The Ontario Securities Commission has ordered former Bay Street fund manager Wayne Pushka and his company to pay over $20-million in penalties after a hearing panel concluded he acted in an “appalling” fashion.Mark Blinch/The Globe and Mail
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
CIBC World Markets analyst Robert Sedran has a message for investors who were rattled by last week's warning from S&P about Canadian banks: relax, bank valuations are not a problem.
"Valuation has become topical with bank shares showing strong performance over the last year," says Mr. Sedran, in a research note. "Despite being above historical averages, we see business and economic conditions as supportive of these higher valuation levels. We raise our group target multiple to 12.5x from 11.9x to reflect this view."
He expects third-quarter earnings per share growth of 3 per cent quarter-over-quarter, along with good loan growth and a slightly lower margin, which "should be enough to help the group sustain the strong top-line growth delivered in recent quarters."
As far as dividend increases go for this quarter, Mr. Sedran says the only likely candidates are Bank of Nova Scotia and Royal Bank, as each of the smaller four banks moved last quarter while TD Bank has moved away from the every-other-quarter pattern. Look for a 5 per cent bump in the dividend from Scotia bank and a 4 per cent increase at Royal bank, he says.
"The group trades at 12.4x our F2014 and 11.6x our F2015 estimates, which have been revised slightly. Bank shares have had strong performance over the last year and we continue to have a positive view of the sector at this time."
Mr. Sedran has a "sector outperformer" rating for both Bank of Nova Scotia and TD Bank.
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Sherritt International Corp.'s stock could realize substantial upside even if nickel prices pull back somewhat, according to Desjardins Capital Markets analyst Jackie Przybylowski.
And if the nickel market improves beyond that conservative forecast, investors could find the risk-reward tradeoff in Sherritt's stock even more attractive, she adds.
"Our outlook for Sherritt is almost singularly dependent on our outlook for nickel," Ms. Przybylowski said. And that outlook assumes nickel prices have peaked.
"We do not expect that the market will be imbalanced in perpetuity. Our forecast is based on our view that the nickel market will ultimately return to a balanced state."
Desjardins initiated coverage of Sherritt with a "buy" rating and a $6 (Canadian) price target.
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Strong second-quarter results from Magna International Inc. are expected to continue, says Citi Research analyst Itay Michaeli.
"Magna posted another strong quarter highlighted both by revenue outperformance and margin upside," says Mr. Michaeli. "The former was perhaps more impressive as Magna's 2014 production revenue guidance has now risen by more than $1-billion since the start of the year. We have raised estimates and see continued upside potential to consensus estimates as Magna continues to benefit from the U.S./Europe auto cycles while deploying capital towards targeted leverage ratios."
Mr. Michaeli is raising his price target for Magna to $120 (U.S.) from $107 and maintaining a "neutral" rating.
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Canadian Apartment Properties (CAP) REIT has slowed down its targeted pace of acquisitions as prices have risen, and is instead shifting its focus to development, Canaccord Genuity analyst Mark Rothschild said.
"Management noted pricing in the private market is intense as multi-family rental remains extremely sought after. In place of acquisitions, management indicated that the REIT is looking at development projects as a potential new avenue of long-term growth," Mr. Rothschild said.
Last week, CAP reported second-quarter results in line with analyst expectations, but posted solid same-property net operating income growth of 5.4 per cent.
Mr. Rothschild raised his price target on CAP stock to $25 (Canadian) from $23 while maintaining a "buy" rating.
CIBC World Market and National Bank Financial also raised their target prices on CAP to $25.50 from $24.50, and to $26.50 from $25.25, respectively.
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Aecon Group Inc.'s disappointing second-quarter results should eventually be offset by a string of recently awarded projects, says Desjardins Capital Markets analyst Benoit Poirier.
Aecon on Monday reported second-quarter results that were well below expectations, explains Mr. Poirier. Earnings before interest, taxes, debt and amortization came in at $13.8-million (Canadian), far below his estimate of $39-million and consensus of $36-million.
"From a trading perspective, we expect the shares to react negatively to the lower-than-expected results," he says. "On balance, we expect the disappointing EBITDA margin in 2Q14 to reverse sharply in 2H14 as activity on recently awarded projects ramps up."
Mr. Poirier rates Aecon as "buy-average risk" and has a price target of $22.
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In other analyst actions:
CIBC has raised its target price on Bank of Nova Scotia to $80 (Canadian) from $76.
NBF is initiating coverage of Spartan Energy with an "outperform" rating and a $5 (Canadian) target price.
RBC Capital Markets has raised its target price for Aimia Inc. to $20 (Canadian) from $19, maintains "sector perform" rating.
Raymond James has cut its target price for Armtec Infrastructure Inc. to $0.75 (Canadian) from $2.