Pedestrians walk past a Couche-Tard convenience store in Montreal, April 18, 2012.© Christinne Muschi / Reuters
Inside the Market's roundup of some of today's key analyst actions
Laval, Que.-based consumer staples company Alimentation Couche-Tard Inc. (ATD.B-T) "offers investors an attractive combination of both organic and acquisitive growth" says Canaccord Genuity analyst Derek Dley. "A strong profile of post-acquisition deleveraging will allow the company to capitalize on additional accretive growth opportunities, such as [Monday's] announcement of the acquisition of CST Brands, in our view."
Mr. Dley calls the merger agreement with CST Brands Inc. (CST-N) in a $3.68-billion (U.S.) all-cash deal "definitive" and its agreement to sell the majority of CST's Canadian operations to Parkland Fuel for $750-million (U.S). "Given Couche-Tard's already strong presence in Quebec and Ontario, an acquisition of CST's Canadian assets may have led to a Competition Bureau concern," he says.
The "buy" rating remains unchanged.
The price target increases to $78 from $73. Desjardins Capital Markets analyst Keith Howlett also increased his price target to $74 from $68. The consensus is $70.28 according to Thomson Reuters.
CIBC Equity Research also boosted its target price on Alimentation Couche-Tard.
"ATD's acquisition of CST fits ideally with its goal of creating value through strong operations and consolidating the [convenience] store Industry," say CIBC Equity Research analyst Mark Petrie. "Synergies are massive, and overlap between the assets helps limit execution risk. Leverage climbs but should fall quickly."
The analyst notes the final terms of the transaction will be known "following a Competition Bureau review in 2017 but either way, ATD becomes North America's largest c-store operator with [more than] 10,000 locations."
His price target increases to $78 from $75. His rating of "sector outperform" remains unchanged.
Also, Gabelli Funds downgraded CST Brands to "hold" from "buy."
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Stifel downgraded Medivation (MDVN-Q) to "hold" from "buy" a day after Pfizer Inc. (PFE-N) announced it would pay $14-billion (U.S.) to buy the cancer drug developer. Meanwhile, Credit Suisse downgraded Medivation to "neutral" from "outperform" saying it saw little likelihood of a competing bid for the company. It's price target is $81.50, the same price as Pfizer has agreed to pay.
"CS Special Situations Desk expects the deal to close with high probability, and we see little likelihood of a competitive bid following the lengthy auction process. Furthermore, we see little likelihood of anti-trust concerns given no overlap in the mechanisms of action of portfolio products. We therefore do not expect major upside / downside to MDVN's valuation and now focus on successful deal closure," said Credit Suisse.
Citi also downgraded Medivation to "neutral" from "buy." And Wedbush downgraded Medivation to "neutral" from "outperform."
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Medical marijuana company Aphria Inc. (APH-X) "is an excellent play on the growing medical marijuana market and upcoming legalization for recreational use," says Mackie Research Capital analyst Andre Uddin. Last week, the company closed its equity financing, for net proceeds of approximately $32.5-million at a price of $2 per share. "The principal use of proceeds will be to fund the company's Part III expansion of its facility and bring eventual capacity to about 52,000 kilograms annually," say Mr. Uddin. Aphria also received its oil sales license from Health Canada on Aug. 17 and it had three products in 60mL bottles for a price of $99 available immediately.
On Monday, the company also announced that it had signed a significant cannabis supply agreement with Australian company Medlab, which will conduct a human trial for the management of intractable pain with oncology patients.
Finally, Mr. Uddin says "last Friday Aphria announced it entered into a purchase and sale agreement with DiNiro Farms to acquire an additional 11 acres of property adjacent to its existing facility for a cost of $2.1-million. DiNiro will continue to operate its existing greenhouse operations until Dec. 31, 2017."
His "speculative buy" rating remains unchanged.
His price target increases to $3.75 from $2.25. The consensus is $3.60.
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The "transformative Hollister acquisition" is the next step in the "compelling growth profile" and evolution of mining company Klondex Mines Ltd. (KDX-T), says Clarus Securities analyst Jamie Spratt.
"We are off restriction following the closing of the company's $129.5-million bought deal financing at $5 per share, which funds the acquisition of the Hollister mine. For an estimated purchase price of $107-million (U.S.), the transaction includes the acquisition of the Hollister Mine, the Esmeralda Mine and milling complex and other assets in Nevada. In our view, the deal puts Klondex on a solid path to approximately 280,000 ounces in annual production by 2018 while leveraging management's experience and knowledge of the Hollister asset."
The analyst's "buy" rating remains unchanged. His price target increases to $8.25 from $6.50. The consensus is $5.96.
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Loblaw has agreed to acquire software and healthcare IT company QHR Technologies Inc. (QHR-X) for $3.10 cash "which represents a 22 per cent premium to Friday's clos,e" says Cantor Fitzgerald Equity Research analyst Ralph Garcea. After reporting positive second quarter results, Mr. Garcea notes QHR's Board has unanimously approved the transaction and shareholders representing 23 per cent of outstanding shares have committed to voting in favour of the sale. "We see the odds of a higher bid as low and note that Telus would have difficulty in completing such a transaction from a regulatory standpoint."
The analyst's new advice is for shareholders of QHR to tender their shares to the bid; his previous rating on the stock was a "buy" rating. His target price was $3.25. The consensus is $2.88.
In other analyst actions:
UBS upgraded CF Industries (CF-N) to "buy" from "neutral" with a price target of $28 (U.S.) as they see the company has an attractive balance sheet, strong cash flow and a dividend that is secure.