Inside the Market’s roundup of some of today’s key analyst actions
National Bank Financial analyst Maxim Sytchev expects Stelco Holdings Inc. (STLC-T) to benefit from higher hot-rolled coil (HRC) prices for longer than originally expected, seeing the macro backdrop looking “constructive” and seeing 2022 “shaping up strong.”
Shares of the Hamilton-based company soared over 10 per cent on Thursday in response to the premarket release of better-than-anticipated third-quarter financial results.
“Management noted that 2022 could be even stronger than the current year – this view is supported by: 1) continued strong spot pricing; 2) chip shortage issue in the automotive end-market abating; 3) recent increases in oil & gas drilling; 4) continued strength of infrastructure market, also supported by the recently passed infrastructure bill in the United States; and 5) declining inventory levels throughout the supply chain as customers wait for lower prices,” said Mr. Sytchev. “Currently, the forward curve is in severe backwardation which management believes is overdone, hence they will not be hedging for next year. We are not that ebullient but nevertheless strongly subscribe to the view that the pricing dynamic will stay healthier for longer vs. historical trend.”
The analyst thinks these “strong” market conditions are likely to delay a decline in HRC prices, though he expects a slight moderation in the fourth quarter.
“With HRC at truly unprecedented levels, we too expect a level of backwardation in our estimates as HRC reverts to the mean over time,” he said. “The question of the quantum of decline and over what time span is wherein lies the rub. We believe, given macro circumstances (infra stimulus, recovering auto production, generally recovering economy, etc.; see here for our perspective on recent removal of barriers with the EU - EU steel exports - providing some context), the HRC pricing journey over the next year is going to be like rolling down a hill rather than falling off a cliff which given where shares are trading right now, would still provide upside. During this extended period of high HRC levels, the company would be able to generate very strong FCF.”
Keeping an “outperform” rating for Stelco shares, Mr. Sytchev bumped up his target to $64 from $62, continuing to exceed the average on the Street of $58.67.
“As a relative comparison, shares were trading at $26 at the previous peak in 2018 while generating a $541-million EBITDA in the year – shares are now trading nearly 70 per cent above that level at $44 (peak of the stock was $49 at the beginning of September) while generating over 3 times the EBITDA for 2021 on our forecasts,” he said. “We continue to be constructive on the name as we slightly increase the target price .... on higher estimates while reducing our target EV/EBITDA multiple on our 2022 forecasts to 3.5 times (from 4.0 times) to better account for the nature of a-typically strong earnings level.”
Elsewhere, RBC’s Alexander Jackson increased his target to $64 from $61 with an “outperform” rating.
“We expect Stelco to generate strong free cash flow at current and forecast steel prices as the company benefits from its highly fixed, low-cost operations,” said Mr. Jackson. “With no large capital projects on the horizon we expect the company to continue to prioritize capital returns to shareholders. We revise our model following Q3 results, tweaking up our realized steel price forecasts in Q4/21 and Q1/22 and increasing our opex slightly.”
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Following an in-line third-quarter, CIBC World Markets analyst Dean Wilkinson reiterated his view that Brookfield Asset Management Inc. (BAM-N, BAM.A-T) possesses a “clear (and, indeed, demonstrable) runway for above-average NAV growth for years to come (a growth outlook that is at odds with the current 10-per-cent discount to NAV).”
Before the bell on Thursday, Brookfield reported funds from operations for the quarter, including realized gains, of 85 cents, matching Mr. Wilkinson’s projection. It also announced its record inflows of US$34-billion since last quarter, noting “fundraising momentum across the business continues to be very strong.”
“The quarter can best be summarized by management’s comment that it has a lot on the go, but its growth prospects have never been better; of note are the record inflows achieved since last quarter, which highlights the unrelenting demand for BAM’s product offering in the current investment environment,” said Mr. Wilkinson. “We continue to view the current interest rate backdrop as favourable for alternative investments, and agree with management’s view on this topic; despite modest increases in rates observed since pandemic lows, we are likely to remain in a ‘lowish for longer’ environment for the foreseeable future.”
Noting all of its peripheral affiliates also saw year-over-year growth, Mr. Wilkinson raised his target for Brookfield’s U.S.-listed shares to US$70 from US$67 with an “outperformer” rating. The current average is US$65.63.
Other analysts making target adjustments include:
* BMO’s Sohrab Movahedi to US$67 from $61 with an “outperform” rating.
“BAM shares should benefit from a favourable set-up heading into 2022 with flagship fundraising providing a step-function increase to fee-related earnings and consistent realization of carried interest providing continued valuation upside. In addition, the scaling of BAM’s reinsurance platform is set to further diversify fee streams (with favorable economics). With the asset management business trading at a discount to our target and U.S. peers, the stock continues to offer an attractive risk-reward, in our view,” said Mr. Movahedi.
* TD Securities’ Cherilyn Radbourne to US$75 from US$72 with an “action list buy” rating.
“We believe that an investment in BAM provides exposure to a high-quality portfolio of real assets, with the added leverage of a world-class asset-management franchise,” she said.
* Canaccord Genuity’s Mark Rothschild to US$69 from US$66 with a “buy” rating
* JP Morgan’s Kenneth Worthington to US$72 from US$71 with an “overweight” rating.
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In response to a better-than-anticipated third-quarter results, iA Capital Markets analyst Frédéric Blondeau upgraded Sienna Senior Living Inc. (SIA-T), saying its “strong” leadership is “paying off.”
After the bell on Thursday, the Markham, Ont.-based company reported funds from operations per unit of 28.3 cents, exceeding both Mr. Blondeau’s 25-cent estimate and the consensus forecast on the Street of 26 cents. Operating results were largely in line with expectations, while expenses were “significantly” lowered than the analyst’s projections.
“We would underline that same property retirement occupancy increased 280 basis points quarter-over-quarter to 82.1 per cent as at Q3/21, while long-term care occupancy reached 92.4 per cent excluding the unavailable beds due to capacity limitations,” said Mr. Blondeau. “[Debt to gross book value] was 45.6 per cent as at Q3, down from 48.2 per cent as at Q4/20. The Company had access to $222-million in liquidity as at Q3.
“In the meantime, as at November 10, only one of SIA’s 83 owned or managed residences had active cases of the virus.”
Raising his financial projections through 2022, the analyst increased his target price for Sienna shares to $16 from $15.50. The average on the Street is $16.48.
“We fully acknowledge the significant improvements in SIA’s operational environment, on the back of solid leadership from the management team, as well as the attractive valuation levels of SIA’s shares,” said Mr. Blondeau. “Looking ahead, we intend to continue to closely monitor labour, utility and insurance costs, as these items continue to negatively impact organic growth”
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After “another quarter of strong organic growth trends,” Desjardins Securities analyst Kevin Krishnaratne raised his rating for Alithya Group Inc. (ALYA-T, ALYA-Q) to “buy” from “hold.”
“Since we resumed coverage of ALYA, it has posted three quarters of top-line beats and accelerating organic growth above broader IT rates,” he said. “Additionally, ALYA acquired Quebec-based firm R3D Conseil, giving it access to a long-term recurring book of business.”
Before the bell on Thursday, the Montreal-based tech firm reported revenue for its second quarter of 2022 of $105.3-million, up 54 per cent year-over-year and ahead of Mr. Krishnaratne’s $93.9-million as organic growth rose 34 per cent from the same period year ago.
“U.S. constant-currency growth was 40 per cent (facing an easy comp), but up from 17 per cent in 1Q,” he said. “In Canada, we calculate organic growth in the mid-20-per-cent range, with management noting strength across all areas. Quebec was noted to be quite strong ex-R3D (organic growth 20 per cent). Prior-quarter bookings are now being realized, while we view the strength as particularly impressive during the slow summer 2Q period.”
Also seeing a margin expansion accelerating, Mr. Krishnaratne raised his full-year 2022 and 2023 revenue and earnings expectations, noting: “We continue to like ALYA’s focus on leading enterprise software providers MSFT and ORCL. Management has done well retaining, attracting and training talent during the pandemic (500+ staff added in FY22 so far) as it invested to capitalize on digital transformation tailwinds, an opportunity we believe it is now realizing.”
His target for Alithya shares to $4.50 from $4, exceeding the current average on the Street of $4.21.
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Based on share price appreciation, TD Securities analyst Graham Ryding cut his recommendation for CI Financial Corp. (CIX-T) to “hold” from “buy,” despite a third-quarter earnings per share beat.
“This was a noisy quarter with material adjustments,” he said. “We were encouraged with the better-than- expected WM EBITDA contribution (and margins) and strong FCF. This was somewhat offset by a lower-than-expected contribution from the asset management business. With leverage increasing, we believe the pace of WM acquisitions may slow, or alternatively, CI may choose to issue equity (at the CI Private Wealth subsidiary level) to fund a portion of future deals. Our estimates have moved higher to reflect updated AUM and a higher wealth management outlook. CI’s shares have had a good run year-to-date, in our view (up 91 per cent). With a limited total potential return to our revised $32.00 target price (up from $29.00), we are moving our rating to HOLD (from Buy).”
Elsewhere, RBC’s Geoffrey Kwan raised his target to $34 from $32 with an “outperform” rating. Others making changes including: Canaccord Genuity’s Scott Chan to $35 from $32.50 with an “outperform” rating; Desjardins’ Gary Ho to $34 from $31 with a “buy” rating and CIBC’s Nik Priebe to $37 from $35 with an “outperformer” rating. The average is $33.89.
“CI reported a generally positive quarter. Adjusted diluted EPS was in line, but earnings quality has remained strong over the [last 12-month] period (measured by free cash flow conversion). Net flows remained positive in October, driven by continued momentum in retail. The company signalled that deal activity could slow in 2022, which is consistent with our expectations. We continue to like CI,” said Mr. Priebe.
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Amid worries about the future of its San Jose mine in Mexico after the expiry of its environmental impact authorization, a pair of analysts downgraded Fortuna Silver Mines Inc. (FVI-T) a day after the release of its third-quarter results.
Canaccord Genuity analyst Dalton Baretto lowered his rating for the Vancouver-based company to “sell” from “hold” with a $5.50 target (unchanged), while BMO’s Ryan Thompson cut it to “market perform” from “outperform” with a $7 target, down from $8.75. The average target on the Street is $6.64.
“We do not view the Q3 financial results are not overly relevant, given that operating results were previously released and there were no major surprises on the cost front. Rather, we are far more concerned about the regulatory challenges facing San Jose, which could have meaningful near-term impacts on the company’s operations as well as its liquidity,” said Mr. Baretto. “At this time, however, the market appears to be focused more on the company’s leverage to silver prices than on the potential negative outcomes associated with these challenges. We attempt to outline the state of affairs below, but note here that we are downgrading FVI to SELL given the overhang on liquidity as well as the negative 15-per-cent implied return to our $5.50 per share target price.”
Mr. Thompson said: “Yesterday, [Secretariat of Environment and Natural Resources] notified the company that the application for an extension of the EIA wasdenied. In our view, the situation seems fluid at the moment, but until clarity is provided, it is hardto see the stock outperforming from current levels.”
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TD Securities analyst Tim James thinks Andlauer Healthcare Corp.’s (AND-T) growing equity value is not properly reflected in its share price.
Accordingly, following the release of third-quarter results that met his expectations, he upgraded the stock to “buy” from “hold.”
“We believe that AHG deserves a premium valuation relative to a group of comparable companies due to its above-average historical and forecast growth, prudent financial leverage, and track-record of strong margins and returns on capital, along with its competitive position within an industry that offers good economic resiliency,” he said.
Mr. James’s target for Andlauer shares rose to $55 from $54, exceeding the $53 average.
“The increase to our target price is due to the impact of shifting forward our valuation period by one quarter,” he said. “Due to recent share price weakness, a steady increase in our target price since early-2021, and the resulting 12-month expected return, we believe that investors should acquire the shares. Management has been delivering strong and predictable growth, along with acquisitions, which, we believe, will provide investors with exposure to specialized segments of the U.S. market, and greater long-term upside. Financial leverage has remained conservative while recently deploying capital into what we view as winning acquisitions.”
Elsewhere, RBC’s Walter Spracklin raised his target to $56 from $55, maintaining an “outperform” rating.
“Q3 was in line, but we highlight three key takeaways that support our positive view on the shares. 1) Organic growth trends remain intact, which supports our high-single digit organic growth assumptions; 2) margins continue to impress reflecting the Skelton acquisition and operating leverage; and 3) the M&A pipeline remains robust with opportunity both in Canada and in the U.S. going forward. Today’s results, while in line with expectations, further support our positive view on the shares,” said Mr. Spracklin.
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In other analyst actions:
* Veritas Research analyst Nigel D’Souza upgraded Bank of Nova Scotia (BNS-T) to “buy” from “reduce” with an $81 target. The current average is $87.67.
* Scotia Capital analyst Ben Isaacson upgraded Chemtrade Logistics Income Fund (CHE.UN-T) to “sector perform” from “underperform” with an $8.50 target, up from $7, while BMO’s Joel Jackson raised his target to $8 from $7 with a “market perform” rating. The average is $9.36.
“Our outlook for CHE improves meaningfully as both controllable and non-controllable factors continue to turn in the company’s favour,” said Mr. Isaacson.
“We value CHE at 7.0 times ‘22 EBITDA, which results in a revised $8.50 PT. As the company continues to make progress on improving its balance sheet, and now preparing for small pockets of organic growth, the market should be willing to show increased confidence in CHE achieving more sustainable results. Keep in mind that the five-year average for the stock is 7.5 times, so there is room for further upside as CHE continues to climb back toward mid-cycle run-rate EBITDA.”
* Seeing “several” neat-term catalysts, TD Securities analyst Craig Hutchison upgraded Ero Copper Corp. (ERO-T) to “buy” from “hold” with a $30 target, matching the average.
“The company ended Q3/21 in a net cash position, and has a total of $220-million in liquidity to deliver on its growth targets,” he said. “Ero’s low-cost structure and strong balance sheet should insulate the company somewhat from a downturn in copper, while its growth projects at Boa and MCSA should provide long-term leverage.”
* Desjardins Securities analyst John Chu trimmed his target for ABC Technologies Holdings Inc. (ABCT-T) to $9.50 from $10.50 with a “buy” rating, while JP Morgan’s Ryan Brinkman reduced his target to $11 from $12 with an “overweight” recommendation. The average is $10.07.
“While the chip shortage is starting to show signs of stabilizing, more normalized supply levels are not expected until calendar year 2023,” said Mr. Chu. “While industry production volumes should improve through CY22, CUVs (representing 50 per cent of ABC’s revenue) will likely continue to take a backseat to higher-margin pickups and SUVs. Therefore, while we expect ABC to show improving growth going forward, it will likely continue to underperform vs peers in the near term but should outperform in a more normalized environment.”
* RBC Dominion Securities analyst Andrew Wong raised his target for Ag Growth International Inc. (AFN-T) to $42 from $40 with an “outperform” rating, while ATB Capital Markets’ Tim Monachello moved his target to $54 from $52 also with an “outperform” rating. The average on the Street is $45.11.
“We expect AGI should continue benefiting from the very strong ag backdrop due to a combination of high crop prices and volumes Additionally, the company has managed extremely well through rising steel cost headwinds that may be abating as steel prices decline, which should result in a margin uplift into next year. We remain very positive on the overall business and see a strong set-up heading into 2022,” said Mr. Wong.
* In response to weaker-than-anticipated third-quarter results, Raymond James analyst Rahul Sarugaser downgraded Aleafia Health Inc. (AH-T) to “market perform” from “outperform” with a target of 50 cents, down from 90 cents and below the 69-cent average.
“Given the delayed medical cannabis revenue from its Unifor contracts, combined with (what we hope are temporary) thin margins, we revise our rating,” he said.
* RBC’s Paul Treiber hiked his Altus Group Ltd. (AIF-T) to $78 from $68, exceeding the $70.13 average, with an “outperform” rating, while Canaccord’s Yuri Lynk bumped up his target to $74 from $70 with a “buy” rating.
“We believe Altus’ stock remains attractive, given the likelihood of sustained strong software growth, relative to valuation below software peers,” said Mr. Treiber.
* CIBC’s Kevin Chiang lowered his CAE Inc. (CAE-T) target to $43 from $44 with an “outperformer” rating, while National Bank’s Cameron Doerksen cut his target to $44 from $46, keeping an “outperform” recommendation, and Desjardins’ Benoit Poirier trimmed his target to $38 from $41 with a “hold” rating. The average is $42.44.
“FQ2 results came in below our expectations as CAE is still dealing with the impact of the pandemic in some key regions. That being said, we remain optimistic about the long-term capabilities of the company, given the tailwinds across its operating segments,” said Mr. Chiang.
* National Bank’s Vishal Shreedhar cut his target for Canadian Tire Corp. Ltd. (CTC.A-T) to $221 from $225 with an “outperform” rating, while BMO’s Peter Sklar lowered his target to $206 from $216 with a “market perform” recommendation. The average is $225.73.
“The stock was down 3 per cent [Thursday] on a modest EPS miss, concern for supply-chain disruptions, cost inflation, and a potential consumer spending shift back to travel/ entertainment,” said Mr. Sklar. “Given that Q3/21 comps were stronger-than-anticipated, especially at the core CTR banner, which comped up 1.4 per cent on top of last year’s ‘huge’ 25.1-per-cent result, we believe [Thursday’s] stock reaction is unwarranted. The company has secured enough inventory for Q4/21, eliminating concern for near-term supply-chain disruptions. Halloween appears to have been a retail success, and predictions are for consumer holiday spend to increase vs. 2020.”
* CIBC’s Dean Wilkinson increased his Canadian Apartment Properties Real Estate Investment Trust (CAR.UN-T) target to $67 from $65 with a “neutral” rating, while RBC’s Matt Logan raised his target by $1 to $69 with an “outperform” recommendation. The average is $68.05.
“Amid a gradually improving operating environment, CAPREIT’s business continues to deliver modest, yet stable growth,” said Mr. Logan. “Importantly, pricing power is improving, incentives are tapering, and occupancy is set to trend higher in the balance of 2021. In 2022, we believe the market will begin to approach pre-pandemic levels by mid-year, supported by a full economic reopening and seasonally stronger demand. In the interim, we see sufficient data points to give us comfort that the recovery is real and well-underway.”
* National Bank Financial analyst Zachary Evershed cut his Cascades Inc. (CAS-T) target to $22 from $22.75 with an “outperform” rating, while Desjardins’ Frederic Tremblay trimmed his target to $17 from $19 with a “buy” rating and TD Securities’ Sean Steuart lowered his target to $18 from $18.50 with a “buy” rating. The average is $19.07.
“3Q adjusted EBITDA was slightly ahead of expectations,” said Mr. Tremblay. “CAS’s main sectors remain broadly balanced, with robust demand and price increases mitigated by higher costs. We see opportunities for stronger performance in 2022 and beyond as asset utilization in Tissue (higher volume) and asset modernization/enhancement in Containerboard (Bear Island and potential investments in converting capacity) contribute.”
* CIBC’s Stephanie Price increased her target for CGI Inc. (GIB.A-T) to $130 from $123, topping the $127.46 average, with an “outperformer” rating.
* RBC’s Keith Mackey increased his CES Energy Solutions Corp. (CEU-T) target to $3 from $2.75 with an “outperform” rating, while ATB Capital Markets’ Tim Monachello raised his target to $4 from $3.75 also with an “outperform” rating and Raymond James’ Andrew Bradford bumped up his target to $3.25 from $3 with a “strong buy” recommendation. The average is $3.13.
“CES reported another strong quarter, with revenue and EBITDA well ahead of the Street,” said Mr. Mackey. “Reflective of the early stages of an up-cycle, the company added working capital to prepare for increased activity in the quarters ahead and grow its raw material inventory buffer in light of industry supply chain challenges. We have increased our estimates on higher revenue generation, offset by slightly lower near-term margins.”
* CIBC’s Robert Bek increased his target for Cineplex Inc. (CGX-T) to $16 from $14 with a “neutral” rating, while National Bank’s Adam Shine raised his target to $19 from $18 with an “outperform” rating and BMO’s Tim Casey bumped his target to $15 from $14 with a “market perform” rating. The average is $16.07.
“While Q3 results provided solid attendance momentum into FY22, coupled with inflation tailwinds, more visibility into the path to full attendance recovery is required for the story for further upside beyond our increase,” Mr. Bek said. “We remain Neutral on Cineplex and continue to apply a 0.5-times discount to the pre-pandemic valuation multiple, given the unknowns in our attendance recovery thesis through 2022 and 2023, notwithstanding materially receded COVID risks and a rich movie slate for 2022.”
* RBC’s Pammi Bir raised his Dream Office REIT (D.UN-T) target to $26 from $24, keeping an “outperform” rating. The average is $26.08.
* Canccord Genuity’s Robert Young hiked his target for Docebo Inc. (DCBO-Q, DCBO-T) to US$95 from US$80 with a “buy” rating, while Scotia Capital’s Paul Steep cut his target to US$79 from US$80 with a “sector perform” rating. The average is US$83.49.
“Docebo reported another quarter with a solid beat on revenue and ARR that was driven by a growing velocity of enterprise customer wins,” said Mr. Young. “ARR grew organically by 60.2 per cent year-over-year to $103.5-million, the third straight quarter of 60-per-cent-plus ARR growth while the company reported 151 new wins, including Zoom Video, Neiman Marcus and several new biotech and healthcare customers. A key takeaway was almost half of incremental ARR from new logos was driven by $100k+ deals, double that in Q2, underscoring enterprise acceleration. Management also noted expansion wins with existing customers Deliveroo and a ‘large ecommerce and cloud’ customer, likely Amazon. Given Q4 seasonality, a healthy pipeline of enterprise customers and steady cross-sell/up-sell initiatives, we have increased our top-line estimates for Q4 and 2022. We continue to have confidence in Docebo’s ability to win medium/large enterprise mandates, still a relatively new customer cohort with low penetration and strong reference customers. Relative to its growth and peer multiples, we believe the stock trades at a discount and weakness should be bought.”
* RBC’s Maurice Choy hiked his Emera Inc. (EMA-T) target to $66 from $62, exceeding the $61.34 average, with an “outperform” rating.
“Given relatively uneventful quarterly results, we believe investors remain focused on the investor day coming up on December 1,” he said. “Indeed, the likely exclusion of certain Atlantic Loop elements from the new capital plan may modestly dampen enthusiasm; however, this exclusion is seemingly temporary. Overall, this event remains an excellent opportunity for Emera to reaffirm many of its core strengths as well as lay out how it is positioned to deliver strong EPS growth that not only improves its financial setup but also is done in a manner that allows it to deliver on its climate and affordability commitments.”
* National Bank’s Don DeMarco raised his Endeavour Mining PLC (EDV-T) target to $49 from $48, exceeding the $44.21 average, with an “outperform” rating.
* CIBC’s Nik Priebe raised his Fiera Capital Corp. (FSZ-T) target to $11.50 from $11 with a “neutral” rating. The average is $11.88.
“Q3 results were modestly positive, underscored by a minor earnings beat, a favourable mix of mandates won and lost, and the first dividend raise in two years. Although we consider the payout ratio to be high relative to free cash flow, we are not particularly concerned with dividend sustainability unless we enter an equity market drawdown scenario. Our price target increases modestly, reflecting a generally positive update,” said Mr. Priebe.
* CIBC’s John Zamparo cut his target for GDI Integrated Facility Services Inc. (GDI-T) to $57 from $59, below the $66.57 average, with a “neutral” rating, while Desjardins’ Frederic Tremblay trimmed his target to $64 from $67 with a “buy” rating.
“Positives in key business units were overshadowed by a slight miss vs expectations in 3Q caused mainly by a one-time item in GDI’s smallest segment,” said Mr. Tremblay. “Despite slight adjustments to our forecasts, we continue to view GDI’s prospects as extremely bright. Notably, we expect the company to play a major role in the ‘new era of cleaning’, especially as return-to-office plans accelerate. We are pleased with the recovery executed in Technical Services and are excited about the segment’s ongoing U.S. expansion.”
* Canaccord Genuity’s Joseph Vafi raised his target for Hut 8 Mining Corp. (HUT-Q, HUT-T) to US$20 from US$12, exceeding the $16.50 (Canadian) average, with a “buy” rating.
* National Bank’s Endri Leno cut his IMV Inv. (IMV-T) target to $2.50 from $4.25, keeping a “sector perform” rating. The average is $6.78.
* CIBC’s Paul Holden bumped up his Intact Financial Corp. (IFC-T) target to $200 from $197, exceeding the $198.77 average, with an “outperformer” rating.
* National Bank’s Michael Parkin raised his Kinross Gold Corp. (K-T) target to $12.50 from $12 with an “outperform” rating. The average is $12.66.
* National Bank’s Endri Leno increased his Knight Therapeutics Inc. (GUD-T) target to $8 from $7.75, topping the $7.82 average, with an “outperform” rating.
* Raymond James analyst Brian MacArthur trimmed his Labrador Iron Ore Royalty Corp. (LIF-T) target to $38 from $41 with a “market perform” rating. The average is $40.07.
“We believe Labrador Iron Ore Royalty Corporation offers investors good exposure to premium iron ore through its interest in and royalties on Iron Ore Company of Canada (IOC),” he said. “Directly and through its wholly-owned subsidiary, Hollinger-Hanna Limited, LIF owns a 15.1-per-cent equity interest in IOC and receives a 7-per-cent gross overriding royalty on all iron ore produced from leased lands, sold and shipped by IOC and a C$0.10 per tonne commission on sales of iron ore by IOC. We also note LIF has lower jurisdictional risk and an attractive dividend yield.”
* RBC’s Andrew Wong cut his Largo Inc. (LGO-T) target by $1 to $23 with an “outperform” rating. The average is $23.50.
“We continue to view Largo favourably due to high quality vanadium assets and a strong financial position, which underpin the transition to a vertically integrated battery producer that could unlock significant value. We think the next several quarters will be key to executing on several key catalysts for Largo Clean Energy, and while a slow-down in steel demand may weigh on vanadium prices, we believe these will be largely overlooked if Largo can execute on plans for LCE 2022,” said Mr. Wong.
* Credit Suisse analyst Dan Levy lowered his target for Magna International Inc. (MGA-N, MG-T) to US$105 from US$110 with an “outperform” rating. The average is US$98.65.
“We remain positive on MGA and reaffirm our Outperform rating,” said Mr. Levy. “With a historical inventory rebuild ahead in the global auto industry, which very possibly may last into 2024, we believe auto suppliers have a significant opportunity ahead to capitalize on a favorable cyclical opportunity – this is especially the case for MGA, which is overweight to North America. And while the challenging operating environment is likely to hinder supplier margins for the time being (as we saw with MGA in 3Q), the worst has likely passed with inventory starting to rebuild. MGA should benefit from this cyclical opportunity. We also hope that MGA will reinvigorate its Auto 2.0 narrative, as investor excitement on the opportunity has cooled vs. earlier in the year. Specifically, we could see opportunity around MGA’s efforts in EV.”
* Echelon Capital’s Amr Ezzat reduced his target for mdf commerce Inc. (MDF-T) to $15 from $20 with a “buy” rating. The average is $13.67.
“mdf commerce’s FQ222 numbers reflect flat organic sales quarter-over-quarter on lower transacted volumes during the summer months and continued margin pressure as the Company invests in the business and digests its recently closed Periscope acquisition,” he said. “We went into the reporting expecting a messy quarter on the acquisition. EBITDA came broadly in line, top line came in below our estimate, but MRR growth impressed. While we recognize that slower growth and EBITDA pressure do little to help the Company’s valuation, we continue to see tremendous value in the business.”
* Scotia Capital’s Phil Hardie raised his target for Power Corporation of Canada (POW-T) to $49 from $48 with a “sector perform” rating. Others making changes include: Desjardins’ Doug Young to $49 from $47 with a “buy” rating and National Bank’s Jaeme Gloyn to $47 from $45 with a “sector perform” recommendation. The average is $46.50.
“We are encouraged by POW’s actions to simplify its corporate structure and improve communication, and we view the valuation as attractive,” said Mr. Young.
* CIBC’s Todd Coupland cut his Quarterhill Inc. (QTRH-T) target to $4 from $4.50 with an “outperformer” rating. The average is $3.59.
* CIBC’s Dean Wilkinson raised his SmartCentres Real Estate Investment Trust (SRU.UN-T) target by $1 to $34 with an “outperformer” rating. The average is $31.75.
“Q3/21 met our expectations from both a transactional and operational standpoint,” he said. “Headline organic growth remains elevated, but this continues to reflect the significantly higher bad debts expenses being lapped in the comparable quarter last year – organic growth ex. this item remains modestly under pressure (i.e., down 1 per cent). Given that occupancy has largely remained resilient through the pandemic (and is trending positively at this time), a slight uptick in leasing spreads may be needed for a reversion to positive SP-NOI growth (we would expect this to occur over the next few quarters). On the development front, management provided some additional details with respect to ArtWalk; the size and scope of this next phase of development at VMC is suggestive of a continued increase in transactional FFO for years to come. As such, we view this announcement as decidedly positive; while we have long suggested that developments will be a key contributor to SRU’s growth profile, the quantification of these projects helps provide context for the opportunity at hand. We do note that with units now trading at only a modest discount to NAV, and significant capex required to deliver on the development opportunity, it may be an opportune time for the REIT to access the capital markets.”
* Canaccord’s Yuri Lynk raised his Xebec Adsorption Inc. (XBC-T) target to $5 from $4.50, topping the $4.43 average, with a “buy” rating.