Skip to main content

The Rogers sign is seen atop the Rogers Communications headquarters building in Toronto in this file photo taken April 25, 2012.Mark Blinch/Reuters

Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.

Canaccord Genuity has initiated coverage on Canadian life insurers with a generally upbeat view, saying that for the first time in a year, sector valuation is attractive given the outlook for earnings growth.

Canaccord analysts Gabriel Dechaine and Hassan Adil recommend investors be selective, however, when choosing stocks in the sector right now. Manulife Financial was given a "buy" rating and $22 (Canadian) price target and Sun Life Financial a "buy" rating with a $40 target.

But Industrial Alliance Insurance and Financial Services was given a "hold" rating and $45 target, and the analysts initiated coverage on Great-West Lifeco with a "sell" rating and $28 target.

"We believe the Canadian lifeco space has become more attractive over the past year, reflecting: (1) emerging EPS growth, with 10 per cent forecasted in 2014 and 12 per cent in 2015 for the group; (2) significantly improved capital levels; (3) an improved outlook for reserve stability; and (4) a generally supportive regulatory environment," the Canaccord analysts said in a research note.

Valuation is also key to their bullish sentiment for the sector, noting that the lifecos have underperformed the banks by 10 per cent this year after outperforming the Canadian banks in 2012 and 2013.

"As a result, sector valuation that had at one point reached a 21 per cent price-to-earnings  premium is now in line. Considering the superior EPS growth that we forecast for the lifecos over the next two years, as well as robust capital levels that could translate into long-awaited dividend increases (which IAG has already delivered) and share buybacks, we believe that current valuation is attractive," they said.

The analysts said they like Sun Life Financial for its strong capital position and "value-enhancing growth" at its U.S-based global asset manager MFS Investment Management. And they recommend investors buy Manulife for its attractive earnings per share growth outlook, strong capital position and a reasonable valuation, with the stock currently trading at an 8 per cent discount to the group and 8 per cent discount to the Canadian banks.

But for IAG, risks related to potential mutual fund outflows and possible deterioration in individual insurance pricing are "too important to ignore," they said. And for Great West, its capital management program will have only limited impact on growing earnings per share, especially given profitability at its Putnam Investments global asset manager division is unlikely in the near future, the analysts said.

=======

A plan to restore growth at Rogers Communications Inc. will take time to bear fruit, said CIBC World Markets analyst Robert Bek.

Last week, Guy Laurence, who took over as Rogers CEO in December, spoke about the need to accelerate revenue and cash flow growth over the long term.

"We believe RCI will not show positives from this plan for some time still, though it's increasingly harder to argue metrics can get much worse," Mr. Bek said. "We argue taking a more wait-and-see approach."

He maintained his share price target of $44 (Canadian) and his "sector performer" rating. The analyst consensus price target over the next year is $44.64, according to Thomson Reuters.

=======

Changes to accounting regulations could weigh on Glacier Media Inc.'s valuation, Canaccord Genuity analyst Aravinda Galappatthige said in a note.

The publisher of newspaper and trade publications must report the results of its joint ventures using equity accounting, so the balance sheet can no longer be presented on an adjusted basis, Mr. Galappatthige said. Also, a possible tax reassessment by the Canada Revenue Agency looms over Glacier.

"While no reassessment notice has been issued, the bear-case scenario can represent a liability as high as $40-million," Mr. Galappatthige said.

Canaccord lowered its target price on Glacier shares to $1.65 (Canadian) from $1.80, while maintaining a "buy" rating. The analyst consensus price target is $1.83.

=======

Dundee Securities analyst David Charles raised his price target on HudBay Minerals Inc. due to a prospective acquisition and a relatively low stock price.

Mr. Charles says it appears likely that HudBay's hostile takeover of Augusta Resource will be successful. Hudbay, which already owns 16 per cent of Augusta, launched a bid in February for the U.S.-based mining company to gain control of its Arizona-based Rosemont project. The development of the project was delayed on May 22 after sightings of an ocelot -- an endangered species -- were reported in the vicinity.

The uncertainty could be affecting the implied takeout premium, says Mr. Charles, which is now at a 6.8 per cent discount, well below the 25- to 30-per cent premium it traded at before. He believes the market is now slowly starting to assume HudBay will not have to increase its bid and this should translate into a higher valuation for HudBay.

Mr. Charles also notes that despite the rally in April, the stock still trades inline or at a discount to peers.

He maintained his "buy" rating and raised his target price to $12 (Canadian) from $10. The analyst consensus price target over the next year is $10.49.

=======

Analysts are turning more bullish on Brightpath Early Learning Inc. after Canada's largest provider of educational child care posted its highest quarterly revenues ever and reported its first positive net income.

The first-quarter earnings success is thanks to "management's determined effort to cut costs, match pricing to its premium offering and anchor growth to a robust Alberta market," commented Industrial Alliance Securities analyst Ben Jekic. He raised his price target to 75 cents (Canadian) from 55 cents and affirmed a "buy" rating.

Dundee Securities analyst Yashwant Sankpal upgraded his stock rating to "buy" and raised his price target to 65 cents from 55 cents.

"Under the new CEO, we believe that BPE's management approach has become more analytical and driven by return on investment figures. In the long-run, we believe BPE should benefit from making operations the number one priority, discarding the previous acquisition strategy and focusing on select markets/projects," Mr. Sankpal said in a note. "Furthermore, the $1-million targeted reduction in G&A (General and Administrative Expenses) has considerably improved BPE's profitability."

"While we are not assuming any material external growth, our model suggests that the current stock price does not reflect BPE's cash flow growth potential with its new management approach," he said.

The analyst consensus price target for the company formerly known as Edleun Group is 60 cents.

=======

In other analyst actions:

Industrial Alliance Securities upgraded Computer Modelling Group to "buy" from "hold" and raised its price target to $35 (Canadian) from $25.50.

Raymond James cut its price target on Silvercorp Metals to $2.30 (U.S.) from $2.80 and maintained a "market perform" rating.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe