Should investors be snapping up shares in Viterra Inc. even after the fierce rally on Friday that was sparked by word of possible takeover interest?
Raymond James Ltd. analyst Steve Hansen is warning against it. He downgraded the stock to "market perform" from "outperform," advising shareholders to trim their holdings just in case a successful bid doesn't materialize.
There's no question, in Mr. Hansen's view, that the company is an irresistible takeover target, given its "formidable global footprint of largely irreplaceable agribusiness assets, including storage, handling, and export facilities strategically positioned in two of the world's largest bread baskets."
And the value of those assets should only go up with the upcoming deregulation of the Canadian Wheat Board, which will likely send more business its way.
But Mr. Hansen is taking a cautious stance, noting the share surge leaves less than 4 per cent upside to his six- to 12-month price target of $14.
"For those investors willing to keep their toes in the water, we acknowledge there could still be healthy upside in the event a formal bid (or bids) transpires, however, we advise trimming into recent strength in the event one does not," he said in a note.
Mr. Hansen took a stab at predicting just how much upside. His review of recent takeover transactions in the sector suggests Viterra could fetch about 10 times next 12 months earnings before interest, taxes, depreciation and amortization. Based on his forward financial estimates for the company, that would imply Viterra fetching $16.50 a share. But that doesn't include the benefit of the recent wheat board deregulation, which won't reach its full impact until 2014, he notes.
Press reports speculate that Bunge, Glencore, Mitsui, Archer Daniels and Cargill could be possible suitors - and Mr. Hansen agrees that the global agribusiness giants are the most logical buyers. Viterra, in its statement Friday, did not name the party or parties interested in possibly launching a bid for the company.
__________
RBC Dominion Securities Inc. analyst R. Rama Bondada downgraded Alliant Techsystems Inc. to "underperform" after the company released "dismal" fiscal 2013 guidance. Earnings per share were forecast at $6-$6.30 a share, well below consensus of $7.17. "The company faces headwinds in practically all of its major end-markets," he said.
Downside: Mr. Bondada cut his price target by $8 to $51.
__________
Clean Energy Fuels Corp. , the largest North American natural gas provider for vehicles, should see strong organic growth this year as it rolls out new stations and expands its California liquefied natural gas plant, said National Bank Financial analyst Rupert M. Merer. But he cautions success is not a certainty. "If oil prices stay in the $105-110 per barrel range and global economic uncertainties persist, the urgency and financial ability to fuel switch may be reduced."
Downside: Mr. Merer downgraded the stock to "underperform" from "sector perform" and maintained a $14 (U.S.) price target.
__________
5N Plus Inc. , a provider of high-purity metals, reported a weak fourth-quarter, with earnings and revenues falling short of Street forecasts and margins taking a hit from high costs, noted National Bank's Rupert M. Merer. "According to VNP, the current quarter is seeing sales and earnings that are reverting back to standard levels. However, with the changes to the company recently, we don't know what standard levels are," he commented.
Downside: Mr. Merer downgraded the stock to "sector perform" from "outperform" with slashed his price target by $3 to $6.
__________
Zillow Inc. has been making steady progress since the Internet real estate firm reported strong fourth-quarter results on Feb. 15, Canaccord Genuity analyst Michael Graham said after a meeting with management. "We believe that over the course of 2012 important new revenue streams may become evident, driving continued operating momentum," he said.
Upside: Mr. Graham maintained a "buy" rating and $42 (U.S.) price target.
Darcy Keith