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CGI Group Pitch (GIB.A-T)

Jonathan J. Chang BComm, 2017

Adita Pat!" BA, #conomic$, 201%

&ii JinBA, #conomic$, 201'

ata$ riu*i+i$ BA, #conomic$, 2017

Januar 1, 201

This presentation is for informational purposes only, and is not an oer to buy or sell or asolicitation to buy or sell any securities, investment products or other nancial product or

service, an ocial conrmation of any transaction, or an ocial statement of QueensEconomics Investment Council (QEIC! "ny vie#s or opinions presented are solely those ofthe author and do not necessarily represent those of QEIC!

TEC$%&'&), *E+I", "%+ TE'EC&**%IC"TI&%-

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Indu$trBr!ado/n

Compan!ri!/

anag!m!ntT!am

InvestmentThesis .oint /0

In!$tm!ntTh!$i$ Point

2

In!$tm!ntTh!$i$ Point

In!$tm!ntTh!$i$ Point

Company1aluation

Pro3!ct!dCata"$t$

A$$ociat!d4i$$

Pric! Targ!tummar

"ppendi2

ur Ag!nda

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140

145

150

155

160

165

170

!ctor !ri!/

Sources: Capital IQ

5P %00 !ctor Indic!$ - In6ormation T!chno"og !ctor

5P %00 !ctor Indic!$ - T!"!communication !ric!$ !ctor

550

570

590

610

630

650

670

690710

Indu$trPo$iti!Gro/th

tagnantGro/th

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34!44

35!44

64!44

65!44

54!44

55!44

In6ormation T!chno"og !ctorBr!ado/n

Sources: Capital IQ

5PT8 Compo$it! Ind!9 T!chno"og :ard/ar! 5 #;uipm!nt(Indu$tr Group)

5PT8 Compo$it! Ind!9 o6t/ar! 5 !ric!$ (Indu$tr Group)

2,200

2,400

2,600

2,800

3,000

3,200

3,400

imi"ar a*o! graph) -> Indication of 7etter &pportunities*easured on a 8is9:8eturn 7asis

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Compan !ri!/

%Sources: Capital IQ

CGI Group Bu$in!$$ ?!$cription Pric! @ =o"um! P!r6ormanc!

inancia" !tric$ (C?, )

Tota" 4!!nu! 04,6;;!< ar!t Capita"iation 03,=00!6 T#=Tota" 4!!nu! 0!52

#BIT?A 0,=!4 Tota" #nt!rpri$!=a"u!

05,

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Compan !ri!/

'Sources: Capital IQ

p!ciDcation$ o6 CGI Compan

p!ration$

Eor"d ap

The company operates in CanadaA the nited -tatesA the %ordics, -outhernEurope, and -outh "mericaA Central and Eastern Europe, includin@ the%etherlands, ermany, and 7el@iumA the nited Bin@domA the "sia .aciccomprisin@ "ustralia, India, the .hilippines and the *iddle EastA and rance,includin@ 'u2embour@ and *orocco

CI roup Inc! #as founded in 0;

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#9!cuti! T!am

7Sources: Capital IQ, C)I Company *e+site

F ounded CI in0;

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In!$tm!nt Th!$i$ ut"in!

Sources: Capital IQ, Tomsonne Analytics

F CE& sets eyes on doublin@ siLe of CI#ithin 5:< years

F E2cess cash aims to be directedto#ards - commercial mar9ets

F $as done solid Job of mana@in@previous acDuisitions

F e# competitors in this space

F $as @overnment contracts that resultin ;>M rene#al rate, ma9in@ it hard

for others to enterF ?ndhi@hest revenue amon@st ICT

companies in Canada

FThe company is e2periencin@ positive

cash No# and has multiple areas tospend on

F +ecline in inte@ration payments for'o@ica is one of the immediate driversfor C improvement

F E2pectin@ improvements from current

cost restructurin@F *ore opportunities available in EuropeF -hiftin@ focus to#ards hi@her mar@in

in -oft#areKI. revenue

IH Incr!a$ing C G!n!ration IIH Incr!a$ing #BIT argin$

IIIH Incr!a$ing Gro/th Through5A

I=H Brand Po$itioning 5 ar!t?ominanc!

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Argum!nt IH Incr!a$ing C G!n!ration

Sources: Capital IQ, .arclays /esearc, !uity /esearc /eports,

F .redicted @eneration of O0!06?*in )06

F +rivers includePF *ar@in e2pansionF .rudent #or9in@ capital mana@ementF 8educed 'o@ica (subsidy inte@ration

paymentsF .erceived @ro#th in 'o@ica

F 'o@ica is multinational IT andmana@ement consultancy companyheadDuartered in the B #hich is a

#holly o#ned subsidy of CI roup

F ?!5 years since acDuisition of 'o@icaand CI is be@innin@ to normaliLe

F Inte@ration of 'o@ica completedone year ahead of schedule

F +ecline in inte@ration spendin@F *ana@ement invested O5

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Argum!nt IIH Incr!a$ing #BIT argin$

10Sources: Capital IQ, .arclays /esearc, !uity /esearc /eports, /.C Capital

F Contracts e2pirin@ in EuropeF Continuation of optimiLin@ its

operations and improvin@ utiliLation insome mar9ets

F 8ecent restructurin@ in inlandF %e# lo# cost delivery centers

F -eein@ more opportunities available in

Europe

F 'eavin@ unprotable countriesF 'oo9in@ to focus more so on hi@her

mar@ins in increased mi2 ofsoft#areKI. revenue

F 'oo9in@ to @lobaliLe e2istin@soft#areKI. (intellectual property

F CustomiLin@ proJects for multipleclients

#BIT argin Impro!m!nt$

4un- o6

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Argum!nt IIIH Incr!a$ing Gro/th Through5A

11Sources: Capital IQ, !uity /esearc /eport,

F F Comm!rcia" ar!tPmana@ement sees CI as bein@

relatively under:inde2edF F !d!ra" ar!tH mana@ementsees opportunities at attractivevaluations and the company hassi@nicant e2perience

F Estimated O=bn in acDuisitions overne2t 5 year can add O? to O00 in shareprice

F *ana@ement sees @ro#th in "ustralia#here there are similarities to Canada04 years a@o in terms of the sta@e inmar9et consolidation

F CE& *ichael 8oach set on doublin@

siLe of CI in 5 to < yearsF $alf of @ro#th from acDuisitions, other

half from acDuisitionsF Increased focus on corporate

development practicesF %o hostile ta9eovers typically in

industry H so deals may ta9e years todevelop

F or e2ample, 'o@ica #as planned since?44< for its ?40? acDuisition

F *ana@ement rarely pays over 0 2revenue and tar@ets acDuisitions that#ill be accretive in rst year

F *ana@ement loo9in@ to @ro# I.

revenues from 0=M today to 34MF .roprietary soft#are is attractive to

CI because it drives stic9ier revenueF &vers hi@h mar@ins ?4:64M vs! mid:

teensF %iche soft#are could provide CI #ith

preferred status for biddin@ forcontracts

ummar Gro/ing IP 4!!nu!$

F !d!ra" ar!t andComm!rcia" ar!t$

Au$tra"ia

Pa$t Tran$action$

Acuire#

O3,660!?0mma 1, 2012

Acuire#

O0,4=3!>0mmAug. 1', 2010

A t I= B d P iti i 5 t

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Argum!nt I=H Brand Po$itioning 5 ar!t?ominanc!

12Sources: Capital IQ, ni4com, .ranam

F *oved from = to ? in ICT ran9in@surpassin@ the 7i@ ThreeR

F Competitors have little room to @ro#

into CIs shareF *+" has lo# focus on professional

servicesF $eld top ICT .rofessional -ervices

.osition for 04 years

Top ICT$ in Canada

Top ICT Pro6!$$iona" !ric!$ *4!!nu!

Gro/th

Company %ame ICT 8an9in@.rofessional-ervices *ar9et Cap

7lac9berry 0 : 5!3;7CI roup ? 0 04!>7-ha# Communications < : 00!

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=a"uation @ Pu*"ic Compan Compara*"!$

1Sources: Capital IQ

F CGIH Tra#in% at a relatie #iscount to all multiples

K! to ot!HF %o dividend yield in comparison to peersF $i@her C *ar@in MF se of international comparables #ith similar mar9et cap

Comm!ntar

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Cata"$t$

1Sources: Capital IQ, !uity /esearc /eports

F 'ast acDuisition in ?40? of 'o@ica led

to O644 million in annual realiLedsyner@ies

F Gith free cash No# and O53= millionin cash, it is li9ely a similar acDuisition#ill be made in ?405

F 7een e2cellent at identifyin@,purchasin@, and inte@rationacDuisitions!

F enerated free cash No# of perviousacDuisition in less than ? yearsF 'i9ely to be @oin@ after - commercial

mar9et

F European economy rampin@ up andoutloo9 is stren@thenin@

F Gill lead to increase in revenue )05for 'o@ica, one of CIs earlieracDuisitions that operates in Europe

F ro#th in economy #ill help increaserecurrin@ revenue, mostly caused bysi@nin@ lon@er term contracts

Fpcoming Pot!ntia" Ac;ui$ition$

#conomic 4!co!r

4!!nu! Br!ado/n

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4i$$

1%Sources: !uity /esearc /eports

F 55:=4M of revenue for -

operation from -@overnment

F 06M of total revenue

F Chan@e in @overnmentspendin@ could impact CIseverely

F overnment ridloc9

?!partur! o6anag!m!nt

F Go. p!nding

F .lan to double siLe of CI in

5:< years

F *aJority of ro#th from *S"

F Challen@e ndin@ accretiveacDuisitions

F CI could fail to meet@ro#th e2pectations

Fna*"! to DndAc;ui$ition Targ!t

F Company based on information andinfrastructure

F E2posed to loss of +ata, unauthoriLedaccess, and destruction of data

F "ny breach in CI can be detrimental toCIs reputation

F Impactin@ their ability to obtain orretain clients

F CI 8eports results in Canadian +ollars

F *aJority of revenues and costs are in forei@ncurrencies

F -tron@ Canadian dollar relative to othercurrencies could ne@atively impact nancialperformance

In6ormation

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ummar - Pric! Targ!t

1'Sources: Capital IQ

Indicati! =a"uation Graph Imp"i!d 4!turn

E1 K E7IT+" 'T*

E1 K E7IT+" ?406E

E1 K E7IT+" ?405E

. K E ?406E

. K E ?405E

E1 K 8evenue ?406E

E1 K 8evenue ?405E

O50!=0

O6;!35

O6;!

O63!>0

O6

O53!>6

O53!?=

O53!4?

O6;!>3

O50!Ana"$t Pric! Targ!t$ Capita"iation Ta*"!

-hare .rice O63!>5+il! -hares &K- 300!4ar!tCapita"iation L1,'7.

: Cash S EDuivalents O535!< Total +ebt O?,=;4!=

.ref! EDuity : *inority Interest :M Tota" #= L1%,72.

Current -hare .rice O66!36

Targ!t har! Pric! L%0.00EDuity pside 0?!>M+ividend )ield :ugg!$t!d 4!turn 12.N

+esJardins Capital *ar9ets

87C Capital *ar9ets

-alman partners

Credit -uisse

8aymond ames

&ur Tar@et .rice

O6=!44

O6

O65

O6>!44

O6;!44

O54!44