Yellow Media Inc. shares have stabilized after sinking to record lows early this week amid intensifying investor concerns about its hefty debt load and ability to retain its attractive dividend.
The stock is hovering modestly above a low of $3.66 reached on Tuesday; the directory publisher released a statement later that day reassuring investors that the $745-million sale of its Trader Corp. unit is proceeding as planned.
The transaction is seen as key to putting a dent in Yellow Media's $2.1-billion debt load. There are fears that without the proceeds, credit rating agencies may cut the company's debt ratings to junk levels, triggering stricter loan covenants that then may lead to a reduction in its common-share dividend.
Adding to concerns were public disclosures that the company's chief financial officer, Christian Paupe, had sold a large chunk of his personal shareholdings into a recent share buyback program - just one day before the company's chief marketing officer, Stephane Marceau, abruptly resigned. The company said Mr. Paupe's sale of 200,000 shares was for the purpose of repaying a loan to a financial institution,
CIBC World Markets Inc. analyst Robert Bek, in a note today, called this week's feverish activity in the stock an "overreaction," noting that there's been little fresh "material" news.
"We see this as little more than speculation, yet the shares have clearly responded otherwise," he said.
"Lacking any real new factors, we continue to rate the name at 'sector performer.' The story is not without risks, and, as such, is not for risk-averse investors. However, the recent trading has likely pushed past the point of a reasonable response to the risk profile in the near term."
Upside: Mr. Bek affirmed his $5.50 price target.
Sprott Inc. reported first-quarter results that were slightly shy of consensus estimates, but its growth outlook appears attractive thanks to "organic initiatives and potential synergies reaped from its acquisition of Global Companies," said TD Newcrest analyst Doug Young. He cautions that with Sprott's heavy exposure to precious metals, volatility in the share price could remain high.
Upside: Mr. Young maintained a "hold" rating and $10 price target. Canaccord Genuity and CIBC World Markets today both affirmed a $9 price target.
ATS Automation Tooling Systems Inc. grew revenues 43 per cent in the fourth quarter year-over-year and the company would be nicely profitable if not for restructuring charges and losses from worker disruptions at French subsidiary Photowatt France, said Versant Partners analyst Neil Linsdell. "ASAG is showing good improvement all around, but Photowatt continues to be under pressure," he said.
Upside: Mr. Linsdell raised his price target to $9.50 from $7.75 and maintained a "buy" recommendation.
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