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No need to hunt down Postmedia shares yet: RBC Add to ...

Finding Postmedia Network Canada Corp. stock to buy isn’t easy, given how few shares are publicly traded - and RBC Dominion Securities Inc. analyst Drew McReynolds suggests nobody should be in a hurry to buy them, anyway.

He has initiated coverage of the stock with an “underperform-above average risk” rating, with a price target of $14.

“Our ‘underperform’ ranking reflects higher return potential elsewhere in the Canadian publishing sector at the moment,” Mr. McReynolds wrote in a research note. “Our above average risk rating reflects lower revenue visibility and higher debt levels relative to other Canadian publishers.”

Mr. McReynolds believes that the shares of Postmedia, formerly the newspaper assets owned by fallen Canadian media giant Canwest Communications, need to drop to the $10 to $11 range before becoming attractive.

While management has made considerable progress in stabilizing earnings and margins, he contends that a number of challenges remain, including rising competition from free daily newspapers across the country and declining circulation revenue.

He sees the picture brightening for PostMedia in the long term if it monetizes its 24 community newspapers or sells some of its real estate holdings. He’s also watching for signs that the company could become a takeover candidate in the future. Given the potential for cost synergies, Mr. McReynolds speculates potential buyers could include Torstar Corp., Power Corp.’s Gesca Ltée, Transcontinental Inc., and the Thomson Family’s Woodbridge Co. Ltd. (Woodbridge is majority owner of The Globe and Mail.)

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Raymond James Ltd. analyst Frederic Bastien is giving a big thumbs up to Bird Construction Inc.’s acquisition of H.J. O’Connell Ltd. for $78.5-million. “Our first impressions of the HJO acquisition are favourable not only because it should be accretive to earnings to the tune of roughly 30 per cent, but also since it is aimed at diversifying Bird’s revenues into the growing heavy civil and mining construction markets,” he said.

Upside: Mr. Bastien upgraded Bird to “outperform” and jacked up his price target to $15 from $11.50.

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Ensign Energy Services Inc.’s has acquired Rowan Companies U.S. land drilling fleet for $540-million (U.S.). While CIBC World Markets Inc. analyst Jeff Fetterly believes Ensign paid a full price for the assets, he believes it makes good strategic sense given it extends the company’s presence into new U.S. regions and will contribute to earnings.

Upside: Mr. Fetterly, who rates Ensign as a “sector performer,” raised his price target by $2 to $24.

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Innvest REIT will lose some tax advantages as a result of Ottawa’s crackdown this week on stapled securities, a corporate structure some REITs have used to mitigate the negative impact of the change in income trust taxation five years ago, said TD Newcrest analyst Sam Damiani. But he believes InnVest will search for an alternate structure that might help offset the impact of Financial Minister Jim Flaherty’s actions this week.

Downside: While still rating the company as a “buy,” Mr. Damiani cut his price target by $1 to $6.50.

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AuRico Gold Inc. boosted its full-year production guidance as it announced a five-stage expansion of its El Chanate project in Mexico. UBS analyst Dan Rollins increased his daily throughput assumptions for the project, as well as boosting his reserve expectations.

Upside: Mr. Rollins raised his price target to $14.75 (U.S.) from $13.50 and reiterated his “buy” rating.

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