Labrador Iron Ore Royalty Income Fund - minephoto from source.
Many North American diversified mining companies have already seen a nice pop in shares after being severely beaten up in the numbing days of the recession when demand for their products went into a tailspin. But after conducting a new valuation analysis, RBC Dominion Securities Inc. believes there's still a lot more upside to come.
How much? For the miners in its coverage universe, RBC believes the shares, on average, offer 30 per cent upside potential from current levels. Its analysis takes into account spot prices, its current commodity price forecasts and forward curve studies.
Using flat spot prices, the entire group is tading at a greater than 20 per cent discount to their net asset value, according to RBC.
Equities that it continues to recommend and should provide significant upside based on its forward curve analysis include: Freeport-McMoRan ,. Inmet Mining Corp. , Labrador Iron Ore Royalty Corp. Lundin Mining Corp. , Mercator Minerals Ltd. Sherritt International Corp. , Teck Resources Xstrata and Western Coal .
Now that Potash Corp. of Saskatchewan Inc. has successfully fended off the $38.6-billion (U.S.) hostile bid from BHP Billiton Ltd., CIBC analyst Jacob Bout is reinstating coverage and still expects shares to climb even without a takeout premium. "We expect a step up in 2011/12 earnings, reflecting improved potash pricing and demand on the back of strong agricultural fundamentals," he said.
Upside: Mr. Bout hiked his price target by $10 to $160 and rates the stock as a "sector outperformer."
Clearwater Seafoods Income Fund reported better-than-expected third-quarter results, as its core business of harvesting and distributing seafood is making a turn for the better, said Beacon Securities Ltd. analyst Michael Mills. Demand for products is strengthening, prices are rising, and Clearwater can now use forward contracts to smooth out volatile currency moves, he said.
Upside: Mr. Mills raised his target price by 35 cents to $1.50 and continues to rate the stock as a "speculative buy."
Bombardier Inc. BBD.B-T may announce a large Chinese aircraft order at the China International Aviation & Aerospace Exhibition this week, said Walter Spracklin, analyst with RBC Dominion Securities Inc. The leasing arm of China Development Bank has already agreed to provide financing for Bombardier products and new orders are often announced at such air shows, he said.
Upside: Mr. Spracklin said Bombardier shares are undervalued and new orders could be a key catalyst to drive them higher. He has a $7.00 price target.
Raymond James Ltd. analyst Steve Hansen is recommending income and growth oriented investors buy shares in CanWel Building Materials Group Ltd. , which currently pays an 8.8 per cent dividend. The lumber and building materials distributor offers the most comprehensive product offerings among its peers and is set to benefit from unusually tight conditions and sharply higher prices for lumber, he said.
Upside: Mr. Hansen initiated coverage of the stock with an "outperform" rating and $5.25 target price.
Hana Mining Ltd. , owner of the Ghanzi copper-silver project in Botswana, has released new drill results that will likely lead to a doubling of resources, said Canaccord Genuity analyst Gary Lampard. Mr. Lampard said metallurgical testing exceeded his expected silver recoveries and showed unexpected potential for molybdenum by-product credits.
Upside: Mr. Lampard hiked his target price by $1.50 to $5 and maintained his "speculative buy" rating.
Darcy Keith