the biotech ecosystem. Here’s a look at some of the most pressing questions to watch after Monday’s announcement.

Why did Novo do this?

Novo Holdings isn’t the most obvious buyer for Catalent, particularly after last year’s on-and-off M&A interest from the serial acquirer Danaher. But the deal could benefit both Novo Holdings and Novo Nordisk.

Novo Nordisk’s biggest challenge has been simply making enough of the weight loss drug Wegovy and diabetes therapy Ozempic. On last week’s earnings call, Novo Nordisk CEO Lars Fruergaard Jørgensen said the company isn’t constrained by capital in its efforts to boost manufacturing. Rather, the main challenge is the limited amount of capabilities out there, he said.

“Most pharmaceutical companies in the world would be shopping among the same manufacturers,” he said. “There’s not an unlimited amount of machinery and people to build it.”

While Novo was already one of Catalent’s major customers, the manufacturer has been hamstrung by its own balance sheet. With roughly $5 billion in debt on its books, it’s had to juggle paying down debt with sufficiently investing in its facilities. That’s been particularly challenging in keeping pace with soaring demand for GLP-1 drugs.

Novo, on the other hand, has the balance sheet to funnel as much money as needed into the plants in Italy, Belgium, and Indiana. It’s also struggled to make enough of its popular GLP-1 drugs to meet their soaring demand, with documented shortages of both Ozempic and Wegovy.

The impact won’t be immediate. The parties expect the deal to close near the end of 2024. Novo Nordisk said it expects the three new sites to “gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.”

As for the rest of Catalent — nearly 50 other sites employing thousands of workers — Novo Holdings will take control. The group previously acquired Altasciences in 2021 and Ritedose in 2022, so the Catalent deal builds on a core investing interest in biopharma services, Novo Holdings CEO Kasim Kutay told Endpoints News.

Kasim Kutay

When asked about possible site closures or layoffs, Kutay said the team hasn’t thought about that.

“That’s not our track record. Our track record is to invest in quality businesses and help them grow,” he said. “There’s always stuff to do with any asset you own, but we haven’t bought this company to do some of the stuff you’re talking about.”

What does it mean for Catalent’s customers? 

Until the deal closes, Catalent will operate as a standalone business. After it closes, Novo Nordisk said it will honor its customer obligations at the three sites, a spokesperson said. But they didn’t answer a question about what happens when those contracts expire.

The wrinkle is the long-term future of the three plants that Novo Nordisk is paying for. Those sites don’t exclusively pump out Wegovy, but that could be the logical long-term aim for the Danish drugmaker.

The ideal scenario is that pricing and timelines remain the same for customers, said Nicole Paulk, CEO of the gene therapy startup Siren Biotechnology.

Nicole Paulk

“The name of the group that you’re going to send your check to is now going to be Novo Holdings instead of Catalent, but otherwise everything remains the same,” Paulk told Endpoints. “That’s the best-case scenario.”

In a worst case, Paulk said she feared the new owners could wind up closing sites or laying off Catalent groups. That could create some uncertainty for customers looking for a long-term manufacturing partner.

Are shareholders and regulators happy? 

The pandemic was a wild ride for Catalent’s stock, with shares surging from about $40 to $140 and then crashing back to earth. The $63.50 share price for the takeover is a happy ending depending on the investor.

On that point, the investing giant Elliott Investment Management is satisfied. Marc Steinberg, a partner at Elliott, called the agreement “an outstanding outcome” that “clearly maximizes value for Catalent stockholders” in a statement.

Elliott helped kick off a strategic review last August that culminated in the sale agreement. Compared to Catalent’s stock price before that review started, the deal pays a nearly 40% premium.

Alessandro Maselli

But this is hardly a victory lap for CEO Alessandro Maselli, who took over in July 2022 when Catalent’s stock price was north of $100. Novo’s takeover is a tacit acknowledgment that Maselli could never fully right the ship, as operational problems plagued the company throughout 2023 while it was limited by its debt.

Additional regulatory filings in the next few weeks could give insight into just how competitive the sale process was. William Blair analysts said they don’t expect a competing bidder “given the organic investments already being pursued at other leading CDMOs and the breadth and scale of Catalent’s operations.”

The Blair analysts also noted the companies likely “expect to spend some time educating relevant government agencies” about the deal, given the lengthy closing timeline. Given Novo Nordisk’s ascent — it’s now one of Europe’s most valuable companies — paired with the limited number of large contract manufacturers, antitrust regulators could be interested in taking a close look.

Are Catalent’s problems finally a thing of the past?

Catalent ran into a mix of financial and operational problems over the past year that played no small part in attracting the interest of an activist like Elliott.

Now with a deal in place, how quickly can Novo rectify those problems? Some of the challenges were driven by the demands of being a publicly traded company, like failing to meet investors’ revenue expectations or even filing earnings reports on time.

But Catalent also struggled with its business at times, with a range of manufacturing delays, inspection reports and occasionally writing down acquisitions that didn’t pan out. Novo’s deep pockets will go a long way to a turnaround, but only the future will tell if all these issues are fixed.

Kutay said his team is excited by the opportunity and was satisfied with the due diligence it did on the company.

“We believe we’re buying a strong company with a good management team and good prospects,” Kutay said. “If that wasn’t the case, I don’t think we’d be here.”

Amber Tong and Reynald Castañeda contributed reporting.

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Petrina Kamya, Ph.D., Head of AI Platforms at Insilico Medicine, presents at BIO CEO & Investor Conference

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb….

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Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

Credit: Insilico Medicine

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

The session will look at how the latest artificial intelligence (AI) tools – including generative AI and large language models – are currently being used to advance the discovery and design of new drugs, and which technologies are still in development. 

The BIO CEO & Investor Conference brings together over 1,000 attendees and more than 700 companies across industry and institutional investment to discuss the future investment landscape of biotechnology. Sessions focus on topics such as therapeutic advancements, market outlook, and policy priorities.

Insilico Medicine is a leading, clinical stage AI-driven drug discovery company that has raised over $400m in investments since it was founded in 2014. Dr. Kamya leads the development of the Company’s end-to-end generative AI platform, Pharma.AI from Insilico’s AI R&D Center in Montreal. Using modern machine learning techniques in the context of chemistry and biology, the platform has driven the discovery and design of 30+ new therapies, with five in clinical stages – for cancer, fibrosis, inflammatory bowel disease (IBD), and COVID-19. The Company’s lead drug, for the chronic, rare lung condition idiopathic pulmonary fibrosis, is the first AI-designed drug for an AI-discovered target to reach Phase II clinical trials with patients. Nine of the top 20 pharmaceutical companies have used Insilico’s AI platform to advance their programs, and the Company has a number of major strategic licensing deals around its AI-designed therapeutic assets, including with Sanofi, Exelixis and Menarini. 

 

About Insilico Medicine

Insilico Medicine, a global clinical stage biotechnology company powered by generative AI, is connecting biology, chemistry, and clinical trials analysis using next-generation AI systems. The company has developed AI platforms that utilize deep generative models, reinforcement learning, transformers, and other modern machine learning techniques for novel target discovery and the generation of novel molecular structures with desired properties. Insilico Medicine is developing breakthrough solutions to discover and develop innovative drugs for cancer, fibrosis, immunity, central nervous system diseases, infectious diseases, autoimmune diseases, and aging-related diseases. www.insilico.com 


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Another country is getting ready to launch a visa for digital nomads

Early reports are saying Japan will soon have a digital nomad visa for high-earning foreigners.

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Over the last decade, the explosion of remote work that came as a result of improved technology and the pandemic has allowed an increasing number of people to become digital nomads. 

When looked at more broadly as anyone not required to come into a fixed office but instead moves between different locations such as the home and the coffee shop, the latest estimate shows that there were more than 35 million such workers in the world by the end of 2023 while over half of those come from the United States.

Related: There is a new list of cities that are best for digital nomads

While remote work has also allowed many to move to cheaper places and travel around the world while still bringing in income, working outside of one's home country requires either dual citizenship or work authorization — the global shift toward remote work has pushed many countries to launch specific digital nomad visas to boost their economies and bring in new residents.

Japan is a very popular destination for U.S. tourists. 

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This popular vacation destination will soon have a nomad visa

Spain, Portugal, Indonesia, Malaysia, Costa Rica, Brazil, Latvia and Malta are some of the countries currently offering specific visas for foreigners who want to live there while bringing in income from abroad.

More Travel:

With the exception of a few, Asian countries generally have stricter immigration laws and were much slower to launch these types of visas that some of the countries with weaker economies had as far back as 2015. As first reported by the Japan Times, the country's Immigration Services Agency ended up making the leap toward a visa for those who can earn more than ¥10 million ($68,300 USD) with income from another country.

The Japanese government has not yet worked out the specifics of how long the visa will be valid for or how much it will cost — public comment on the proposal is being accepted throughout next week. 

That said, early reports say the visa will be shorter than the typical digital nomad option that allows foreigners to live in a country for several years. The visa will reportedly be valid for six months or slightly longer but still no more than a year — along with the ability to work, this allows some to stay beyond the 90-day tourist period typically afforded to those from countries with visa-free agreements.

'Not be given a residence card of residence certificate'

While one will be able to reapply for the visa after the time runs out, this can only be done by exiting the country and being away for six months before coming back again — becoming a permanent resident on the pathway to citizenship is an entirely different process with much more strict requirements.

"Those living in Japan with the digital nomad visa will not be given a residence card or a residence certificate, which provide access to certain government benefits," reports the news outlet. "The visa cannot be renewed and must be reapplied for, with this only possible six months after leaving the countr

The visa will reportedly start in March and also allow holders to bring their spouses and families with them. To start using the visa, holders will also need to purchase private health insurance from their home country while taxes on any money one earns will also need to be paid through one's home country.

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