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

Though 2019 is likely to be a “transition” year for Aimia Corp. (AIM-T) after the sale of its flagship Aeroplan program, Industrial Alliance Securities analyst Neil Linsdell raised his rating for its stock following Thursday’s strategic update and release of quarterly results.

“With Aeroplan now divested, Aimia is focusing on using its acquired knowledge and experience in building and managing loyalty programs to invest in and consolidate other loyalty programs around the world,” said Mr. Linsdell, adding he expects its restructuring to turn a profit by 2020.

"The remaining Aimia operations generated a $57-million adjusted EBITDA loss in 2018 (including an $18-million distribution from PLM). The Company will continue to right-size operations through 2019, including reducing full-time employees from 640 at the end of February, to 550 by the end of 2019."

Moving the stock to "buy" from "speculative buy," Mr. Linsdell increased his target price for Aimia shares to $5.50 from $5. The average on the Street is $4.21.

“Although we currently assign zero value in our target price calculation for the Canadian Loyalty Solutions (CLS) and Insights & Loyalty Solutions (ILS) business units, we ultimately expect a positive contribution as we rework our model,” he said. “We believe the remaining parts, that we estimate to provide $5.50 per share in current value, provide a substantial enough base to justify upgrading our recommendation.”


Dollarama Inc. (DOL-T) is “hurrying hard to keep winning,” said Raymond James analyst Kenric Tyghe following Thursday’s release of quarterly results that fell short of expectations.

"The earnings miss on EPS of $0.54 versus consensus of $0.55, as highlighted by the share price reaction, was less of a focus for investors (as was expected), than the read through to fiscal 2020 given what we believe was a very low (for Dollarama) conviction on both the print and outlook," said Mr. Tyghe in a research note released Friday. "Sales of $1.060-billion (for growth of 13.0 per cent) were were a touch below consensus of $1.071-billion, with essentially in line comparable store sales growth of 2.6 per cent, masked by the extra week's (which was weaker than expected) contribution to sales growth. Gross margin compression (103 basis points) reflected continued investments in the absolute (given heightened consumer caution), and relative (given competitive dynamics) value proposition. The gross margin compression dovetailed with a modest increase in SG&A margins (reflecting the extra week in the quarter and higher expenses related to store openings), for essentially in line EBITDA of $273.2-million (versus consensus of $277.2-million).

“We believe that a key piece of the puzzle is that the investment in the value proposition is about playing smarter offense, in a game which has gotten tougher as the macro has weakened, versus key competitors suddenly outplaying Dollarama (which is one of the fears). That Dollarama is able (at the midpoint) to guide to 3.0 peer cent comparable store sales growth, and square footage growth of 5.3 per cent in this environment on relatively modest investment in the value proposition, in our opinion, speaks to the strength of the model (and the probability of an acceleration in comp store growth into fiscal 2021). We believe ticket growth through fiscal 2020 be complimented by modest traffic increases (long a challenge) on key planned initiatives.”

With the results, Mr. Tyghe lowered his earnings per share projections for fiscal 2019, 2020 and 2021 to $1.67, $1.84 and $2.05, respectively, from $1.68, $1.92 and $2.16.

Maintaining an "outperform" rating, his target declined to $40 from $42, while the average on the Street is $39.21.

“We believe that our target multiple appropriately reflects a smaller valuation premium to key U.S. peers, given the current visibility on Dollarama’s relative earnings power and positioning, in an increasingly competitive market,” he said.

Meanwhile, National Bank Financial analyst Vishal Shreedhar upgraded the stock to “outperform” from “sector perform” with a $41 target, up from $40.


Savaria Corp.'s (SIS-T) “story is quickly regaining momentum,” according to Desjardins Securities analyst Frederic Tremblay, noting its stock “remains attractively valued.”

On Thursday, the Laval-based manufacturer of wheelchair lifts, stairlifts, home elevators and accessible vans reported quarterly results that largely fell in line with expectations.

"There is a lot to like: (1) highly profitable growth in the core Accessibility business, (2) better-than-expected margins at Span, and (3) execution of a credible plan to integrate the strategic Garaventa acquisition," said Mr. Tremblay. "In our view, investors should take advantage of SIS’s attractive valuation as the business is quickly regaining momentum following some temporary challenges in 2018."

Maintaining a "buy" rating, he raised his target to $17.50 from $16. The average is $17.96.

"Despite a 6-per-cent share price increase following the 4Q release, SIS still trades at a discount to its average historical EV/EBITDA multiple of 13.4 times," said Mr. Tremblay. "We believe that solid execution should at least help narrow that gap."


Acquisition and strategic initiatives have positioned PRO Real Estate Investment Trust (PRV.UN-X) “well” for future growth, said Canaccord Genuity analyst Brendon Abrams following Wednesday’s release of “solid” fourth-quarter results.

"PRO is executing a proven, repeatable growth strategy," he said. "PRO has successfully gained scale by acquiring properties too big for smaller investors and too small for larger investors. The 'Goldilocks' approach focuses on secondary markets while larger Canadian investors are narrowing their focus to urban markets; this reduces competition for assets, allowing PRO to capitalize on highly accretive opportunities of well tenanted, high-quality commercial properties. PRO’s management team executed this strategy previously with Canmarc REIT, which was ultimately acquired for $1.9-billion."

The Montreal-based REIT's approval to graduate from the TSX Venture Exchange to the Toronto Stock Exchange has the potential to broaden its investor base, said Mr. Abrams, noting its intent to consolidate its units on a 3-for-1 basis.

Maintaining a "buy" rating, he raised his target to $2.50 from $2.25. The average is $2.44.

"We believe the units should trade at a premium to NAV to reflect the REIT's growth potential as it sources accretive acquisitions, particularly in the context of the current outlook for interest rates (dovish)," said Mr. Abrams. "Combined with a 9.1-per-cent distribution yield, our target price implies a one-year total return of 17.3 per cent."


A pair of equity analyst took opposing views on Mosaic Co. (MOS-N) on Friday with Minnesota-based fertilizer producer receiving both an upgrade and a downgrade.

Pointing to a weaker phosphate market and a lack of near-term catalysts, Citi analyst P.J. Juvekar lowered Mosaic to "neutral" from "buy."

“Following the MOS analyst day we feel phosphate fundamentals have weakened in the near term and are unlikely to pick-up significantly despite the company acting as a swing supplier by curtailing capacity,” said Mr. Juvekar. “A short-run spring rebound is still possible, but phosphate supply growth is still expected to outpace demand in 2019/20 unless China curtails capacity. Given these uncertainties we now see phosphate prices roughly flat over the next few years, which reduces our estimates and moves us to the sidelines.”

"New competitor capacity in Morocco and Saudi Arabia, which have lower cost structures, has forced MOS to defend pricing by idling capacity. Entering the spring, phosphate inventories were worse than potash and Argus is now reporting traders are considering re-exporting DAP out of the U.S. on weak demand. We think MOS management has done a tremendous job in lowering its costs, but market pressure has intensified. We initially applauded MOS’s most recent production cuts, but we now feel more could be necessary with the company acknowledging the market could be in surplus."

After lowering his earnings expectations through fiscal 2021, he dropped his target for Mosaic shares to US$30 from US$38. The average on the Street is US$37.

Conversely, though acknowledging near-term risks, Credit Suisse's Chris Parkinson upgraded his rating to "neutral" from "underperform" with a US$30 target, falling from US$31.

“We upgrade MOS ... on the back of: (i) only modest downside to Chinese cash operating costs, (ii) lower intermediate-term ammonia / sulfur costs, (iii) evidence of NT volume discipline by MOS/OCP to offset NA demand weakness, (iv) MOS further emphasizing long-term cost reduction programs (stabilizing rhetoric to combat NT price degradation), and (v) balance sheet stability / secure dividend,” he said. “We acknowledge that US flooding may keep pressure on the ag space in its entirety, but we fundamentally do not believe this changes any one co’s intermediate to long term value. Additionally, there is still a reasonable probability MOS will be forced to cut guidance on lower 1H P prices, but we haven’t had a conversation in the past 2 weeks (bull or bear) that doesn’t heavily weight this probability; at this juncture, we argue any future cut is simply a de-risking of the story for 2H19.”


In other analyst actions:

Haywood Securities analyst Neal Gilmer initiated coverage of Eve & Co Inc. (EVE-X) with a “buy” rating and 80-cent target.

"We believe that Eve & Co is well positioned to complete its greenhouse expansion that will enable the Company to scale up production towards 50,000 kg per year from the current 10,000 kg of annual capacity," he said. "In our view the recent credit facility with the Royal Bank of Canada helped de-risk the construction financing and enables to Company to move as quickly as possible towards completion. Pending Health Canada approval, which can be a bit of a wild card, Eve should be ramping up production towards the end of 2019 for a strong 2020. The Company currently has MOU’s in place with three provinces in Canada and an agreement with a German distributor to export internationally."

Cormark Securities analyst Jesse Pytlak cut CannTrust Holdings Inc. (TRST-T) to “market perform” from “buy” with an $11 target, which falls below the consensus of $16.94.

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