A new weekly look at some of the small-cap stocks making news - or about to. Please let us know in the comments how you like this new feature and your suggestions on what you’d like to see in the future.
Canada’s S&P/TSX SmallCap Index is up 20 per cent year-to-date and rose 27 per cent over the past 12 months (as of Nov. 21). The Russell 2000 in the U.S. is up about 17 per cent YTD and close to 29 per cent over the past 12 months (as of Nov. 21).
Here’s one small-cap in Canada that investors may want to put on their radar screen.
Rogers Sugar Inc. (RSI-T). Investors are watching for possible margin pressures and an update on cost overruns at the company’s Montreal and Toronto expansion project when the high dividend payer reports its fourth-quarter results on Nov. 28.
In its third-quarter report released in August, the Vancouver-based company, which has a dividend yield of 6.2 per cent, said the cost of its expansion project has risen “primarily due to design changes, market-driven price increases for construction, and new safety regulations.” A year earlier, Rogers Sugar announced plans to spend $200-million to update its Montreal plant to increase production by 20 per cent or 100,000 tonnes a year. The project also includes expanding its logistics and storage capacity in the Greater Toronto Area. Analysts expect more detailed cost information to come in next week’s earnings report, which covers the company’s financials for the quarter ended Sept. 30.
Rogers Sugar said in its third-quarter report that it expects to deliver higher fourth-quarter and year-end financial results compared to the same periods last year. “The continued positive outlook for the sugar segment from a market demand and pricing point of view, and the recovery of our maple segment over the last few quarters, should drive an increase in consolidated adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] for fiscal 2024 over fiscal 2023,” the company stated on Aug 8.
Adjusted EBITDA came in at $110.9-million for fiscal 2023 and is expected to be $135.8-million, according to analyst estimates from S&P Capital IQ.
In an analyst call on Aug. 8, Rogers Sugar chief financial officer Jean-Sébastien Couillard said the company was happy with its growing margins but expected the numbers to stabilize in the near future. “We’re not expecting the same type of increase in margin going forward as we’ve seen over the past few quarters,” he said, according to a call transcript. He said the company expects more industrial sales in the quarter, “which doesn’t carry the same type of margin than some of the business we’ve seen, especially over the last two quarters.”
Rogers Sugar reported revenue of $308-million and earnings per share (EPS) of 9 cents for its fourth quarter last year. Analysts expect revenue to come in at $312.8-million and EPS of 9 cents for the fourth quarter of this year, according to Visible Alpha data.
National Bank Financial’s fourth-quarter revenue estimate is $328-million and its EPS estimate is 13 cents. National Bank Financial analyst Zachary Evershed has a “sector perform” (similar to hold) rating on the stock and $6.25 target price, based on his latest note on Aug. 9. Mr. Evershed said at the time he was holding his rating and target price until getting more clarity on the revised budget for the expansion project.
BMO Capital Markets analyst Stephen MacLeod has a “market perform” (similar to hold) on Rogers Sugar as of his Aug. 9 report and said the company’s 6.4-per-cent dividend yield “could be attractive to income-oriented investors.” He also lowered his target price at that time to $6.50 from $7, citing rising expansion project costs.
Other small caps making news this week
Solaris Resources Inc. (SLS-T) announced on Nov. 20 a new chief executive officer and final steps to complete its move from Canada to Ecuador. The company appointed Matthew Rowlinson, who was most recently head of copper business development at Glencore plc, as president and CEO effective Jan. 1. He will be based in a new office in Zug, Switzerland. The Vancouver-based company said in September that it plans to relocate its headquarters to Quito, Ecuador’s capital. The news came months after it abandoned a financing deal with a Chinese investor. The company said in May that “after four months of Canadian regulatory review in an evolving environment, approval has not been obtained and the transaction no longer adequately reflects market value.”
Real Matters Inc. (REAL-T), a network management services platform for the mortgage and insurance industries, reported on Nov. 21 revenue of US$45.6-million for its fourth quarter ended Sept. 30, up 8 per cent from the same quarter last year. Adjusted net income was $900,000 or a penny per share, roughly in line with last year. Analysts expected revenue to come in at US$47.7-million and earnings of a penny per share, according to S&P Capital IQ. The company also said its founder, Jason Smith, will retire as board chair and from the board at the next annual meeting in February. Lead independent director and audit committee chair Garry Foster will become board chair.
Dentalcorp Holdings Ltd. (DNTL-T) Canada’s largest network of dental practices, announced on Nov. 18 a $100-million bought-deal offering based on 10.53 million subordinate voting shares at $9.50 each, half issued from treasury and the other half sold by CEO Graham Rosenberg and existing private equity backers. The company said it plans to use the proceeds to reduce leverage.
Osisko Metals Inc. (OM-X) announced on Nov. 18 a $100-million bought-deal offering and some management changes. The company said John Burzynski will become executive chairman of the board, founder Robert Wares will continue as CEO and director, Don Njegovan become president and Blair Zaritsky chief financial officer (CFO). Anthony Glavac will step down as CFO. Osisko said the $100-million bought deal includes about 288.5 million units at 26 cents each for gross proceeds of $75-million and 50 million flow-through units for 50 cents each for $25-million. It plans to use the proceeds to advance its Gaspé Copper project to a construction decision and for general corporate purposes.
Upcoming
Here are a few other companies expected to report earnings next week: Atlas Engineered Products Inc. (Nov. 25), Goodfood Market Corp. (Nov 27), and Exco Technologies Ltd. (Nov. 27).