Shares in Canadian Satellite Radio Holdings Inc. haven't made a lot of headway since the company became parent of both XM Canada and Sirius Canada earlier this year. But Canaccord Genuity analyst Aravinda Galappatthige thinks that's about to change.
The stock has traded choppily between $2.40 and $4.50 in the past 52 weeks and is currently near the mid point of that range. In a fresh commentary, Mr. Galappatthige now sees the stock surpassing that 52-week high, and reiterated his "buy" recommendation.
"We believe XSR will emerge as a genuine growth story in the Canadian media space as it consolidates, following the merger of XM Canada and Sirius Canada," he said. "We are projecting a steep upswing in earnings before interest, taxes, depreciation and amortization (EBITDA) and free cash flow in the upcoming years, similar to the experience in the U.S. following the merger of Sirius and XM south of the border."
The company, he expects, will be able to wring out more merger-related synergies as time goes on and expects ongoing subscriber growth.
After adjusting for seasonal and one-time items, he estimates EBITDA in the fourth quarter came in at about $8.9-million, translating into $35.6-million on an annualized basis. "Add to that additional merger-related synergies (estimated at $20-million in total over 18 months), and the incremental EBITDA contribution from ongoing subscriber growth, and we believe it is quite easy to see the upside potential for XSR."
Upside: Mr. Galappatthige raised his price target by 45 cents to $4.75.
Atlantic Power Corp. has successfully acquired Capital Power Income Ltd. Partnership in a $2-billion transaction that will add "significant heft" to the power generation and transmission company, commented CIBC World Markets Inc. analyst Ian Tharp. "Its installed capacity grows by 150 per cent, and while they are still present, contract -related risks have been much reduced on a proportionate basis," he said.
Upside: Mr. Tharp resumed coverage with a "sector performer" rating, up from "sector underperformer," and raised his price target by 75 cents to $13.50.
High Liner Foods Inc. has agreed to purchase Icelandic Group's U.S. and Asian operations for $230.6-million (U.S.). The deal won high praise from Beacon Securities Ltd. analyst Michael Mills: "This is a transformational deal that gives High Liner the leadership position in the U.S. foodservice frozen seafood category. The purchase will boost total revenues by roughly 40 per cent and drive improved profit margins."
Upside: Mr. Mills raised his price target by $3 to $21 and reiterated his "buy" rating.
The improved operations at Great Basin Gold Ltd.'s Burnstone gold project in South Africa that were hoped for in the second half of 2011 remain at least several quarters out, said Raymond James Ltd. analyst Brad Humphrey. "Although the experience and knowledge gained over the past year should ultimately lead to a more reliable and better optimized operation, we believe the market will remain in a 'wait and see' posture until clear operating improvements are achieved at Burnstone." Burnstone began commercial production in February.
Downside: Mr. Humphrey downgraded the stock to "market perform" from "outperform" and cut his price target to $2.15 from $3.70 (U.S.)
Cargojet Inc. , with an enterprise value-to-EBITDA valuation of 4.4 times based on estimates for 2012, "is significantly undervalued," especially considering its cash flow stability and its ability to pass on fuel costs, said RBC Dominion Securities Inc. analyst Walter Spracklin. "More importantly, we believe the company has established new platforms for growth that are not being reflected in its valuation," he added.
Upside: Mr. Spracklin reiterated his "outperform-above average risk" rating and $8.50 price target.
Darcy Keith