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

Following a trio of shareholder-friendly announcements late Thursday, Scotia Capital analyst Cameron Bean upgraded Paramount Resources Ltd. (POU-T) to “sector perform” from “sector underperform.”

After the bell, the Calgary-based company revealed the implementation of a monthly dividend program, declaring a 2-cent cash payment starting on July 30. It also said it has gained approval for a normal course issuer bid with a plan to purchase up to 7.3 million common shares, representing 10 per cent of the public float, and it has received a cash payment of $67-million from Strathcona Resources Ltd. in settlement of its previously disclosed dissent proceedings.

“POU’s institution of a dividend is not a surprise, given that the company had started to point to the possibility; nevertheless, the timing is much sooner than we expected,” he said. “While modest (approximately 1.7-per-cent yield), we anticipate the announcement to garner a positive response. We also expect POU’s move to institute a normal course issuer bid (NCIB) to be positively received. The company has been active on its NCIBs in the past and given the shares’ low liquidity, we believe this NCIB could be a key source of support for the stock. While the settlement on the Strath shares came in below POU’s previous expectations and the company’s recent dispositions (Birch Montney and Royalty assets) came at prices below our NAV estimates, the sale proceeds in combination with higher revenues from robust oil prices have largely fixed POU’s balance sheet.

“We still believe the stock is expensive relative to the peer group (particularly in light of POU’s asset retirement obligations); nevertheless, we are retiring our SU rating.”

With an updated net asset value estimate as well as stronger strip WTI prices and an increase to his 2022 cash flow-based valuations, Mr. Bean raised his target price for Paramount shares to $15 from $10. The average target on the Street is $14.02, according to Refinitiv data.

“We have reviewed our call on POU on several occasions in recent months and each time we have found the stock’s valuation unappealing,” he said. “This is still the case. We believe the stock is expensive and see more upside in several other names in our coverage group. Nevertheless POU has found strong backing in the market and the stock is a key beneficiary from robust oil prices. Given the stock’s positive momentum, we are capitulating and moving to a neutral stance. On the positive side, management has done a great job reducing costs across the board and hitting guidance over the past few quarters. These improvements, combined with the oil price rally, have enabled POU to begin generating free cash flow and repair its balance sheet. The institution of a dividend and NCIB will enable investors to tangibly benefit from POU’s improved financial position and may signal a commitment to capital discipline that has been lacking in the past. We expect the new shareholder return measures to bolster the stock’s already strong momentum. Provided oil prices remain strong and POU executes on its guided plans, it is hard not to see the stock as a solid performer. We see risks to the stock if oil prices weaken or the company falls short of its plans and we continue to have concerns about POU’s high amount of asset retirement obligations (ARO). However on balance we no longer see POU as an underpeformer in the context of the current market environment.”

Others making target changes include:

* ATB Capital Markets’ Patrick O’Rourke increased his target to $16.50 from $16 with an “outperform” rating.

“Overall, we view the event as highly positive – we previously highlighted POU as a prime candidate for potential shareholder friendly return of capital actions in our June 6 outlook, on the back of our view of strong asset performance, underappreciated capital structure strength and a financial outlook including a low estimated 2022 payout ratio,” said Mr. O’Rourke. “[Thursday’s] announcement is certainly inline with our prior sentiment, but also on an accelerated timeline relative to our expectations, and in our view speaks to management’s confidence in asset performance. The credit facility extension to 2024 provides further third-party (creditor) validation to our view and the freshly instituted return of capital plan.”

* Stifel’s Cody Kwong to $18.50 from $16.75 with a “buy” rating.

“It wasn’t so long ago that Paramount was notorious for spending multiples of cash flow, running an aggressive leverage profile, and missing quarterly production and earnings bogeys with regularity,” said Mr. Kwong. “That company no longer exists. In its place, is an entity that has cleaned up its balance sheet where we show D/CF moving to 0.4 times in 2022, reinvestment of only 60 per cent of its FFO while still growing volumes, and a source of production/earnings beats over the past several quarters. The culmination of gaining operational/financial command of its business has allowed Paramount to complete this transformation by implementing a dividend (2 cents per share monthly) that we believe is not only sustainable, but has the potential for meaningful and predictable growth ahead. This dividend could introduce a new class of investors to the stock which often results in multiple expansion, which is the impetus behind our increased target price.”

* CIBC World Markets’ Jamie Kubik to $17 from $15 with a “neutral” rating.


In a research report released Friday, CIBC World Markets analyst Robert Catellier revised his valuations for TSX-listed energy infrastructure companies, “taking longer-term approach as pandemic risk subsides.”

“At the onset of COVID, we moved away from DCF valuations to a multiple-based approach, figuring the market would be fixated on short-term factors. We now revert back to our preferred DCF-based valuation methodology as we are comfortable that the risk from the pandemic has subsided enough to more heavily weight a longer-term outlook,” he said.

“As the pandemic risk subsides, we see industry risk factors changing from access to capital and counterparty credit risk to more concern about inflation and interest rates. Labor inflation is worth monitoring, but we see more risk to capital cost inflation. We believe some projects have seen returns compress from this development; however, we expect future projects to reflect higher costs for steel, which is a common issue for every operator on new projects. Hence, the industry should adjust for this reality in pricing new projects.”

A day after it announced a plan to jointly develop carbon transport and sequestration infrastructure with TC Energy Corp. (TRP-T), Mr. Catellier raised his rating Pembina Pipeline Corp. (PPL-T) to “outperformer” from “neutral.”

“Consistent with our prior EV/EBITDA valuation, our DCF valuation includes a successful closing of the IPL acquisition at the current terms and conditions,” he said. “We have included only the $400-million of capital projects announced at the time of the offer, and none of the potential projects announced with the recent business update.”

His target for Pembina shares jumped to $47 from $39. The average on the Street is $40.44.

He also raised his target for TC Energy to $74 from $70, exceeding the $70.42 average, with an “outperformer” recommendation.

Concurrently, Mr. Catellier also made these target adjustments:

  • AltaGas Ltd. (ALA-T, “outperformer”) to $28 from $26. The average is $25.70.
  • Enbridge Inc. (ENB-T, “outperformer”) to $57 from $52. Average: $52.77.
  • Gibson Energy Inc. (GEI-T, “neutral”) to $25 from $23. Average: $24.82.
  • Keyera Corp. (KEY-T, “outperformer”) to $36 from $32. Average: $32.07.

“We believe valuations have been pushed up recently due to investors expectations for continuing M&A in the sector. Specifically, we believe Gibson Energy and Keyera have benefitted as fundamental investors sell Inter Pipeline and redeploy funds in the sector,” said Mr. Catellier.


Desjardins Securities analyst Bill Cabel thinks Boralex Inc.’s (BLX-T) Investor Day event on Thursday was “extremely well done,” delivering on its forecast of “a strong tailwind from the accelerating transition to renewable energy.”

“Nailed it — the topics discussed, details provided and growth outlined was music to our ears and we believe investors should be buying BLX following this update,” he said. “The company provided a new five-year (year-end 2020–25) strategic plan which communicated an installed capacity target of 4,400 mega watts (up 2 times from the 2,200 MW at year-end 2020); BLX expects to achieve this by investing $6-billion or $2.7-million per MW. BLX expects the growth to drive an EBITDA CAGR of 10–12 per cent (to $800–850-million) and an AFFO CAGR [adjusted funds from operations compound annual growth rate] of 14–16 per cent (to $240–260-million) by 2025. What is even more impressive is that BLX expects to grow its installed capacity to 10–12GW by 2030 — a 5-times increase from its 2020 installed capacity.

“Overall, we have always believed that BLX is a top-performing renewables player with a focus on key global markets — its investor day messaging more than confirmed that, with a significant growth path which exceeded our expectations.”

Reaffirming Boralex as his “preferred name,” Mr. Cabel raised his target for its shares to $53 from $50 to reflect its increased growth outlook, keeping a “buy” rating. The average target on the Street is $49.09.

“With a solid near-term identified growth pipeline and development projects at various stages, including 0.8 GW of bid-ready projects in New York, we believe BLX is well positioned to achieve its growth plan and that its outlook remains positive. We continue to believe that the market is underestimating BLX’s growth potential and we would be buyers at current levels,” he said.

Elsewhere, CIBC’s Mark Jarvi increased his target by $1 to $48 with an “outperformer” rating.

“We believe double-digit installed capacity, EBITDA and AFFO compounded annual growth rates (CAGRs) out to 2025, backed by an evolving strategy and expanding growth horizons, will impress most investors,” said Mr. Jarvi. “However, a lack of details on funding and an explicit per share financial growth metric may leave the market with lingering questions. To help investors, we’ve made our estimate of AFFO/share growth — we estimate a five-year CAGR of 7 per cent (10.5 per cent on weather-normalized basis).”


Ahead of the release of its second-quarter financial results on June 30 before the bell, Desjardins Securities analyst Gary Ho reaffirmed AGF Management Ltd. (AGF.B-T) as his top asset manager pick.

“Looking out over the next 12 months, continued positive retail net flows and the sizeable tailwind from the ban of DSC [deferred sales charge mutual funds] (on EPS and FCF) present decent catalysts for the AGF story,” he said.

For the quarter, Mr. Ho is projecting earnings per share of 12 cents, a penny below the consensus on the Street, with retail net inflows of $409-million, up from $385-million in the first quarter and representing its third consecutive increase.

Expecting a “meaningful” jump in earnings and free cash flow when the DSC ban takes effect in June of 2022, Mr. Ho increased his target for AGF shares to $9.75 from $9.50, keeping a “buy” rating. The average is $8.32.

“We foresee a few near- or medium-term positive catalysts: (1) retail net sales momentum; (2) redeploy capital for organic growth, seed new private alt strategies and share buybacks; (3) growth in fees/earnings from its alt platform; (4) execution on SG&A cost reduction to improve EBITDA and EBITDA margins; and (5) DSC ban benefiting FCF and EPS,” the analyst said.


Pointing to “solid” fuel trends and a sales recovery, CIBC World Markets’ Mark Petrie remains bullish on Alimentation Couche-Tard Inc.’s (ATD.B-T) fundamentals ahead of the release of its fourth-quarter financial results.

The analyst is now projecting earnings per share for the quarter of 47 cents, up from 35 cents previously after increasing his U.S. fuel margin projection (to 32 cents from 24 cents). He expects sales to rise 25 per cent year-over-year to $12.1-billion.

“Better fuel margins are the key factor in revising our EPS forecast upward, but we expect strong revenue growth year-over-year in both merchandise and fuel due to easier comparisons as well as improving trends in U.S. miles driven,” said Mr. Petrie. “Even with higher fuel margins than previously expected they are not likely to approach last year’s record level, driving EBITDA of $999-million, down 4 per cent year-over-year.

“Beyond the quarterly results, we are focused on comments regarding the current operating environment, in particular, inflation and the labour market. Last month Circle K announced plans to add 20,000 new employees in the U.S., and we expect ATD’s ability to fill these vacant positions will be one area of focus. In addition, we will look for colour on how consumer habits are normalizing, particularly in tobacco, alcohol and prepared foods. Despite rising gas prices, we expect another summer of primarily domestic travel will offset any pressure on fuel volumes and support rational fuel margins. Looking past the quarter, we expect more fulsome updates at the company’s July 14 investor day, including on its organic growth initiatives, business performance in Norway and M&A strategy.”

Reiterating an “outperformer” rating, Mr. Petrie also hiked his target for Couche-Tard shares to $50 from $46, The average is $47.72.

“Sentiment on the stock has improved in recent months as investors regain comfort with the longer-term growth opportunity and M&A outlook,” he said.


Stifel analyst Alex Terentiew thinks investors seeking high-quality good exposure in a lower-risk jurisdiction should focus on Nevada and the surrounding Great Basin, saying the area has become “synonymous” with the precious metal.

“The region accounts for roughly 75 per cent of America’s gold production, is consistently a top ranked investment destination, has a massive gold resource endowment, and communities and governments that are generally supportive of the industry, and its miners are competitively placed on the cost curve,” he said.

With that view, Mr. Terentiew initiated coverage of two companies and resumed coverage of two others in the region that he feels offers investors “a compelling opportunity to add gold exposure to their portfolio.”

He initiated coverage of:

* Millennial Precious Metals Corp. (MPM-X) with a “speculative buy” rating and $1.20 target.

“Millennial Precious Metals is bringing a new investment and exploration approach to rapidly advance several prospective projects in Nevada, which previously sat largely overlooked and under explored by their prior owners,” he said. “While there exist only inferred resources on two of the company’s seven projects, historic intercepts at Mountain View, Wildcat and Red Canyon have already identified resource growth opportunities that we expect could see ounces grow to over 2 million in 2022 (from 1.2 Moz currently), lending strong support to a PEA later in the year that will outline the potential of these near-surface, oxide gold deposits.”

* Northern Vertex Mining Corp. (NEE-X) with a “buy” rating and 60-cent target.

“New management is bringing a new, longer-term and geologically focused approach towards maximizing value at Moss, which has the potential to be a solid foundation for growth,” said Mr. Terentiew. “ 2021 will see the new team develop their understanding of Moss’ potential and set the stage for the mine’s growth and cash generation potential, with an updated mine plan expected in 2H 2021. With positive cash flow being generated, we expect funds will be directed towards an exploration program at Hercules in Nevada where a long list of prospective targets will be refined in preparation for narrowing in on resource definition drilling in 2022.”

He resumed coverage of:

* Gold Standard Ventures Corp. (GSV-T) with a “buy” rating and $1.70 target.

“With the second largest land position in Nevada, a strong balance sheet, and exploration looking to further enhance South Railroad’s resource on one of the more advanced development projects in the Great Basin, we believe Gold Standard Ventures current share prices provides a compelling entry point for shareholders to realize value as the project advances towards production,” the analyst said.

* Liberty Gold Corp. (LGD-T) with a “buy” rating and $2.70 target.

“Led by a team with a successful track record advancing mining projects and a strong technical understanding of Great Basin geology, Liberty Gold is steadily defining Black Pine’s potential to be one of the region’s next multi-million ounce gold deposits,” he said. “While the company’s Goldstrike project in Utah is more advanced and also holds promise, Black Pine’s greater scale and potentially easier development path is rightfully taking center stage, and in our view is the most significant value drive for the company.”


In other analyst actions:

* Canaccord Genuity analyst Luke Hannan initiated coverage of Vintage Wine Estates Inc. (VWE.U-T, VWE-Q) with a “buy” rating and US$17 target, exceeding the US$16 consensus on the Street.

“We believe VWE is poised to capitalize on secular trends that will lead to material margin expansion and free cash flow generation over the course of our forecast period,” he said. “With growth prospects among the highest in the beverage alcohol space, we believe the current valuation of 13 times our fiscal 2022 EBITDA estimate provides a compelling entry point for investors given that spirits and wine peers trade at 18 times.”

* Though its fourth-quarter results fell short of expectations, Canaccord’s Robert Young increased his target for shares of Evertz Technologies Ltd. (ET-T) by $1 to $16.50, exceeding the $16.33 consensus, with a “buy” rating, while Raymond James’ Steven Li hiked his target to $16.50 from $16 with an “outperform” recommendation.

“We continue to believe that the headwinds will prove temporary and that Evertz has the potential to emerge from the pandemic in a stronger competitive position,” Mr. Young said. “As well, management highlighted a more aggressive stance on M&A with a strengthening cash position. While challenges remain, we believe that Evertz is about to lap the low point seen in FQ1.”

* After marketing meetings with its management on Thursday, Raymond James analyst Frederic Bastien increased his target for shares of Russel Metals Inc. (RUS-T) to $37 from $32 with an “outperform” rating. The average is currently $33.04.

“With every end market relevant to RUS (but energy) back to pre-COVID levels, inventories remaining low across the steel supply chain, imports staying at bay thanks to effective section 232 measures, and domestic mills having little room to increase utilization further, we believe there is sufficient momentum to push the stock to new heights,” he said.

* In a research note titled Where there’s a will, there’s a way, RBC Dominion Securities analyst Robert Kwan raised his AltaGas Ltd. (ALA-T) target to $31 from $26, keeping an “outperformer” rating. The average target on the Street is $25.70.

“We expect the market to continue to drive AltaGas’ share price higher based on a more positive outlook for Midstream volumes and higher valuations for both Midstream and Utilities, partly driven by recent M&A in the sector,” he said. “On M&A, while it is not the primary strategy, we believe that AltaGas’ willingness to explore value-enhancing opportunities (e.g., asset sales; breaking up the company) will lead to investors being more likely to ascribe higher valuations for AltaGas’ assets (and stock) versus its peers that the market views as unlikely to take similar steps.”

* Raymond James analyst David Novak initiated coverage of Antibe Therapeutics Inc. (ATE-T) with an “outperform” rating and $7 target. The current average is $17.59.

“We believe ATE shares are well-positioned for a significant market re-rating over the next 12-months and thus view the company as an attractive investment opportunity for risk-tolerant investors,” he said.

* TD Securities analyst Tim James raised his Bombardier Inc. (BBD.B-T) target to $1.55 from $1.20, maintaining a “speculative buy” rating. The average is 96 cents.

“We believe that Bombardier’s business aviation franchise is strong and that there is potential for long-term EBITDA and FCF that justifies a higher share price. Although financial leverage remains high and elevates the risk profile of a standalone business jet company, we believe that risk-adjusted upside justifies acquiring the shares,” he said.

* TD’s Lorne Kalmar increased his American Hotel Income Properties REIT (HOT.U-T) target to US$4.75 from US$4.25, exceeding the US$3.78 average, with a “buy” rating.

“As Canada’s only publicly traded hotel REIT, we believe that AHIP has the most torque among any of the names in our coverage universe as the reopening theme continues to play out,” said Mr. Kalmar. “Although generally we see plenty of upside in the broader hotel/tourism industry as the pandemic subsides, we believe that there are several REIT-specific factors that should drive outperformance of the stock over the coming months, particularly as we enter the seasonally stronger travel season. As the U.S. reopens, AHIP has benefitted from the resurgence in domestic travel. With leisure demand expected to remain strong through 2021, we believe that the REIT’s portfolio is uniquely positioned to benefit from a double tailwind as corporate demand begins to pick back up over the latter-half of the year and into 2022.”

* TD’s Greg Barnes initiated coverage of Triple Flag Precious Metals Corp. (TFPM-T) with a “buy” recommendation and a Street-high $25 target, topping the $18.83 average.

* BMO Nesbitt Burns raised his Metalla Royalty & Streaming Ltd. (MTA-X) target by $1 to $15 with a “market perform” rating. The average is $14.35.

* JP Morgan analyst Kenneth Worthington raised his Brookfield Asset Management Inc. (BAM-N, BAM.A-T) to US$62 from US$57 with an “overweight” recommendation. The average is US$55.57.

* National Bank Financial initiated coverage of Gold Standard Ventures Corp. (GSV-T) with an “outperform” rating and $1.50 target. The average is currently $1.68.

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