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Gildan products.
Gildan products.

Eye on Equities

Gildan, Bombardier make the right moves Add to ...

Gildan Activewear has put its strong balance sheet to very good use by buying sock maker Gold Toe Moretz, National Bank Financial analyst Hugues Bourgeois said.

"Among the many positives, we note that GTM provides recognized brands and access to the entire spectrum of retail channels (national chains, price clubs, sporting goods chains, etc). The transaction is immediately accretive and presents little integration risks," he wrote in a report.

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The acquisition will generate margins of 21 per cent to 23 per cent, Mr. Bourgeois said.

Upside: He raised his price target to $40 (U.S.) from $36 and rates the stock "outperform."

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Bombardier Inc. is seeking to strike the right balance between managing lower-margin early deliveries of its C Series planes and customer diversity, RBC Capital Markets analyst Walter Spracklin said.

"The key is that numerous smaller orders could have a more beneficial impact than large single orders at this stage in the order cycle," he wrote in a research report.

Mr. Spracklin referred to Bombardier's recent contract with China's COMAC and noted that the chairman of COMAC is also a minister in the Chinese government. "With the Chinese market expected to grow to 30 per cent worldwide share, the C Series early penetration through partnerships such as this is all the more exciting."

Upside: Mr. Spracklin regards the stock as a "a very compelling value play." He rates the shares "outperform" with a price target of $8.50 (Canadian).

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Gammon Gold Inc.'s Ocampo mine appears to have turned the corner, and the company now has three producing mines, Desjardins Securities analyst Brian Christie said.

"The underground [mining]continues to ramp up and we expect the 2011 exploration program to continue to expand the reserves and resources," Mr. Christie said, noting that he is pleased that its production cash costs have fallen to $383 (U.S.) an ounce from $411 at Ocampo. "We also believe that the grassroots exploration activities will bear fruit as activities ramp up."

Upside: Mr. Christie raised his price target to $12.25 (Canadian) from $11.50 and has a "buy" rating on the stock.

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International Forest Products Ltd.'s exports to China will support lumber shipment volumes in 2011, but the impact of Japanese reconstruction after the earthquake has been overestimated, said TD Newcrest analyst Graham Meagher.

The company's $54-million secondary offering will be used to support capital spending and strategic initiatives, and reduce interest costs. Higher lumber prices will help gradually improve earnings, he said.

Upside: Mr. Meagher raised his target price on the stock to $7 from $6.50 and has a "hold" rating. "We expect positive earnings momentum for Interfor over the next two years, but consider the shares fairly valued at current levels," he said.

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Orezone Gold Corp. is nearing several key milestones as it advances its two projects in Burkina Faso, said Raymond James analyst Brad Humphrey.

"In our view, ORE continues to offer good upside given its leverage and exploration potential at Bomboré and as both the Bomboré and Sega projects move towards construction decisions," he wrote in a report. "We recommend investors buy shares of ORE."

Upside: Mr. Humphrey raised his target price to $6.10 from $5.30 and rates the stock "outperform," citing its potential, location, and seasoned management team.

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