CIBC World Markets Inc. analyst Andrew Potter has trimmed his price target on Suncor Energy Inc. in reaction to news the company is withdrawing from Syria. But even after removing the troubled nation from his net asset value calculations, he still sees considerable upside for the stock.
Suncor announced Sunday it declared force majeure under its contractual obligations in Syria. But management did not change their total production guidance for 2011 and 2012 because output from Libya - which has not been included in company guidance - is now ramping up and helping to offset the impact from Syria.
Syrian production averaged about 17,000 barrels of oil equivalent per day in 2011, representing roughly 3 per cent of Suncor's total 2011 production, according to Mr. Potter. He cut his cash flow per show estimates for both 2012 and 2013 by 2 per cent.
Although Suncor hasn't commented on insurance coverage, Mr. Potter believes the company could be eligible for about a $400-million claim, helping to mitigate the impact of the withdrawal.
"Despite Sunday's release, we maintain our thesis," he said in a research note. "SU offers one of the best growth profiles (7-8 per cent production compound annual growth rate) and free cash flow (average 5 per cent yield through 2016) at an incredibly low valuation 4.6x 2012 EV/DACF (Enterprise value to debt-adjusted cash flow)," he said in a research note.
Upside: Mr. Potter cut his price target by $1 to $45 and reaffirmed his "sector outperformer" rating.
Versant Partners analyst Neil Linsdell has downgraded Le Château Inc. to a "sell" from "neutral" after the fashion retailer reported another disappointing quarter and eliminated its dividend.
Le Château reported a third-quarter loss per share of 16 cents, reversing from a 10-cent profit a year earlier, as revenues sank 5.4 per cent.
"Third-quarter revenue was slightly lower than expected, but expenses increased substantially and the higher inventory level is tying up cash. Free cash flow is being squeezed and borrowing is increasing," Mr. Linsdell said in a note.
The company has undertaken a brand repositioning, upgrading its merchandise while beefing up its marketing efforts. But Mr. Linsdell believes the jury is out on whether it will be successful.
"This will remain a 'show me' story until the new branding strategy can demonstrate improved financial performance over an extended period of time," he said.
Downside: Mr. Linsdell cut his price target by $3 to $2.
UBS analyst Peter A. Rozenberg has upgraded Sun Life Financial Inc. to a "buy" from "neutral" in the wake of the insurer's strategic overhaul that will see it stop selling variable annuity and individual life products in the United States. "This should reduce interest rate and equity sensitivities, improve capital allocation, and increase long-term growth and returns," he said.
Upside: Mr. Rozenberg cut his price target by $3 to $22.
Shareholders of March Networks Corp. should reject Infinova (Canada) Ltd.'s $5-per-share takeover offer, urges CIBC World Markets Inc. analyst Todd Coupland, who believes any bid should be at least $7. "Lowered revenue expectations, increased hardware costs from Thailand flooding, and the economic headwinds the last six months were all said to have played a factor in the sale price. Regardless, the discount given on the sale price due to these shorter-term issues appears too deep," he said.
Upside: Mr. Coupland reiterated his "sector outperformer" rating and $7 price target.
While costs continue to be high, Kirkland Lake Gold Inc. "continues to march to delivery of doubling production in one year," commented CIBC World Markets Inc. analyst Barry Cooper. He expects operating costs at its Ontario operations to come down about 25 per cent as economies of scale kick in.
Upside: Mr. Cooper, who rates the company as a "sector outperformer," trimmed his price target by $1 to $28.