Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO Capital Markets analyst Ben Pham picks the biggest winners from the upcoming completion of the TMX pipeline,
“For the first time in over a decade, the WCSB will have excess crude oil takeaway capacity with the completion of TMX over the next several months. We see four key implications: (1) WCS [Western Canada Select crude] pricing should improve and benefit the Cdn. producers, such as CNQ [Canadian Natural resources], IMO [Imperial Oil], and MEG [MEG Energy] (all rated OP [outperform] ); (2) crude by rail has surged to at least 170k bbls/d from 100k for most of 2023 and should drop as TMX fills (impact to OP-rated CNR and CP are limited); (3) volumes will also turn down on competing export pipelines, such as ENB’s Mainline (though impact is also modest); and (4) TMX sale process will gain further momentum, with PPL[ Pembina Pipeline] (our favorite idea in Cdn. midstream) the most likely in our coverage to pursue (but only at the right price)”
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Head of BofA Global Research Candace Browning highlights a report by analyst Lawson Winder pointing to upside for nuclear power and Cameco,
“Our Metals & Mining strategists think nuclear power and uranium will be key in the energy transition. Uranium spot prices have eclipsed $100/lb., doubling since the start of last year, with potential to overshoot $120/lb. Slower production growth from the world’s largest uranium producer will likely squeeze supply and global demand for nuclear power is expected to ramp quickly as China transitions from coal. Lawson Winder sees more than 20-per-cent upside to Cameco after solid 4Q23 earnings results and strong 2024 guidance. On the other hand, green hydrogen, another potential solution for clean energy, is ramping up slower than hoped. Green hydrogen is produced from renewable energy sources, while blue hydrogen uses natural gas and carbon capture. Alexander Jones notes high production costs and insufficient subsidies are challenges to the green hydrogen industry. Companies exposed to blue hydrogen, like Air Liquide and Johnson Matthey look more attractive”
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RBC Capital Markets analyst Geoffrey Kwan assessed the state of the Canadian mortgage industry,
“The Canadian housing and mortgage market could use an inspirational speaker like SNL’s Matt Foley, as the industry continued to weaken in Q4/23 with home prices continuing to decline while home sales appear to be stabilizing, albeit at depressed levels, driven by elevated mortgage rates and broad-based severe housing unaffordability. Looking ahead, housing affordability should see some relief in the short term, as 5-year fixed prime mortgage rates declined 90bps from the recent peak and home prices continue to decline. While we expect home sales to increase from current levels, reflecting stabilizing and likely declining mortgage rates, weak housing affordability is likely to limit home price appreciation in the short term. Our outlook assumes residential mortgage loan growth remains in the low single digits in 2024 and a material but manageable increase in mortgage loan losses … Delinquency rates remain low by historical standards in Canada and its largest provinces and were largely unchanged year-over-year. The delinquency rate in Canada was up 2 basis points year-over-year (0.17 per cent) in October 2023 (the latest data point). By province, delinquency rates were flat to marginally up quarter-over-quarter and on a year-over-year basis up 4 bps in Ontario (0.11 per cent), 3 bps in B.C. (0.13 per cent), 3 bps in Québec (0.13 per cent), and down 5 bps in Alberta (0.32 per cent)”
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Diversion: “The last Sam the Record Man is closing” – A Journal of Musical Things
Scott Barlow