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SNC-Lavalin has launched its own investigation into the matter. (Christinne Muschi/Reuters/Christinne Muschi/Reuters)
SNC-Lavalin has launched its own investigation into the matter. (Christinne Muschi/Reuters/Christinne Muschi/Reuters)

Eye on Equities

'Undocumented payments' bring SNC-Lavalin downgrade Add to ...

Allegations of undocumented payments and ties to Libya’s Gadhafi family will hurt SNC-Lavalin Group Inc.’s stock for the forseeable future, according to Versant Partners analyst Neil Linsdell.



The Montreal-based engineering and construction firm said it is investigating $35-million in undocumented payments in 2011 but would not specify if they were related to the company’s ongoing troubles with its projects in Libya.

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It also revealed that it expects to lose $23-million from its Libyan activities.

The company's stock plunged more than 20 per cent or $10.37 to $38 on Tuesday in Toronto.

Read more: SNC-Lavalin to probe $35-million in payments



“These concerns on top of other allegations will likely cause many investors to shy away from SNC until investigations are completed,” says Mr. Lindsell. He adds that fourth-quarter results expected on March 4 have been delayed and are now expected before March 30.



“Allegations of involvement with Saadi Gadhafi and other items have tarnished SNC’s image,” he says. “Investors will likely wait for reports on investigations before warming up to the stock.”



Dowside: Mr. Lindsell is downgrading the stock to ‘neutral’ from ‘buy’ and lowering his price target to $57 from $64 (Canadian)



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A revised resource estimate for Rainy River Resources Ltd.’s North Ontario gold deposit has resulted in an increased price target and a favourable outlook from CIBC World Markets Inc. analyst Jeff Killeen.



The project realized a 50 per cent and 26 per cent increase in ounces in the measured and indicated categories, respectively, versus previous estimates, explains Mr. Killeen.



Upside: He is maintaining his ‘sector perform’ rating and raising his price target $1 to $11, based on more ounces and improved costs.





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Clarus Securities analyst Jamie Spratt is initiating coverage of Soltoro Ltd. with a 12-month target price of $1.85 per share.



Mr. Spratt says Soltoro presents an opportunity to gain leverage to silver while participating in huge exploration upside at its prospective El Rayo project in Mexico.



Soltoro has tripled its resource since April 2010 and its proximity to infrastructure should enable fast tracking of exploration and development.



Upside: Mr. Spratt has placed a ‘speculative buy’ rating on Soltoro shares.





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Money manager Fiera Sceptre has struck a $310-million cash-and-stock deal to buy National Bank of Canada's Natcan asset management arm. In return, the bank gets a 35-per-cent stake in the newly created entity to be called Fiera Captial. The transaction will add significant scale to Fiera's operations, and is expected to raise earnings per share and "substantially boost profit margins," said Scotia Capital analyst Phil Hardie.

Upside: Mr. Hardie increased his one-year target to $9.50 a share from $7.50 a share.



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TransCanada Corp. announced that it is going ahead with construction on part of the Keystone XL pipeline, a move considered a positive step by CIBC World Markets Inc. analyst Paul Lechem.



The section would span from Cushing, OK to the U.S. Gulf Coast, and is expected to be in service by mid-to-late 2013.



The project is independent of the Keystone XL approval process and does not require a Presidential Permit.



Upside: Mr. Lechem is maintaining his ‘sector outperform’ rating and $46 (Canadian) price target.

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