Valeant Pharmaceutical's head office is seen, Tuesday, June 14, 2016 in Laval.Ryan Remiorz/The Canadian Press
Inside the Market's roundup of some of today's key analyst actions
Piper Jaffray affirmed Valeant Pharmaceuticals International Inc. (VRX-N) with an "underweight" rating and $22 (U.S.) price target following news that the company entered an amended credit facility.
"Valeant shares have been strong of late, ostensibly in anticipation of an amendment to the company's credit facility (which was announced on Thursday) that gives the company more breathing room as it looks to stabilize and turn around key segments and sell off non-core assets as a means of accelerating debt pay down," analyst David Amsellem said in a report.
"That said, the amendment in and of itself does not render VRX investable, in our view. The shares are trading at 8.4-times enterprise value to 2016 EBITDA (based on the low end of VRX's guidance range of $4.8-billion to $4.95-billion issued in June), bearing in mind that we continue to believe that VRX's implied expectations for a significant 2H16 recovery is overly optimistic. Further, we do not see how potential divestitures recently cited by VRX would put the shares on a stable footing, nor do we see a path to stable EBITDA beyond this year."
Meanwhile, Morgan Stanley maintained an "overweight" rating on Valeant with a price target of $42.
Two major U.S. institutional investors launched a lawsuit this week against Valeant Pharmaceuticals International Inc. and six current and former top executives for allegedly engaging in "a fraudulent scheme" that cost shareholders billions of dollars.
***
Raymond James is boosting its target price for Leucrotta Exploration Inc. (LXE-X) as the company focuses on boosting its oil and gas production growth.
"In our view, Leucrotta was founded to be sold. It isn't a traditional business model seeking a material production growth profile and exit. Rather, we see it as a vehicle that has a compelling land base with multiple layers of Montney and multiple cocktails of oil, gas and NGLs, ownership of its own infrastructure and a strong financial position. So it is a self-contained production growth opportunity for whoever wants to pursue it," wrote analyst Kurt Molnar.
"We have always held the belief that Leucrotta would maximize the delineation of the opportunity, while retaining infrastructure and financial strength so as to maximize both the number of parties that might be interested in buying it, as well as maximizing the potential realization upon exit. The only thing that slowed this process was the collapse in commodity prices. With low prices, both well delineation and potential exit considerations took a back seat – until now. With their 2Q16 results, LXE noted their intent to a return to spending more money to tie in 3,100 Boed of tested but unconnected production capacity while spending money on new wells to step out the delineation of the Lower Montney."
The analyst reiterated his "outperform" rating but boosted his 12-month price target to $2.50 from $2.
Meanwhile, Desjardins Capital Markets kept its "buy" rating on the stock and boosted its price target to$2.25 from $2 due to its "increased cash flow expectations for 2017 from the business."
***
Desjardins Capital Markets initiated coverage on Crew Energy Inc. (CR-T) with a "buy" rating and a price target of $7.25.
"While Crew has long held a position in the northeast B.C. Montney, we see the company being at a slightly later stage of its transition toward a Montney pure-play model versus some of its peers. Further, the
future direction of the business is clearly underpinned by its successful development. In our view, Crew provides investors with the highest leverage to the Montney in a >$0.5-billion public company and we see it outgrowing its peers in 2017."
***
Canaccord Genuity is raising its price target on Marathon Gold Corp. (MOZ-T).
Analyst Eric Zaunscherb raised his target price on Marathon Gold to $1.10, from 80 cents, and maintained his "speculative buy" rating.
"Our increased target price is predicated on a decrease in share dilution (due to the recent rise in stock price) to our fully funded target NAV [net asset value]; we have not made any changes to our model or project NAV," he wrote in a note.
"Using our forward-driven price deck featuring a long-term $1,449 (U.S.)/oz gold price and a 0.79 [Canadian to U.S. dollar exchange rate], Valentine generates an after-tax NAV(13% per cent) of $334 million, or $0.61 per share and a 42 per centt IRR [internal rate of return]. Net corporate adjustments total $0.52 per share and include a $274.1-million equity raise at a 10 per cent discount to market ($0.71 per share). We then apply a 1.0x multiple to our corporate NAV to generate a target NAV of $1.14. This supports our rounded target price of $1.10 (Canadian), up from 80 cents."
***
The recent $30-million equity raise by medical marijuana company Aphria Inc. (APH-X) "will support its significant capacity expansion" say Claris Securities analyst Noel Atkinson.
He estimates the company will grow to 52,000 kg in 2019 from 6,000 kg today and $45.1-million in the 2018 calendar year
from $3.8-million estimated for
this year.
Mr. Atkinson also says his estimates for
2018 "are about 75 per cent driven by the medical marijuana business and only
about 25 per cent by the recreational market as we expect recreational sales to
only begin in early-mid 2018."
The target price has been raised to $5. The consensus is $2.79 according to Thomson Reuters.
***
FBR & Co. trimmed its price target on Canadian Solar (CSIQ-Q) to $23 from $32 and kept its "outperform" rating after the company reported strong second quarter results but suggested there are "headwinds" in demand for the solar industry that will create challenges in the months ahead.
***
In other analyst actions:
BMO Capital upgraded Hormel Foods (HRL-N) to "outperform" from "market perform" with a price target of $44 (U.S.).
Citi upgraded Symantec (SYMC-Q) to "buy" from "neutral."