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The Dollarama discount store near Bloor St. West and Bathurst St., in Toronto.Fred Lum/The Globe and Mail

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

Bank of Nova Scotia (BNS-T, BNS-N) still has "room to run," said Desjardins Securities analyst Doug Young, calling its third-quarter results "positive."

On Tuesday, the bank reported cash earnings per share of $1.55, topping the projection of $1.48 of both Mr. Young and the Street. He noted the result "puts BNS mid-pack of peers this quarter."

"Of note, stronger-than-expected capital markets earnings added 5 cents per share," said Mr. Young. "On the positive side: credit was a non-issue, Canadian banking earnings growth of 8 per cent was the highest amongst peers so far in 3Q FY16, capital markets results were strong across the board, the CET1 ratio of 10.5 per cent was above our 10.2-per-cent estimate, expense trends were favourable and the quarterly dividend was increased 2 cents as expected. That said, while ahead of consensus, international banking earnings were below our estimate, driven by seasonally slower loan growth. However, looking through this, there were a number of positive trends at its international banking operation, in our view."

In reaction to the results, Mr. Young raised his 2016 and 2017 cash EPS projections to $5.89 and $6.25, respectively, from $5.80 and $6.16.

Mr. Young maintained his "buy" rating for the stock while raising his 12-month target price to $73 from 71. The analyst average is $71.23, according to Bloomberg.

"While BNS is the best performing stock year-to-date in 2016 versus peers, it had previously under-performed peers for two years in a row and it now trades only in line with its historical average forward P/E [price to earnings] multiple, versus a premium for large-cap Canadian peers," he said. "Looking forward, we see room for further momentum in international banking and from expense reductions across all three divisions. While it has a larger relative exposure to oil and gas loans, we believe this risk is well-understood and baked into investor expectations."

Elsewhere, CIBC World Markets analyst Robert Sedran raised his target to $72 from $67.

Mr. Sedran said: "What did we learn this quarter? Incremental progress continues on the restructuring, but also that execution elsewhere was solid in what was a fairly clean quarter. Operating leverage was positive at the all-bank level and at each of the business segments while total revenues were in line with our estimates. Management noted on the conference call that this expense control was only partly owing to the restructuring charge booked last quarter, which implies there is more benefit to come. We think we have captured this trend in our estimates, though we expect the realization of these benefits to be gradual."

"The shares have performed well and have reclaimed a premium multiple (albeit a small one that is inside of historical averages). Despite a positive view, that recaptured relative valuation leaves our rating at Sector Performer at this time."

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Ritchie Bros. Auctioneers Inc.'s (RBA-N, RBA-T) $758.5-million (U.S.) purchase of IronPlanet will drive significant growth for years to come, said Raymond James analyst Ben Cherniavsky.

He added he's "very excited" about the Burnaby, B.C.-based company's acquisition of the privately held U.S. e-commerce site for used equipment.

"This transaction bolsters Ritchie's multi-channel strategy (particularly its online initiative), enhances its capital efficiency, and alleviates much of the competitive pressure that has been brewing between these two companies," said Mr. Cherniavsky. "It also helps Ritchie penetrate new verticals and greatly enhances its analytics capabilities. The concurrent strategic alliance with CAT, which effectively commercializes Ritchie's proprietary data and extends its reach into the dealer world, is an excellent case-in-point and could, we believe, prove to be a source of 'hidden value' in this transaction."

In reaction to the deal, Mr. Cherniavsky raised his 2017 revenue and EBITDA projections to $772-million and $294-million, respectively, from $600-million and $236-million. His 2016 estimates of $554-million and $212-million did not change.

"For revenue, we assume the same 12.50-per-cent ARR [accounting rate of return] we currently model for RBA, which is in line with IP's recent results," the analyst said. "In terms of incremental EBITDA we are assuming an additional $58-million in 2017 ($758-million deal/13-times multiple on 2017 estimated EBITDA equals $58-million). This implies that IP's EBITDA margin has been a little less than half of Ritchie's, but after incorporating the $20-million run rate synergies, as well as full integration efforts and economies of scale, Ritchie expects the combined margin to return to 40 per cent by 2018. Finally, with additional depreciation and a lower tax rate (due to the $100-million tax synergies), we arrive at a 2017 EPS of $1.51, which is 21-cents accretive according to our calculations."

His 2016 EPS estimate remains at $1.18.

Mr. Cherniavksy kept his "outperform" rating for the stock, while he raised his target price to $41 from $34. The analyst average is $37.17.

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Dollarama Inc.'s (DOL-T) tight cost controls are likely to support earnings growth, said Canaccord Genuity analyst Derek Dley ahead of Thursday's release of its fiscal 2017 second-quarter results.

Mr. Dley is projecting revenue of $733-million for the discount retailer, an increase of 12 per cent from the previous year. His EBITDA estimate of $159-million is an improvement of $12-million from 2016, while EPS of 85 cents is up 11 cents and a cent above the consensus forcast.

"We are forecasting 5.0-per-cent same-store sales growth during the quarter, along with 6.9-per-cent year-over-year square footage growth," the analyst said. "We are forecasting gross margins as a percentage of revenue of 37.0 per cent, down from last year at 38.4 per cent, which benefited from a favourable currency adjustment. Our gross margin estimate is in line with the low end of the company's guidance range for F2017, and may be conservative, in our view.

"Following the company's Q1/F17 earnings results, we reduced our SG&A as percentage of revenue estimate, given the company's lowered guidance for SG&A as percentage of revenue to 15.5-16.0 per cent from 16.0-16.5 per cent. We are forecasting SG&A as a percentage of revenue to amount to 15.3 per cent during Q2/F17, down 60 basis points year over year, as the company continues to leverage recent productivity initiatives such as implementation of the kronos labour management system, and warehouse automation."

Based on its "flexible" balance sheet, Mr. Dley expects the company to remain active in repurchasing shares through the 2017 fiscal, citing its net debt-to-EBITDA ratio of 1.6 times as well as the recent announcement that it's been approved to repurchase up to 6 million (or 5 per cent) of outstanding shares.

Mr. Dley did not change his "buy" rating for the stock, but he raised his target price to $108 from $101. The analyst consensus price target is currently $103.87, according to Thomson Reuters.

"In our view, Dollarama offers investors the most visible growth profile in our Consumer Products universe," he said. "Given the company's robust square footage growth, industry leading profitability, and substantial free cash flow generation, we believe Dollarama deserves to trade at a premium valuation."

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Desjardins Securities analyst Michael Parkin initiated coverage of Tahoe Resources Inc. (THO-T, TAHO-N) with a "buy" rating, adding it is on the cusp if transitioning to senior producer status in 2017 due to the successful ramp-up of its Shahuindo mine in Peru.

" In our view, the risk to the outlook for Tahoe is relatively high given the jurisdictional exposure to Guatemala through its flagship Escobal mine; we assume a positive [Ministry of Energy and Mining] decision on the mining licence and a higher tax scenario in our base-case 2017+ estimates," said Mr. Parkin. "Despite higher taxes, we see good value in the shares."

Mr. Parkin pointed out Tahoe was largely considered solely a silver producer until the April of 2015 with the $1.1-billion acquisition of Rio Alto Mining Ltd. followed by the $945-million purchase of Lake Shore Gold Corp. in April of 2017. The company currently possesses three gold producing assets.

"The company now has a much more diversified metals exposure, as we estimate 59 per cent of its 2017 revenue will be sourced from gold and 37 per cent from silver; the remainder is expected to come from sales of lead and zinc which are produced at Escobal," he said. "As Tahoe has become a general precious metals producer with significant gold and silver revenue, we now consider the company's production on a gold-equivalent ounce (GEO) basis as this makes for a fairer comparison with the rest of our coverage. We forecast 2016 production of 669,4000 GEO and expect this to increase by 12 per cent in 2017 to 747,700 GEO. This would put Tahoe at the threshold of senior producer status, ie those producing at or more than 750,000 GEO annually. In 2018, we expect production growth to continue with a year-over-year increase of 9 per cent as Phase 2 commences at Shahuindo. We note that, ceteris paribus, senior producers tend to trade at a premium to smaller producers due to the lower perceived operational risk with a more diversified asset base. Within our coverage universe, the senior producers trade at an 11-per-cent premium compared with mid-tier producers on an EV/2017 EBITDA basis. On a cash-adjusted P/NAV [price to net asset value] basis, our covered seniors trade at a 35-per-cent premium to our covered mid-tiers. We believe that as Tahoe proves up Shahuindo and grows reserves and resources at the Timmins assets, the company could solidify its place as a premium senior producer. Management indicated on the 2Q16 earnings conference call that its near-term focus would be internal rather than on further acquisitions. However, based on management's past comments, we believe the company is likely to make further acquisitions over the medium term, possibly shifting back to pre-producing assets to leverage its development strengths."

Mr. Parkin emphasized the company's relatively low-cost production profile, and estimated its all-in sustaining costs of $951 (U.S.) per GEO is the third-lowest in his coverage universe.

"We expect healthy margins and profitability in 2017 from all of the company's producing assets at recent spot metals prices and exchange rates," he said. "In 2017, we estimate a net profit margin of 36 per cent at Escobal, 24 per cent at Timmins, 29 per cent at La Arena and 22 per cent at Shahuindo, and forecast significant free cash flow at all operating mines."

He added a key reason he likes the stock is "significant" free cash flow growth, expecting it to rise by 315 per cent from 2016 to 2017 frpm $54.5-million (U.S.) to $226-million.

"This should lead to a stronger balance sheet over the medium term, which is why we believe further M&A is likely for Tahoe as the market is not particularly interested in dividend growth," he said.

Mr. Parkin set a price target of $23 for the stock. Consensus is $25.92.

"Tahoe recently traded at a significant premium to other mid-tier precious metals producers," the analyst said. "In addition to its significant silver production, we believe this premium was attributable to the strong margins at its operating assets as well as its attractive dividend yield. Tahoe's share price has very recently underperformed vs the S&P/TSX Global Gold Index, due in our opinion, to recent news that Guatemala is looking to raise revenue through potentially higher mining taxes as well as news (in Tahoe's 2Q16 earnings) of what we deem to be a relatively short-term issue, ie limited water access at Shahuindo negatively impacting the near-term production outlook for the company's newest mine. With clarity assumed to be forthcoming on the Guatemalan tax situation and with an expected successful (albeit slower than originally planned) ramp-up of Shahuindo, we believe Tahoe can recapture its premium EV/EBITDA valuation relative to the mid-tier peers."

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Liquor Stores N.A. Ltd. (LIQ-T) offers investors "attractive" price upside and income opportunity with "significant" embedded operating leverage not currently priced in, according to M Partners analyst Stephen Salz.

He initiated coverage of the Edmonton-based company with a "buy" rating.

"Liquor Stores brought in a top tier management team just before the oil downturn, which in our view has smoke screened underlying operational improvement, providing meaningful torque to the upside," said Mr. Salz.

He added: "New management has taken a liquor store business run like a utility, and is applying best retail practices: renovating its store base, investing in sales staff, implementing a more efficient IT & inventory platform, and diversifying into new geographies away from resource markets. This investment has resulted in temporary EBITDA margin compression, which we believe the market has mistook as wholly attributable to the oil rout."

He said those improvements are visible in "the relative insulation" of its Canadian same-store sales (down 0.1 per cent) versus the 2008/2009 recession (down 4 per cent).

Mr. Salz set a price target of $13 per share. Consensus is $10.67.

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Investor sentiment toward Teck Resources Ltd. (TCK.B-T) gas improved with the increases in zinc and hard coking coal prices, according to BMO Nesbitt Burns analyst Sasha Bukacheva.

She added Teck has become a "go-to" stock for exposure to HCC following U.S. producer bankruptcies, noting the share price has more than tripled since lows in January.

"Teck's share price has been rallying, arguably in sympathy with the higher HCC and zinc prices, reflecting stronger steel demand and supply cuts (HCC)," the analyst said. "Current prices boost Teck's EBITDA/cash flow/leverage outlook. If prices or multiples continue to rise/expand, there could be 40-per-cent upside to Teck's valuation ($30 per share). Conversely, equity value could be at risk of multiple compression if underlying prices pull back, with a possible downside of 40 per cent ($12 per share) - especially asTeck trades at a premium to peers."

She maintained a "market perform" rating and raised her target to $16 from $10. Consensus is $18.13.

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In other analyst actions:

Canfor Corp. (CFP-T) was upgraded to "buy" from "neutral" by Dundee analyst Stephen Atkinson. He did not change his target price of $17.50 (Canadian), compared to the average of $19.79.

Citing EPS growth concerns, Argus analyst John Staszak downgraded Under Armour Inc. (UA-N) to "hold" from "buy" and noted "further expansion of the business will require substantial investment, which will add debt and interest expense and weigh on earnings growth."

Concerned about a project backlog and "intense" price competition, Argus analyst Stephen Biggar downgraded First Solar Inc. (FSLR-Q) to "hold" from "buy."

Atlantic Equities LLP analyst Sam Hudson downgraded Dollar General Corp. (DG-N) to "neutral" from "overweight" with a target of $78 (U.S.), down from $99. The average is $87.80.

Raymond James analyst Michael Turits downgraded Palo Alto Networks Inc. (PANW-N) to "outperform" from "strong buy." He lowered his 12-month target to $165 (U.S.) from $180. The average is $182.93.

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