Greg Bonnell explains how today’s real estate spin outs by Hudson’s Bay will work, what properties are going where - and how much money the retailer will make on the deals.
Inside the Market's roundup of some of today's key analyst actions. This file will be updated often during the trading day so check back for new details.
There's more than meets the eye with Hudson's Bay Co.'s recently announced REIT deal, says CIBC World Markets analyst Perry Caicco.
Announced on Tuesday, the deal involves HBC placing a substantial portion of its U.S. and Canadian properties into joint ventures with new partners Simon Property Group and RioCan.
"On the surface, over $4 per share of value is created by these structures, if we take the deal at face value," says Mr. Caicco. "However, these deals are not public REITs, and REITs may be years away; the rents seem above market value; the debt applied to the joint ventures is modest; the off-balance sheet debt is still an obligation. We have applied our own cap rates to the deal -- higher in Canada, similar in the U.S. -- and lowered the multiple on the more heavily burdened retail operations."
Mr. Caicco maintains his "sector performer" rating and is boosting his target price to $30 (Canadian) from $27. The analyst consensus price target is $28.90.
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Sears Canada Inc. is in need of a "radical restructuring plan" if it is to survive, says Desjardins Securities analyst Keith Howlett.
The retailer reported a fourth-quarter 2014 operating loss of $28.8-million, worse than Mr. Howlett's $16.3-million forecast. Sales and gross margin rate were both well below forecast, and same-store sales declined by 9.1 per cent. He does not expect a special dividend to be declared, given operating needs.
"Our view is that a radical restructuring plan is urgently required to capture as much value as possible for all stakeholders, and to minimize future cumulative operating losses," he says.
Mr. Howlett is downgrading Sears to "sell" from "hold" and is slashing his target price to $8.50 Canadian from $12. The analyst consensus price target is $13.50.
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Royal Bank of Canada shareholders can expect a healthy dividend hike in 2015, says Desjardins Capital Markets analyst Doug Young.
Canada's largest bank reported first-quarter 2015 earnings per share of $1.67, above Mr. Young's $1.59 estimate and consensus of $1.57.
He explains that despite recent hiccups, RBC still has the strongest wealth management franchise among the banks. It also has a scale advantage, which should allow it to manage costs in a slower loan growth environment.
Mr. Young is forecasting a 9 per cent dividend increase sometime in fiscal year 2015.
He maintains his "buy" rating and is boosting his target price to $87 (Canadian) from $85. The analyst consensus price target is $83.42.
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Magna International has posted impressive quarterly results, says Credit Suisse analyst Dan Galves.
The auto parts maker reported adjusted fourth quarter earnings per share of $2.52 versus a consensus of $2.24, thanks to a 3.5 per cent revenue beat, Mr. Galves explains. He adds that the adjusted earnings before interest taxes and amortization margin was up 100 basis points year-over-year, "impressive performance given the fourth quarter of 2014 was a difficult comparison (as the fourth quarter was by far the highest margin quarter in 2013)."
Mr. Galves maintains his "outperform" rating and is raising his price target to $127 (U.S.) from $121. The analyst consensus price target is $120.
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Nevada Copper Corp. has completed its production shaft to the 1,900 foot level at its Pumpkin Hollow copper development in Nevada. "This represents a significant milestone for Nevada Copper," said Dundee Capital Markets analyst Joseph Gallucci.
"We believe that with the permitting and shaft sinking being de-risked, Nevada Copper has become a mergers and acquisition target," he said.
However, the company still needs to raise financing to complete stage 1 of this development.
Dundee kept its "buy" rating on Nevada Copper stock and has a target price of $3. The consensus target price is $3.80.
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Dollar Tree Inc. was downgraded to "hold" from "buy" at BB&T Capital. Dollar Tree was also downgraded to "hold" from "buy" at Stifel. The 12-month target price is $80 (U.S.) per share.
Starz was downgraded to "hold" from "buy" at Pivotal Research. The 12-month target price is $35 (U.S.) per share.
Chinook Energy Inc. was rated new "buy" at Mackie Research Capital. The 12-month target price is $2 (Canadian) per share.
Elkwater Resources Ltd. was rated new "speculative buy" at FirstEnergy Capital. The 12-month target price is 20 cents (Canadian) per share.
Monster Worldwide Inc. was rated new "buy" at B. Riley. The 12-month target price is $10 (U.S.) per share.
Strad Energy Services Ltd. was raised to "outperform" from "underperform" at Raymond James. The 12-month target price is $3.20 (Canadian) per share.
Sonoco Products Co. was raised to "buy" from "hold" at Argus. The target price is $56 (U.S.) per share.
State Street Corp. was downgraded to "neutral" from "outperform" at Credit Suisse. The target price is $78 (U.S.) per share.
Open Text Corp. was rated new "buy" at Dundee Securities. The target price is $68 (U.S.) per share.
Redknee Solutions Inc. was rated new "buy" at Dundee Securities. The target price is $5 (Canadian) per share.
With files from Bloomberg News