Bankers Petroleum is a takeover play in the making: RBC

Inside the Market's roundup of some of today's key analyst actions

Bankers Petroleum Ltd., which has assets in Albania, this week announced a cut in reserves and an increase in development costs. But RBC Dominion Securities analyst Al Stanton believes the bad news is now all out and that the heavy oil producer, trading about 40 per cent below its 52-week high, could be a takeover target.

"Bankers is almost an archetypal take out play," Mr. Stanton said in a research note. "It has a focused portfolio with a material, operated, stake in a material project; but production of 16,800 barrels per day perhaps falls a little short of what a larger buyer would seek. However, output is budgeted to increase by 10-15 per cent per year."

As its production grows, he thinks Bankers Petroleum "would make a neat bolt-on acquisition" for the buyers of its crude, which include global firms Eni, Repsol and Vitol.

"Which begs the question, at this price, why should they wait," he commented.

Upside: Mr. Stanton upgraded the stock to "outperform" from "sector perform" and maintained a $4.50 price target.

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Sears Canada Inc.'s fourth-quarter results, to be announced Wednesday, will reflect "unrelenting weakness in sales trends," Desjardins Securities analyst Keith Howlett said.

Its management has taken steps to cut costs by eliminating 700 jobs and to upgrade its merchandise by entering into agreements with Carter's, Aldo and Buffalo, he pointed out.

"With sales of apparel and accessories down 11.4 per cent year-to-date, and sales of home and hardlines (excludes major appliances) down 13.4 per cent year-to-date, it is disappointing that fourth-quarter results will reflect little improvement. Poor sales results will intensify pressure to sell under-market leases in prime locations, including the Eaton Centre in Toronto," Mr. Howlett wrote in a research note.

The retailer's sales for 2013 will also come under pressure from the arrival of Target Corp., whose Canadian stores are scheduled to begin opening in March.

Downside: Mr. Howlett rates the stock "hold" and has a $9 price target.

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If you want to buy Thompson Creek Metals Co. Inc., you need to be a firm believer that the ramp up of its Mt. Milligan copper-gold operation in British Columbia will be successful and that molybdenum prices will rebound, commented CIBC World Markets analyst Matthew Gibson.

But given the teething issues miners typically experience in starting up new mills, and his "fundamental view" on molybdenum prices, Mr. Gibson downgraded Thomson Creek to "sector underperformer" from "sector performer."

Thomson Creek earlier this week cut its production guidance for this year as it raised its capital expenditure forecasts at Mt. Milligan. "We believe that until Mt. Milligan ramps up, investors should take a wait-and-see approach." he said.

Upside: Mr. Gibson cut his price target to $4.90 from $5.20.

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Aurora Oil & Gas Ltd. should post another year of strong growth in 2014, funded entirely from internal cash flows, said CIBC World Markets analyst Adam Gill.

He expects Aurora's production volumes to grow 106 per cent in 2013 and a further 33 per cent in 2014.

Mr. Gill upgraded the stock to "sector outperformer" from "sector performer," noting that he's also been impressed by productivity improvements in wells drilled in 2012.

Upside: Mr. Gill maintained a $4.75 price target.

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Autodesk Inc. shares are poised for an upgrade after its "solid" fourth-quarter results beat estimates, helped by large deals and promotional pricing, said Canaccord Genuity analyst Richard Davis.

"Assuming trend-line world economic recovery, ADSK's numbers set up well for a second-half calendar 2013 acceleration," he wrote in a research note. "We are waiting for the shares to trade back perhaps 10 per cent to consider an upgrade from our current 'hold' rating."

Upside: Mr. Davis raised his price target by $6 to $38 (U.S.)

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