-Vishnu Kumar
Inside the Market's roundup of some of the Canadian small caps making news and on the move today. This post will be updated through the morning.
Jennings Capital initiated coverage on CERF Inc. with a "buy" rating and $5 (Canadian) price target, calling the oilfield and construction equipment rentals provider "overlooked and under covered."
"We view CFL as an overlooked play on strong regional demand for equipment rentals, as it offers investors a relatively high earnings growth profile and dividend yield," analyst Russell Stanley wrote in a research note.
CFL focuses on high-margin, low headcount equipment rental business lines in Western Canada. It also provides waste management services. It has completed five acquisitions to date, the biggest being the recent acquisition of Winalta Inc. for $69.8-million in stock and debt. At current levels, the stock offers investors a dividend yield of 6.9 per cent, alongside a compounded annual growth rate of 40 per cent through fiscal 2015, Mr. Stanley noted.
He thinks potential catalysts for stock gains will come from improved financial results, which should result from the Winalta acquisition, additional merger and acquisition activity, dividend increases, and an eventual listing on the Toronto Stock Exchange.
"At current levels, CFL offers a dividend yield of 6.9 per cent while maintaining a payout ratio of below 40 per cent on our fiscal 2014 and fiscal 2015 operating cash flow estimates," Mr. Stanley said. "The stock currently trades at approximately 4.1x our fiscal 2015 EBITDA forecast and 7.9x our estimate for diluted EPS."
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Agnico Eagle Mines Ltd. has entered into an agreement to acquire Cayden Resources Inc. for $205-million. But there's already chatter that competing bids could be in the works.
The price works out to approximately $3.29 per share, which represents a premium of 42.5 per cent to the volume weighted average price of Cayden shares on the TSX Venture Exchange over the past 30 days, up to Sept. 5. The offer of 0.09 Agnico shares and 1 cent for each Cayden share needs approval from Cayden shareholders as well as Mexican regulators.
Cayden owns, has options to acquire or has staked, concessions constituting a 100 per cent interest in the El Barqueňo Property, which covers approximately 41,000 hectares in the Guachinango gold district in Jalisco State, Mexico.
Beacon Research analyst Michael Curran suggested a competing bid is possible. "We have previously suggested that El Barqueño is one of the best exploration success stories this year. As many mid-tier producers either already are active in Mexico (Yamana, New Gold, Primero), or could benefit from adding a lower risk jurisdiction such as Mexico (Iamgold, Eldorado Gold), we believe other mid-tier producers will have a hard look at Cayden. We also consider Cayden's Las Calles property to be strategic to Goldcorp, and the potential future expansion of the Los Filos gold mine, and therefore Goldcorp management must consider a competing bid," he said in a note.
Shares in Cayden Resources were up 15 per cent at $3.40 in early TSX Venture trading.
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MBAC Fertilizer Corp. said it has resumed continuous production of single super phosphate at its Itafós operations, following the receipt of funds from the recently obtained Santander working capital facility at the end of August. The company also implemented a number of initiatives aimed at optimizing its operations and reducing costs, including cutting its workforce by more than 15 per cent, re-negotiation of agreements with suppliers and the more efficient use of equipment and office facilities. These measures are expected to generate annual savings of approximately $4-million, the company said. It expects to incur one-time charges relating to the corporate restructuring in the third quarter of 2014 of approximately $1.5-million.
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Taseko Mines Ltd. said it will buy mineral exploration and development company Curis Resources in an all-share deal, giving it access to the advanced-stage Florence copper project in central Arizona. Taseko, whose New Prosperity copper and gold project in British Columbia was turned down earlier this year by the Canadian government, said the Florence project will help "strengthen" its near-term development pipeline.
Under the deal, Curis shareholders will receive 0.438 of a Taseko common share for each Curis share held, worth $1.055 per share based on Taseko's 20-day volume weighted average price for the period ending Sept 5. That would value the smaller company at roughly $80-million.
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Redline Communications Group Inc., a provider of wireless networks, said it signed a definitive agreement to acquire the assets of PureWave Networks, a privately held wireless technology company located in Santa Clara, California, for a cash purchase price of $2-million. The acquisition will enable Redline to accelerate the expansion of its high-performance rugged network solutions to include LTE-based capabilities. Redline will be acquiring all of PureWave's assets, including technology IP and patents.
Cantor Fitzgerald analyst Blair Abernathy says the agreement is another sign that Redline has successfully completed its turnaround. He maintains a "buy" recommendation and $4.50 price target.
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Sandvine Corp., a provider of broadband network solutions for fixed and mobile operators, said it has received over $5-million in expansion orders from a global tier-1 mobile operator group for its properties located in the Caribbean and Latin American region. Its directors also approved an open-market stock buyback program for the purchase of up to 13.9-million common shares over a one-year period, expected to commence in October.
The company separately said that it expects revenue for its third quarter to be between $27.5-million (U.S.) and $28-million. "Our results this quarter highlight the challenges related to the timing of closing larger opportunities. There were a couple opportunities that we expected to close in the quarter that did not materialize as quickly as expected, which is disappointing, but we do anticipate closing them in the fourth quarter," said CEO Dave Caputo.
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Sherwood Athletics Group Inc. said it has acquired all of the assets and liabilities of Sher-Wood Hockey Inc., from Callidus Capital Corp. Inc.
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Redknee Solutions Inc., which provides real-time monetization and subscriber management software, said it has received $6-million in orders for software and services from a global group mobile network operator.
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Red Eagle Mining Corp. said results from its feasibility study for the San Ramon deposit at its Santa Rosa gold project in Colombia showed that, based on a long-term forecast price of $1,300/ounce for gold, the post-tax internal rate of return would be 52 per cent, with a payback period of 1.5 years. Average cash costs would be $600/ounce and all-in sustaining costs would be $758/ounce, with production in the first two years averaging 71,000 ounces of gold per year at an average grade of 6.48 grams gold per tonne.
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Falco Resources Ltd. said it has signed an agreement with the city of Rouyn-Noranda in Quebec to acquire surface rights to land above the Horne 5 deposit and immediately adjacent to the Horne smelter. The agreement provides Falco with a five-year option to purchase over five hectares of land that could support a headframe, mill and other surface facilities required to develop the underground deposit. The total purchase price is $2.9-million (Canadian).
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West Kirkland Mining Inc. announced that in its first phase of exploration drilling, the company intersected 50.29 metres of 0.73 grams per tonne gold on the Three Hills deposit, and discovered additional near surface mineralization on the Hasbrouck deposit, both located near Tonopah, Nevada.
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Paris Energy Inc. announced it has obtained shareholder approval for a name change to Mapan Energy Ltd. as well as a share consolidation of its common shares on a 1 for 12 basis. It is anticipated that Mapan will commence trading on a consolidated basis under its new name at the opening of trading on Wednesday under the symbol "MPG".
The company also announced its planned capital budget for the remainder of 2014 and first quarter of 2015.
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Newfoundland's Research & Development Corp. said it would invest $750,000 to support a demonstration plant at Rambler Metals and Mining Plc's Ming copper-gold mine in Baie Verte.
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