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President and CEO of Bell Canada Enterprises (BCE) George Cope at the annual general meeting in Toronto in 2009. With the bid for Astral Media, Mr. Cope has made another move in his quest for convergence of content and the delivery of services like Internet, TV and wireless. (Nathan Denette/The Canadian Press/Nathan Denette/The Canadian Press)
President and CEO of Bell Canada Enterprises (BCE) George Cope at the annual general meeting in Toronto in 2009. With the bid for Astral Media, Mr. Cope has made another move in his quest for convergence of content and the delivery of services like Internet, TV and wireless. (Nathan Denette/The Canadian Press/Nathan Denette/The Canadian Press)

Eye on Equities

Analyst praises BCE-Astral deal, hikes price target Add to ...

BCE Inc.’s decision to acquire Astral Media Inc. is strategically and financially sound and should help the Montreal-based telecom to realize its goal of a stable dividend growth model for shareholders, says Desjardins Securities Inc. analyst Maher Yaghi.

“We believe the most important rationale for this acquisition is to increase the French content in Bell’s media portfolio as the company tries to deepen its penetration of the Quebec TV market with the launch of IPTV,” said Mr. Yaghi. He explains that competitor Videotron enjoys an advantage with regard to French content available for its wireless and TV customers, but the Astral acquisition will level the playing field.

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“While it is true that any wireless company can buy the content as per recently established CRTC rules, by owning the content, Bell will be able to more quickly package it for smartphone users, which should lead to more rapid adoption and usage.”

Mr. Yaghi also says that BCE is acquiring a solid media company that has grown revenue and EBITDA at a compound annual growth rate of 11 per cent over the last five years. By combining the assets of Astral, Bell will reduce its reliance on wireline assets, which will allow it to reposition its asset base toward growth businesses such as wireless and media. This, in turn, will provide the ability to deliver on its goal of executing a stable dividend growth model for its shareholders.

Mr. Yaghi expects the deal to add approximately 10 cents to earnings per share and approximately $100-million to free cash flow after accounting for the expected share dilution and the additional interest cost given the assumed funding of the acquisition.

Upside: Mr. Yaghi maintained his “buy--average risk” rating and raised his price target 20 cents to $43.20 (Canadian).

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Revised gold resource estimates for Canaco Resources Inc.’s Magambazi project in Tanzania have resulted in a lowered price target. CIBC World Markets Inc. analyst Jeff Killeen is reducing his expectations for total ounces within the Magambazi deposit from 3.5 million ounces to 2.2 million ounces, based on drilling results that have been released over the last six months.

Downside: Mr. Killeen dropped his price target to $2.80 from $4.50 and maintained his “sector outperform.”

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WebTech Wireless Inc.’s management has successfully restructured the business and delivered a solid fourth-quarter, but the market has yet to realize the value of the company, says Versant Partners analyst Justin Kew. Revenue of $11.4-million was up 4 per cent year-over-year, ahead of Mr. Kew’s $10.9-million forecast and consensus of $11.2-million.

Upside: Mr. Kew is maintaining his ‘buy’ rating and 60 cents target price.

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Desjardins Securities Inc. analyst Pierre Lacroix has upgraded Stella-Jones Inc. to a “buy” in the wake of the industrial wood producer’s better-than-expected fourth-quarter results. “We continue to see support from Class 1 railroads as recent capital spending plans generally call for increases over 2011 levels. Meanwhile, demand for utility poles for maintenance and large projects has remained consistent with levels in recent quarters,” Mr. Lacroix commented.

Upside: Mr. Lacroix raised his price target by $4 to $50.

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The North West Company , a food and general merchandise retailer serving remote communities, reported a favourable fourth quarter and its outlook calls for continuing modest sales growth and improving margins, noted Versant Partners analyst Neil Linsdell. The quarterly dividend was also raised by 2 cents to 26 cents, providing “an attractive and sustainable” 4.9 per cent yield that should continue to attract investors to the name.

Upside: Mr. Linsdell upgraded the stock to a “buy” and raised his one-year price target by $4 to $23.

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