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Inside the Market’s roundup of some of today’s key analyst actions

Pembina Pipeline Corp.’s (PPL-T) recent share price appreciation pushes it “into the driver’s seat” for the acquisition of Inter Pipeline Ltd. (IPL-T), according to iA Capital Markets analyst Elias Foscolos.

“At the moment, we weigh the odds of the transaction as 50 per cent in favour of PPL, 25 per cent in favour of BIP, and 25 per cent that neither succeed,” he said.

In a research note released Thursday, Mr. Foscolos said the next key date in the bidding war comes on June 22 when Brookfield Infrastructure Partners LP’s (BIP.UN-T) current offer expires. Though he sees Pembina’s proposal as “superior at this point in time,” he emphasized Brookfield’s next steps remain unclear.

“Given PPL’s current trading price and the superiority of the PPL offer, Brookfield can as a next step choose to extend its offer, increase and extend its offer, or let its offer expire,” he said. If it lets its offer expire, it is highly likely, but not a certainty, that PPL will succeed in acquiring IPL due to the IPL shareholder vote.”

“If Brookfield extends its offer into the date of the shareholder meeting it will create some uncertainty as to the outcome of the vote. BIP could elect to vote against the transaction which would leave some uncertainty as to whether the transaction will be approved. However, if IPL shareholders vote down the transaction, the break fee is payable.”

After a marketing event with Pembina Pipeline on Wednesday, two days after the release of its business update, Mr. Foscolos said “it is clear that the company is committed to executing on its growth opportunities.” He feels Inter Pipeline is central to that strategy and potential upside.

“Volumes across PPL’s Pipelines and Facilities segments have been growing this year, exceeding pre-COVID levels,” he said. “Going forward, Pembina unveiled approximately $7-billion of potential accretive projects in various stages of development to be pursued alone or with IPL. The Company reiterated its partnership with the Haisla Nation to build the Cedar LNG facility as well as its ‘Chinook Pathways’ partnership with the Western Indigenous Pipeline Group (WIPG) to pursue ownership of the Trans Mountain Pipeline. PPL informed the market that combining IPL’s Heartland Petrochemical Complex (HPC) with Pembina’s 60,000 barrels per day of propane supply infrastructure would eliminate long-term supply risk and potentially allow PPL to construct its previously deferred petrochemical facility.”

Maintaining a “hold” rating for its shares, Mr. Foscolos increased his target by $1 to $42. The average on the Street is $39.94.


Credit Suisse analyst Andrew Kuske made a pair of notable rating changes in a research note released Thursday.

“With North America’s Major League Baseball season nearly approaching the All-Star break, we consider the stage of this cycle (or inning in baseball parlance) of the regional energy infrastructure performance versus the larger cap cross-continental stocks,” he said. “A selection of regional energy infrastructure stocks delivered 47 per cent year-to-date versus the two majors (Enbridge (ENB) and TC Energy (TRP)) up 22 per cent and 25 per cent, respectively. Yet, the performance of regionals versus the larger caps is only one relevant metric, and we consider the three major Canadian infrastructure sub-sectors with energy infrastructure delivering an ample amount of outperformance over both utilities and power/renewables.”

Accordingly, he upgraded Enbridge Inc. (ENB-T) to “outperform” from “neutral” with a $55 target, up from $52 and exceeding the $52.35 target.

Conversely, Mr. Kuske lowered Keyera Corp. (KEY-T) to “neutral” from “outperform” with a $36 target, rising from $34. The average is currently $31.67.

He also made these target price adjustments:

  • AltaGas Ltd. (ALA-T, “outperform”) to $29 from $27. Average: $25.10.
  • Gibson Energy Inc. (GEI-T, “underperform”) to $25 from $22. Average: $24.46.
  • TC Energy Corp. (TRP-T, “outperform”) to $77 from $70. Average: $69.84.

“The energy infrastructure sector remains our preferred sub-sector for exposure, however, greater selectivity is required among the regionals – albeit the situation is very fluid given all of the activity in the sector along with commodity price movements.,” he said. “In a very explicit fashion, with the ENB upgrade, our bias shifts towards the larger cap cross-continental companies. An upward bias to our AltaGas (ALA) and KEY estimates are outlined in this note. Yet, revised target prices were also a function of multiple expansion for ENB, KEY and TRP that is partly based on favourable funds flow (Canadian specific) along with the overall environment.”


Though he thinks it continues to see the potential in its “attractive” Rose Spodumene project in Northern Quebec, Stifel analyst Anoop Prihar lowered his rating for Montreal-based Critical Elements Lithium Corp. (CRE-X) to “hold” from “buy” in response to recent share price appreciation.

“CRE management is waiting to receive federal and provincial environmental permits for the project,” he said. “The permits were originally expected at the end of Q1/21 and management now anticipates receiving them by the end of Q2/21. We believe management’s primary focus is on finding a strategic partner for the project. A financial advisor has been retained to help with this initiative. In light of the current momentum in the lithium sector as well as recent investment activity specific to Quebec (Livent Corporation partnering with the New Nemaska and Piedmont Lithium investing in Sayona Mining), we believe the potential may exist for CRE management to secure the capital needed to advance the Project.”

Mr. Prihar thinks the securing of environmental permits, which is expected by the end of the second quarter, is a “de-risking event for the project and a precursor to attracting a potential strategic partner.”

He maintained a target of $1.50 per share, falling short of the $2 average.


Canadian Apartment Properties Real Estate Investment Trust (CAR.UN-T) is seeing early signs of improving leasing demand as the Canadian economy slowly reopens from pandemic-related restrictions, said Raymond James analyst Brad Sturges after hosting its senior management team for meetings with investors earlier this week.

“Although CAPREIT suggests there could be a 1-2 week lag between lower case counts and greater leasing activity, CAPREIT highlighted that leasing traffic is improving as lockdown restrictions ease,” he said. “With growing optimism for 2H21, CAPREIT’s leasing strategy is starting to shifts towards sacrificing some occupancy in order to maximize rent upon suite turnover as leasing demand strengthens, particularly for the key under 30 demographic. The REIT suggests its rent growth achieved upon suite turnover is trending around an increase of 5 per cent in 2Q21 (up from 3.5 per cent in 1Q21), which could recover to pre-pandemic levels of 15 per cent or more.”

Though he thinks Toronto, Montreal, and Vancouver will remain the REIT’s “core focus,” Mr. Sturges expects expansion into secondary markets, including Victoria and Quebec City.

“The common investment theme for these markets include: 1) a population of over 100k people, 2) less economically sensitive to a single industry, 3) above-average population growth that benefits from the seniors’ demographic migrating and downsizing into retirement communities, and 4) features average going-in apartment cap rates of 4 per cent,” the analyst said. “CAPREIT’s acquisition pipeline remains active, which may support 2021 acquisition volume of at least $500-million.”

Maintaining a “strong buy” rating for the REIT’s units, Mr. Sturges bumped up his target to a Street-high $68 from $67. The current average is $61.15.

“Unit prices for Canadian multifamily REITs including CAPREIT have finally started to break out, rising in tandem with falling COVID case rates and the easing of lockdown restrictions,” he said. “Despite the rebound, we believe that CAPREIT’s value proposition remains compelling, with its current market valuation still failing to capture both strengthening near-term organic growth prospects and expected further cap rate compression (supported by private market transactions), while also ascribing no value to CAPREIT’s large existing land bank (may add 10,000 suites).”


Calling it “a roll-up story in the attractive digital sports media space,” Canaccord Genuity analyst Matthew Lee thinks the long-term thesis for Playmaker Capital Inc. (PMKR-X) is “sound.”

However, emphasizing “the story remains in its infancy,” he initiated coverage with a “speculative buy” rating.

The Toronto-based company, formerly Apolo III Acquisition Corp., commenced trading on TSX Venture Exchange on June 3 following a reverse takeover.

“Playmaker’s overarching strategy involves acquiring sports media assets across North and South America and improving monetization by growing the content portfolio, adding affiliate partnerships with OSB platforms, and driving direct-to-consumer revenues,” said Mr. Lee. “By acquiring assets across various geographies, the company can maximize the value of its content through internal syndication (sharing content across platforms) while also improving its negotiating leverage with ad buyers and gaming partners.”

After beginning its acquisition strategy with a deal for Futbol Sites, a Latin American digital sports media content provider, in early May, Playmaker has “just scratched the surface of its monetization potential,” according to Mr. Lee, noting its expectations for “significant growth through the launch of a new app-based platform, the addition of consumer-direct offerings (streaming, ecommerce, etc.), and continued subscriber additions.”

Mr. Lee thinks further acquisitions could drive “substantial” value, projecting at least four deals over the next 12 months.

“We believe PMKR’s roll-up strategy positions it to take advantage of the rising tides in online sports betting (OSB) as it leverages its growing digital sports content portfolio to deliver engaged audiences to sports betting companies, advertisers, leagues, and teams,” he said. “We liken the strategy to Levi Strauss’ famous sale of supplies to miners during the California gold rush, which offered his firm robust returns despite being less glamorous than mining. In the case of Playmaker, we believe the firm has the expertise and capital to broaden its portfolio and cost-effectively deliver subscribers to OSB operators without competing in the contentious OSB market. This, in turn, gives the company the ability to drive substantial revenue growth without burning cash on marketing or spending to build a platform.”

Mr. Lee, currently the lone analyst on the Street covering the stock, set a target of 60 cents. Playmaker closed at 47.5 cents on Wednesday.


Canaccord Genuity analyst Michael Pettingell sees Vizsla Silver Corp.’s (VZLA-X) flagship Panuco silver-gold project in Sinaloa, Mexico as an “emerging discovery” that shares main key characteristics with SilverCrest Metals Inc.’s (SIL-T) advanced-stage Las Chispas project.

“While still early days, we highlight similarities with respect to district consolidation, grade interval profiles and distribution, path to development and regional upside potential,” he said. “As such and given the current delta in market capitalization between the two companies (approximately $280-million vs $1.8-billion), we see considerable potential for Vizsla to re-rate by applying the same playbook SilverCrest used at Las Chispas,” he said.

Accordingly, Mr. Pettingell initiated coverage of the Vancouver-based company with a “speculative buy” rating in order to " to reflect both the financing risk associated with a non-revenue-generating company, and the technical risk associated with a project for which feasibility has yet to be demonstrated.”

“The past-producing Panuco project is situated along a prolific mineral trend in western Mexico that hosts the majority of the country’s epithermal and porphyry deposits,” he noted. “With recent drilling now demonstrating high-grade mineral continuity along two separate near-surface vein structures, we view Panuco as the next emerging discovery in the silver space.”

Seeing Vizsla “well positioned to execute” with $93-million in cash and led by a “young, dynamic team,” Mr. Pettingell set a target of $4 per share, exceeding its Wednesday closing price of $2.35.

Earlier this week, PI Financial’s Philip Ker, the other analyst covering the stock, gave it a “buy” rating and $3.25 target.

“We view the Napoleon discovery on the high-grade Panuco silver-gold project in Sinaloa, Mexico demonstrating property wide potential for an extensive resource that could support an attractive, low-cost operating scenario,” said Mr. Ker. “We believe that as Panuco matures and cash flow from its existing mill becomes more imminent, that Vizsla will be a bona-fide M&A target.”


After the closing of its $35-million convertible offering, Canaccord Genuity Aravinda Galappatthige sees “a better investment thesis” and “a cleaner path” for the management of BBTV Holdings Inc. (BBTV-T)

“Despite the potential dilutive impact, we believe that investors of BBTV can be quite encouraged by this refinancing as it removes a key overhang for the stock and for management, and incidentally offers the company an additional $17-million to pursue its growth,” he said. “The previous capital structure was problematic due to the substantial RTL debt that was maturing as close as July 2022, and the conversion price was essentially dependent on the immediately preceding share price. This created the risk of a vicious cycle where a declining share price increased the potential dilution upon conversion which in turn compromises the share price, and on and on. With the maturity now five years away, this situation has been arrested.

“Equally important, the company should be better financed to pursue its growth plans, including incremental investment in driving forward the deployment of Plus Solutions and M&A. Recall, despite the large IPO last year of $170-million, BBTV only actually received $2-million of that for its own balance sheet. In fact, our understanding of BBTV’s history suggests that they have had to operate on a fairly restrictive financial capacity through much of its entire existence. With BBTV expected to exit Q2/21 with over $21-million in cash and adj EBITDA likely to improve in H2/21, we believe management would have significantly more flexibility to push through with its strategies, including the ramp up of direct sales.”

Mr. Galappatthige said he’s looking for an “uptick” through 2021 and beyond for the Vancouver-based media technology company’s Plus Solutions content management offering, which helps manage unauthorized fan uploaded copies of content. He called it a “cornerstone” of BBTV’s strategy.

“Management reiterated its objective of doubling the U.S. sales team by Q2, and we have been seeing higher sales related opex in the financials,” he said. “Given BBTV’s substantial audience size, it’s very much a case of expanding capacity within sales. We also note the significant long-term upside considering the fact that BBTV’s partner count is just 5,000 in a landscape of 2 million content creators. Given the size of the opportunity, over time, we suspect that BBTV may consider a path of a more basic self-serve product to capture a larger share of the market, including the lower end. This can supplement its current Plus Solutions driven growth.”

Reaffirming his “buy” recommendation, Mr. Galappatthige raised his target by $1 to $18. The average is $18.64.


In other analyst actions:

* TD Securities analyst Daryl Young lowered his Major Drilling International Inc. (MDI-T) to $12.50 from $13 with a “buy” recommendation. The average on the Street is $11.50.

* National Bank Financial analyst Vishal Shreedhar raised his Alimentation Couche-Tard Inc. (ATD.B-T) to $49 from $47 with an “outperform” rating. The average is currently $47.46.

* Canaccord Genuity analyst Katie Lachapelle raised her Standard Lithium Ltd. (SLL-X) target to $5 from $4.50 and above the $4.70 average with a “speculative buy” rating, while Stifel analyst Anoop Prihar raised his target to $4.30 from $3.60 with a “hold” recommendation.

“We believe the market is anticipating a positive outcome from the Tetra PEA, which is expected to be published in Q3/21,” said Mr. Prihar. “Additionally, Lanxess’ early conversion of its loan could be interpreted as a sign of things to come. While we believe that Lanxess and SLL will likely enter into a formal JV at the Arkansas Project, given SLL’s proprietary technology and the competitive advantage that it could provide, it is possible that Lanxess could look to acquire SLL.”

* Scotia Capital analyst Trevor Turnbull cut his Torex Gold Resources Inc. (TXG-T) target to $22 from $24 with a “sector outperform” rating, while while BMO Nesbitt Burns’ Ryan Thompson lowered his target to $28 from $29 with an “outperform” recommendation.. The average is $28.86.

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