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CIBC's new price target on Yellow Media: zero Add to ...

Don’t hold on to Yellow Media Inc. stock in hopes for a recovery, warn Desjardins Securities Inc. analyst Maher Yaghi and CIBC World Markets Inc. analyst Robert Bek. Mr. Yaghi today slapped Yellow Media shares with a “sell” rating and a 40-cent price target (both were previously under review).

And Mr. Bek went a step further, slashing his price target to zero while also downgrading the stock to an equivalent of a sell rating.

The company Wednesday killed its dividend and announced a $2.9-billion goodwill hit for the third quarter.

It also amended its credit agreement with a syndicate of lenders, slicing its $1-billion (U.S.) senior unsecured facility to $500-million. That move, Mr. Yaghi says, “significantly squeezes the company’s financial flexibility and makes it even more difficult for the firm to support its long-term debt.”

“Fundamentals point to continued secular declines, and we see significant funding issues in 2013-17,” Mr. Yaghi commented. Yellow Media faces a high degree of refinance risk associated with the expected renewal of its credit facility in 2013, and further out, the company’s refinancing risk “becomes cloudier” given the ongoing decline in its profitability, he said.

Mr. Bek was even harsher, effectively throwing in the towel. “Where we previously noted that a positive equity value was tenuous, we now believe that is very unlikely,” he said.

“Given the focus appears solely on protecting access to lenders, we do not see a situation where a positive equity outcome is likely.”

Mr. Bek previously had a $1.25 price target on the stock.


What’s the perfect stock in this highly volatile, low interest rate investing environment? Desjardins Securities Inc. thinks its Brookfield Asset Management Inc. , upgrading the company today from a “buy” to a “top pick” - it’s highest recommendation.

“Brookfield Asset Management provides a solution to the urgent need of long duration investors severely challenged by the current investment environment, characterized by low interest rates and hyper-volatility,” Desjardins analyst Michael Goldberg wrote in a research note.

“The high absolute return, low volatility assets in which BAM specializes are the antithesis to this environment. As a result of its focus and its successful track record, BAM should be a magnet for long-duration investors, which would also support its ability to grow its assets under management.”

Mr. Goldberg praised Brookfield’s announcement earlier this month that it will merge its wholly owned hydro and wind assets with Brookfield Renewable Power Fund , forming a massive new global green energy player.

Together, the new Brookfield Renewable Energy Partners LP will hold $13-billion in assets and trade on the Toronto Stock Exchange, and eventually seek a listing on the New York Stock Exchange.

“BREP creates a new source of asset management fees for BAM and significantly increases liquidity at the BAM level,” Mr. Goldberg commented.

Valuation is also highly attractive, he argues. BAM is trading at an 18 per cent discount to its net asset value of $33.26 (U.S.) a share and hit a fresh 52-week low last Thursday amid the global economic turmoil. Mr. Goldberg believes there’s sufficient justification for the shares to be trading above net asset value.

“We believe that net asset value can double over five to six years, and that a return to a premium market price to NAV....would mean thhat the stock price could double even sooner.”

His price target on BAM remains at $37 (U.S.).


Advanced Micro Devices Inc. has reduced its third-quarter revenue and gross margins expectations, partly because of manufacturing issues at a German factory that limited supply of the Llano chip. But Canaccord Genuity analyst Bobby Burleson reiterated a “buy” rating, noting that supply issues appear to be short term, while sales checks continue to show strong demand for Llano.

Downside: Mr. Burleson cut his price target by $1 to $7 (U.S.)


Cineplex Inc. stock has appreciated about 10 per cent since reporting second-quarter results on Aug. 11, a sharp contrast to the 3-per-cent fall in the TSX media index. Given this stock performance, and potentially weaker-than-expected third-quarter Canadian industry box office receipts, RBC Dominion Securities Inc. analyst Drew McReynolds downgraded Cineplex from “outperform” to “sector perform.”

Downside: Mr. McReynolds maintained a $26 price target.


Equity funds may stay out of favour for some time, signalling that AGF Management Ltd.’s mutual fund redemptions will remain significant, said CIBC World Markets Inc. analyst Paul Holden. The fund giant reported quarterly operating earnings just shy of consensus on Wednesday as retail funds were hit with $585-million in net redemptions. But he expects the positive momentum in AGF’s institutional business to continue.

Downside: Mr. Holden cut his price target by $1.25 to $18 and maintained a “sector performer” rating.

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