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A pedestrian walks past the SNC-Lavalin Group Inc., headquarters in Montreal. (© Christinne Muschi / Reuters/REUTERS)
A pedestrian walks past the SNC-Lavalin Group Inc., headquarters in Montreal. (© Christinne Muschi / Reuters/REUTERS)

Inside the Market

Takeover of Inmet Mining could be bad news for SNC-Lavalin Add to ...

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

It’s “two steps forward, one potential step back” for SNC-Lavalin Group Inc.

At least, that’s the view of Raymond James analyst Frederic Bastien after a handful of new developments concerning the engineering firm.

The good news for SNC-Lavalin is that it secured a contract for an innovative power project in New Jersey, which involves a gas-fired combined cycle power plant that could be one of the most environmentally friendly in the U.S. And, SNC-Lavalin is also likely to benefit from the approval this week of the $7.7-billion Muskrat Falls hydroelectric project in eastern Canada, for which the company is providing engineering and construction services.

“Together, these two developments should add about $800-million to (SNC’s) power segment’s backlog in Q4 2013, lending support to our bullish outlook for the division,” said Mr. Bastien.

The bad news? First Quantum Minerals Ltd’s takeover of Inmet Mining Corp., should it succeed, could result in less work for the company in the construction of Inmet’s massive Cobre Panama copper project.

“We say this because First Quantum is recognized for its ability to build new mines and may opt to in-source some of the technical and project development requirements. Our view is that SNC’s expertise would still be needed on site, but perhaps not to the same extent as what Inmet had envisioned for the firm,” Mr. Bastien said.

First Quantum boosted its bid for Inmet for a second time this past weekend, offering shareholders $72 a share. Inmet shares are trading this afternoon at $73.18, however, suggesting investors think a higher bid may materialize, possibly from other potential suitors given that the latest offer was hostile.

Upside: Mr. Bastien maintained an “outperform” rating and $52 price target.


Mainstreet Equity Corp. reported a 20 per cent rise in fiscal fourth-quarter funds from operations, thanks to strong internal growth, noted Canaccord Genuity analyst Jenny Ma.

“Mainstreet remains well positioned for further cash flow growth as it expands through acquisitions and improves its portfolio through repositioning non-stabilized properties, refinances maturing debt at exceptionally low market rates, and eliminates tenant incentives from its portfolio,” she commented.

Upside: Ms. Ma downgraded the stock to “hold” from “buy” due to recent share price appreciation, but raised her price target to $36.70 from $34.50.


Transat A.T. Inc. far surpassed analyst expectations in reporting fiscal fourth-quarter adjusted earnings per share of 75 cents. Revenues fell short of forecasts as the company reduced capacity on certain transatlantic and sun destinations, but this aided profit margins. “We like management’s disciplined approach to achieving superior margins by focusing on capacity management and higher sales prices,” commented Desjardins Securities analyst Benoit Poirier.

Upside: Mr. Poirier maintained a “buy-above average risk” rating and $6.25 price target.


Desjardins Securities analyst Keith Howlett maintained a “hold” rating on Sears Canada Inc. in the wake of the struggling retailer’s plans to pay out a $1 per share special dividend as of Dec. 31. “Sears Canada’s balance sheet remains solid, with significant underlying real estate and no net debt,” and therefore feels comfortable with the payout, he said.

Downside: Mr. Howlett, who remains concerned about increased competition for the retailer in the next two years from Target and Wal-Mart, reduced his price target by $1 to $9 to reflect the pending dividend.


Nucor Corp. released lower-than-expected fourth-quarter guidance, as steel mill margins are under pressure from high import levels and general economic uncertainty. But better-than-expected U.S. housing starts in September and October provides some encouragement conditions will eventually improve, said CIBC World Markets analyst David Galison, who cut his 2012 and 2013 earnings estimates for the company.

Upside: Mr. Galison maintained a $40 (U.S.) price target and “sector performer” rating.


For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities

(An earlier version of this article stated incorrect price targets on Mainstreet Equity)

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Follow on Twitter: @eyeonequities


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