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Site of Sherritt's Ambatovy mining project in Madagascar (Geoffrey York)
Site of Sherritt's Ambatovy mining project in Madagascar (Geoffrey York)

Eye on Equities

Analysts whack Sherritt with price target cuts Add to ...

Analysts have been quick to cut their price targets on Sherritt International Corp. in the wake of the company announcing Tuesday a delay to its key Ambatovy nickel project in Madagascar.

Management is now expecting the first metal to be produced in the first quarter of next year instead of the third quarter of 2011. Capital costs were also raised to $5.50 (U.S.) per pound from $4.76.

"While Sherritt made no changes to the scope/technology/capacity of the project, we believe technical risk at Ambatovy remains, and the market will likely remain cautious on Sherritt's ability to differentiate Ambatovy from previous large nickel laterite projects with significant cost/time overruns," commented CIBC World Markets Inc. analyst Alec Kodatsky.

"In our view, the shares will likely be kept in check until production start-up approaches in early 2012," he added.

Downside: Mr. Kodatsky cut his price target to $9.25 from $10.20. Desjardins Securities Inc. analyst John Hughes decreased his target to $10.50 from $12. Mr. Kodatsky has a "sector performer" rating on the stock, while Mr. Hughes rates it a "buy."

CIBC World Markets analyst Michael Willemse has cut his price target on New Flyer Industries Inc , anticipating lower free cash flow generation as a result of its proposed conversion from its Income Deposit Securities structure into shares. The action would eliminate a favourable tax shield for the company. Mr. Willemse said he foresees an increase in valuation multiples if NFI manages to generate material earnings growth.

Downside: Mr. Willemse's price target is now $9.50, down from $11.

Rio Novo Gold Inc. continues to be rated as a "speculative buy" at Canaccord Genuity following a delay at the company's Almas project in Brazil to allow for additional resource growth. Analyst Rahul Paul said that even while Almas has the best potential for near-term production, market focus may switch to its Guaranta and Toldafria projects if exploration results are positive.

Downside: Mr. Paul cut his price target to $3 from $3.40.

WaterFurnace Renewable Energy, Inc. reported seasonally weak first-quarter financial results, prompting Canaccord Genuity to modestly lower its target price. But analyst Sara Elford added that "given the stock's respectable (and, historically, growing) dividend and limited liquidity, we continue to recommend buying the stock now to position for a return to historical growth rates in 2012 and beyond."

Upside: Ms. Elford cut her price target on the stock, which yields about 4 per cent, by $1 to $33.

Azure Dynamics Inc. reported seasonally weak first-quarter results, with losses of $9-million slightly worse than forecasted by analyst Rupert Merer. He said sustained high oil prices and a push for increased fuel economy and vehicle electrification in the U.S. could drive more sales this year for the developer of electric and hybrid technology.

Downside: Mr. Merer maintained a 45-cent price target on the stock, which he rates as an "outperform."

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