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Inside the Market’s roundup of some of today’s key analyst actions

Chemtrade Logistics Income Fund (CHE.UN-T) is displaying “increasing resilience” despite a mixed outlook, said Desjardins Securities’ David Newman following a “strong” second-quarter earnings beat.

That prompted the analyst to raise his rating for its stock to "buy" from "hold."

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"We are upgrading ... on the strong 2Q beat, stronger-than-expected recovery of regen acid, resilient water treatment (heading into high summer season) and strong ultra-pure acid," said Mr. Newman. "The offsets are continued pressure on merchant acid (economic slowdown), HCl (fracking), caustic soda (prices rolling over) and sodium chlorate (reduced paper consumption), as well as a lower operating rate in North Vancouver (chlor-alkali facility). The outlook is mixed, but the stock is inexpensive."

After the bell on Thursday, Toronto-based Chemtrade reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $76-million, exceeding both Mr. Newman’s $56-million projection and the consensus expectation on the Street of $63-million.

"While expected to be the trough this year, 2Q results were much better than what the company and the Street initially anticipated," said Mr. Newman. "On a high level, the dynamics within each segment during 2Q were consistent with our preview, but the magnitude of the COVID-19 impact was overestimated."

After raising his 2020 EBITDA estimate to $290-million from $270-million, Mr. Newman increased his target for Chemtrade units to $7 from $6.50. The average on the Street is $6.86.


Mediagrif Interactive Technologies Inc. (MDF-T) is beginning to see tangible improvements in its revenue growth, according to Desjardins Securities analyst Maher Yaghi.

Expecting to see the stock re-rate if that continues, he raised his rating for the Montreal-based e-commerce solutions provider to “buy” from “hold.”

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“When MDF began its transformation last year, we supported management for turning its attention to improving the top line vs historically focusing on managing profitability and neglecting to support new product launches,” said Mr. Yaghi. “What we indicated at the time was that given the increased operational risk to undertake that transition and that it was difficult to forecast the timing for this to begin to deliver concrete results, we preferred the ‘wait and see’ approach.

“Looking at MDF’s results in the quarter ended June 2020, one would not know there was a global pandemic affecting economies around the world—organic growth significantly improved by close to 10 per cent sequentially, supported by the company’s online e-commerce platforms and strategic sourcing.”

Though he cautioned that a few of the company’s platforms “remain under pressure,” Mr. Yaghi thinks recent investments in both sales and marketing are leading to revenue growth, which he thinks is likely to generate increased free cash flow generation next year.

“We also believe the company is focusing again on M&A after a period of introspection due to the pandemic; this could potentially lead to even better growth down the road,” he said.

On Wednesday, Mediagrif reported revenue for the quarter of $20.5-million, exceeding Mr. Yaghi’s $19-million estimate and the consensus forecast on the Street of $19.3-million.

“Overall, we see a clear change in the direction of organic growth. It is difficult at this point to determine what proportion of the change in growth is due to the shift in the company’s strategy and what is due to increased demand for technological solutions in light of COVID-19. However, the answer to this question does not matter much from a revenue forecast perspective as we believe both reasons support long-term revenue growth.

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“Moreover, we see significant revenue improvement opportunities with targeted investments in the sales force and partnerships. We believe the pandemic has created an environment in which technological tools are now, in many cases, almost indispensable. We also believe the recently announced sales partnerships (Logic and The Canning Group) could further accelerate revenue growth. Recall that MDF had a very modest sales/implementation workforce until recently and establishing relationships themselves globally would take significantly more time than using partners.”

With this upgrade, Mr. Yaghi increased his target for Mediagrif shares to $8.25 from $7. The average on the Street is $8.75.


After a “good” quarter, Intertape Polymer Group Inc. (ITP-T) is “well-positioned to weather any additional storms,” said Industrial Alliance Securities analyst Neil Linsdell.

On Thursday before the bell, the Montreal-based packaging products and systems company reported better-than-anticipated second-quarter results. Revenue of $267.8-million was down 9.4 per cent year-over-year but narrowly higher than Mr. Linsdell's projection of $267.1-million and the Street's expectation of $267-million. Adjusted EBITDA of $40.4-million blew past his estimate ($35-million) and the consensus forecast on the Street ($35-million).

“Despite headwinds primarily related to COVID-19, ITP has reacted to this crisis by further optimizing operations in order to both protect profitability in the short term while also preparing for possible subsequent waves of lockdowns or economic disruption,” Mr. Linsdell said. “The company was already well-positioned to deal with the new environment thanks to years of investment in more automated manufacturing, and the development and acquisition of tape and packaging solutions focused on e-commerce fulfilment. With still solid cashflow, after years of high capex spending and buildout, we see a reduction of debt levels that should bring equity investors back to this story.”

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After raising his revenue and earnings projections through 2022, Mr. Linsdell increased his target for Intertape shares by a loonie to $18, keeping a “buy” rating. The average on the Street is $17.25.


Following a second-quarter earnings beat coupled with a “slighter weaker” outlook for the second half of fiscal 2020, Citi analyst William Katz is “increasingly optimistic” about Brookfield Asset Management Inc.‘s (BAM-N, BAM.A-T) fundraising and further fee-related earnings margin improvement.

"Management offered a compelling value proposition against the specter of continued lower rates reflecting Globality, Real Asset skew (particularly Infrastructure), scale, and long-term track record – and we see reasonable 'line of sight' to $100-billion capital raise cycle that could accelerate into year-end 2021 – led initially by Distressed mandates, Infrastructure, RE and further scaling in product adjacencies," he said.

With the results, he lowered his target for Brookfield shares to US$36 from US$36.50, keeping a "neutral" rating. The average on the Street is US$40.30.

"We view BAM as core long-term holding but relatively full to our 12-month SOTP [sum-of-the-parts], which we edge down $0.50 to $36 and thus keeping us Neutral," he said. "We shift to 2022 FRE valuation construct given greater NNA sightline but lower investments/carry less debt offsets out-year upside. We continue to apply 18 times target comparable FRE multiple given growth/underlying drivers. At the margin, discussion around FPAUM RE metrics encouraging and management provided a litany of favorable real time metrics for I/C related RE exposure, but we suspect investors will likely take a wait and see attitude pending more decisive decline in COVID-19 risks."

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Elsewhere, Canaccord Genuity analyst Mark Rothschild kept a "buy" rating and US$43.50 target.

“Notwithstanding some of the pressures BAM’s property division faces, over the long term we expect that BAM will generate meaningful cash flow growth as it closes more and larger funds, and benefits from continued strong performance from its various divisions,” he said.


With the release of “impressive” second-quarter results, Desjardins Securities analyst Gary Ho raised his financial expectations for goeasy Ltd. (GSY-T) and said he continues to like Mississauga-based alternative financial company “on an economic recovery backdrop.”

On Wednesday, goeasy reported adjusted earnings per share of $1.89, exceeding Mr. Ho’s $1.29 projection as well as the consensus forecast in the Street of $1.35. Net charge-offs and allowance for future credit losses also topped his estimates.

“Evident this quarter was its significant earnings and cash flow generation, typically distorted by punitive accounting provisioning noise due to GSY’s loan book growth,” said Mr. Ho. “While COVID-19-related uncertainties remain, credit trends have improved and guidance points to a gradual recovery.”

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With the results, Mr. Ho raised his 2020 and 2021 earnings per share projections to $6.58 and $7.77, respectively, from $5.10 and $7.37.

Keeping a “buy” rating, he hiked his target for goeasy shares to $79 from $66. The average on the Street is $69.46.

“Our investment thesis is predicated on: (1) GSY’s loan protection insurance program provides a safety net for clients to weather the pandemic storm over the near term, covering two-thirds of customers; (2) a solid management team able to maneuver through short-term industry challenges and take advantage of opportunities; and (3) with scale, the business could generate a mid-20-per-cent ROE [return on equity],” said Mr. Ho.

Elsewhere, Raymond James analyst Stephen Boland increased his target to $76 from $64.25 with an "outperform" rating (unchanged).

Mr. Boland said: “GSY reported another solid quarter of earnings and appears to have started to turn from a strictly defensive mode to gradually returning to offense. The charge off rate with the assistance of relief measures and the presence of insurance continues to track better than estimates. The charge-off rate was 10 per cent and 3Q20 is expected to be the same or better. While the charge off rate remains in check, we expect earnings will be robust and the stock should respond accordingly. Month over month originations are gradually building. In our view, the company continues to perform well in difficult times. Our estimates for both years have been increased and 2021 with new product initiatives should be strong.”


Sherritt International Corp.‘s (S-T) debt restructuring eases near-term liquidity concerns, said Scotia Capital analyst Orest Wowkodaw.

He resumed coverage of the stock with a "sector underperform" rating.

"Although the company was successful in relieving its near-term balance sheet stress via a debt restructuring transaction that both lowered debt outstanding and termed out pending maturities, while also shedding its remaining interest in the disastrous Ambatovy Ni-Co mine, we believe the near-term outlook for Sherritt remains relatively poor in the current depressed nickel price environment," he said. "Moreover, we anticipate nickel fundamentals to remain relatively weak for some time."

Seeing several issues continuing to "overhang" shares, Mr. Wowkodaw maintained a 15-cent target. The average on the Street is 20 cents.

“Although the near-term balance sheet stress has been relieved and the company has finally exited Ambatovy, we note that several issues continue to overhang the shares in our view: (1) still too much debt for a company of this size, (2) the ability to collect on overdue Cuban receivables from the Cuban government (US$159-million at Q2/20), (3) a material level of corporate cash still effectively trapped in Cuba ($85-million of the company’s total Q2 cash balance of $172-million), (4) the apparent failure to date of drilling Block 10 and the resulting future uncertainty of the Cuban O&G business, (5) Cuban exposure in general given the current pandemic environment and heightened pressure from the current U.S. Administration, and (6) funding potential Spanish O&G reclamation liabilities ($47-million),” he said.


In other analyst actions:

* CIBC World Markets analyst Matt Bank upgraded AutoCanada Inc. (ACQ-T) to “neutral” from “underperformer” with a $17 target, rising from $9. The average on the Street is $16.79.

“The turnaround story has been longer and more challenged than hoped, but underlying trends are positive, and the rest of the year sets up well.,” he said. “As important, debt again improved, we no longer see balance sheet as a concern, and M&A is a renewed possibility. Valuation and lack of visibility hold us back from getting too positive, but we acknowledge more upside.”

* Jefferies analyst Stephanie Wissink raised Spin Master Corp. (TOY-T) to “buy” from “hold” with a $33 target, up from $26 and above the $27.20 consensus.

* Touting the potential for its battery business and saying its shares “from this point may most likely be driven by factors beyond the business of selling cars,” Morgan Stanley analyst Adam Jonas raised Tesla Inc. (TSLA-Q) “equal weight” from “underweight” and a target of US$1,360, rising from US$1,050 per share. The average on the Street is US$1,256.25.

“Based on the body of evidence collected and research conducted by our tech colleagues, we now give Tesla credit for a third party battery/EV powertrain supply business in our base case (previously in our bull case scenario) that is worth $310 per share,” he said.

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