TMX: Canadian Growth Companies Qualify for CEWS

Business reversals were rampant following the COVID-19 breakout in March 2020. Many companies that couldn’t keep their workers on their payrolls had to lay off the majority of them. The federal government came to the rescue by introducing the Canada Emergency Wage Subsidy (CEWS) program.

CEWS aims to arrest job losses and enable the rehiring of displaced workers. A business can be eligible provided it meets the following criteria:

• With a CRA Business Number issued before March 15, 2020 or a third-party payroll provider who submits payroll to the tax agency;
• With employees on the payroll, including new hires, who receive a T4 slip;
• Has a revenue loss (at least 15%) within a claim period.

The wage subsidy program became effective on March 15, 2020 and will run until October 23, 2021. Qualified employers will receive about 75% of an employee’s pre-crisis baseline remuneration or $847 per week, whichever is lower.

Inclusion of listed growth companies

The TMX Group, the operator of the Toronto Stock Exchange, called for fairness for Canadian growth companies and wrote to the finance minister in April 2020 to include public companies that are in the crucial growth phase of their life cycles to be eligible for CEWS.

When COVID-19 was declared a global pandemic, two-thirds of Canada’s public companies were growth companies. They needed wage subsidy support like privately-held companies. John McKenzie, TMX’s CFO and Interim CEO, confirmed that the government approved the request.

Next-generation digital solutions

Many investors are on the lookout for growth companies that could deliver superior returns. On February 3, 2021, TELUS International (TSX: TIXT)(NYSE: TIXT) went public simultaneously on the TSX and NYSE. It was the largest tech initial public offering (IPO) in Canada and the fifth-largest in TSX’s history.

TELUS, Canada’s second-largest telecom, owns 62% of the digital experience solutions and business services provider. The $8.22 billion company designs, builds, and delivers next-generation digital solutions to enhance the customer experience (CX) for global and disruptive brands.

The tech stock hasn’t taken off yet, with only a 1.32% gain since its IPO. However, market analysts have set a 12-month average price target of $44.50 or a 14.93% climb from $38.72. While net income in Q2 2021 dropped 62.8% versus Q2 2020, revenue jumped 33.6% to US$533 million. Meanwhile, free cash flow from operating activities rose 109%.

Stalled growth

The global pandemic hampered the growth of Aecon Group (TSX: ARE) in 2020 and 2021. According to management, the health crisis created an indeterminate period of volatility in the markets in which Aecon operates. Nonetheless, the $1.21 billion global construction and infrastructure development company endured the disruption.

In the first half of 2021 (six months ended June 30, 2021), total revenue increased 12.99% to $1.72 billion compared to the same period in 2020. Net income decreased to $0.8 million year over year from $17.6 million. However, Aecon’s total backlog (construction and concession) stands at $6.52 billion.

At $20.03 per share, the industrial stock’s year-to-date gain is 25.19%. Market analysts forecast a 17.5% potential upside in the next 12 months. Since Aecon pays a 3.49% dividend, the overall return would be higher.

Valuable support

As of August 1, 2021, the federal government has approved wage subsidies worth $88.54 billion. CEWS helped many employees retain or rehire employees during the pandemic. Some businesses under the Aecon and TELUS groups even applied for CEWS. With the economic recovery underway, expect growth stocks to shine.