Inside the Market's daily roundup of some notable analyst actions.
Canadian Apartment Properties REIT reported solid growth in its fourth quarter and this week announced that it will enter the U.S. market by providing asset management services there, noted Canaccord Genuity analyst Mark Rothschild.
It will collect a management fee from a third party REIT in the U.S. which has real estate interests in Colorado, Texas, Arizona and Michigan.
“While the financial impact of this contract is likely to be relatively minor for the near-term, we believe it could ultimately be the beginning of a new growth opportunity for the REIT,” commented Mr. Rothschild. “Also, CAP REIT is in essence being paid to learn the U.S. market.... We view this as a unique way to learn the market while not risking its own capital.”
Upside: Mr. Rothschild raised his 12-month target price to $28.25 from $26.50.
IBI Group Inc. shares’ valuation is “compelling,” compared to its peers, and its dividend is sustainable, said Canaccord Genuity analyst Yuri Lynk.
The stock offers a potential return of 48 per cent, inclusive of a 9 per cent dividend yield, Mr. Lynk wrote in a research note. “IBI’s relatively high indebtedness remains a concern to us, but it appears manageable,” he added.
Upside: Mr. Lynk raised his rating to “buy” from “hold” and his price target to $8.50 from $7.
Desjardins Securities cut its price target for Sherritt International Corp. after the resources company lowered its forecast for oil production and earnings from coal.
“Although Sherritt’s fourth-quarter results met our forecast, management’s 2013 oil and coal production guidance was slightly below our expectation,” said Desjardins analyst John Hughes.
Downside: Mr. Hughes cut his target to $7.40 from $8 and left his “buy” rating on the stock unchanged.
Joy Global Inc. beat revenue and profit margin forecasts, even as bookings and backlogged orders declined, as it focused more on returns than on volumes, said Raymond James analyst Theoni Pilarinos.
“Looking further ahead, several data points including a recent reversal in coal to gas switching in the U.S. thermal coal market, improving electricity demand and steel production in China, and robust copper activity indicate that commodities demand is on the mend. While this provides us some comfort relating to the long-term mining capex trend, excess supply and a lack of urgency make the likelihood of a recovery more likely to occur on the 'distant' horizon, in our view,” she wrote in a research note.
Joy has a solid management team, revenue growth, a balance sheet that can support future share buybacks and has also undertaken cost-cutting measures -- but it also has “heavy exposure to the still depressed U.S. coal market and uncertain capex budgets,” Ms. Pilarinos said.
Outlook: She rates the stock “market perform” and has a $67 price target.
TransAlta Corp. reported fourth-quarter results that were below consensus expectations, and the outlook for the power generator remains “relatively lacklustre,” commented Desjardins Securities analyst Jeremy Rosenfield.
“TA’s shares offer investors an attractive yield, funded by ongoing operations. However, we have limited visibility on near-term growth, mixed with uncertainty over the longer-term outlook for TA’s Centralia power plant,” he said.
Upside: Mr. Rosenfield cut his price target to $17 from $18 and maintained a “hold” rating.
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