A survey of North American equities heading in both directions
On the rise
Toronto-based Dye & Durham Ltd. (DND-T) rose 12.5 per cent on Monday after saying it has launched a strategic review of its non-core assets in an effort to reduce its debt.
The company says the review will examine a variety of options, including the potential sale of all or part of its non-core assets, including its financial services business.
Dye & Durham CEO Matthew Proud says the company is working closely with its financial and legal advisers to ensure the review is “comprehensive, diligent and maximizes value.”
The company cautioned that there’s no assurance the review will result in a transaction.
Dye & Durham is a provider of cloud-based legal practice management software.
It has operations in Canada, the United Kingdom, Ireland, Australia and South Africa.
In a research note, BMO analyst Thanos Moschopoulos said: “DND has previously said that it views its financial services infrastructure business as non-core. The business nonetheless has some positive characteristics, in our view (high margins, strong competitive position in its market segments, and a revenue base that we believe is less cyclical than some of DND’s other businesses). We believe the business might be generating perhaps $60-million of annual EBITDA (i.e., just over 20 per cent of DND’s total), although this is unclear. ... All else equal, we’d rather see our M&A stories get bigger, not smaller. That said, given DND’s current depressed valuation (6.5x CY2024E EV/EBITDA) we do think that a sale of the financial infrastructure business would be likely to unlock value.”
“DND’s leverage has been the key issue weighing on the stock, in our view; consequently, we believe that deleveraging through an asset sale would potentially be positive for the share price—contingent on the details of such a transaction.”
Q4 Inc. (QFOR-T), a Toronto technology company that sells digital tools that public companies use to host shareholder meetings, soared 34.5 per cent after it said it had signed an agreement to end its own two-year run as a public company - the sixth such TSX-listed tech company to do so out of the 20 that went public from mid-2020 through late 2021.
Q4 agreed to a buyout at $6.05 a share by Sumeru Equity Partners, a San Mateo, Calif private equity firm with two other investments in Canada, valuing the company at $257-million. That represents a 36-per-cent premium to Q4′s last closing price on Friday but is barely half of the company’s issue price of $12 a share in October 2021. Investors holding about 34.1 per cent of the stock, including CEO Darrell Heaps, private capital investment firm Ten Coves Capital, director Neil Mudoch and another undisclosed shareholder will roll over their shares and maintain their ownership stake once the deal is done.
Q4 follows MindBeacon Holdings Inc. and Dialogue Health Technologies Inc. which agreed to takeovers well below their issue prices in 2021 and 2023 respectively and BBTV Holdings, which has agreed to a go-private transaction led by CEO Shahrzad Rafati last month at 37.5 cents a share, down more than 97 per cent from the October 2020 issue price.
Online automotive marketplace E Automotive Inc. announced its voluntary delisting from the TSX earlier this year, while private equity giant Thoma Bravo bought Magnet Forensics Inc. for $1.8-billion at $44.25 a share in April, well above its $17 a share IPO price in 2021. That deal materialized after Thoma outbid the Waterloo company for another cyber-investigations software company, then subsequently offered to buy Magnet as well and merge the two businesses under the Canadian company’s leaders Adam Belsher and Jad Saliba, rolling some of their shares and those of chairman Jim Balsillie into the merged company.
- Sean Silcoff
U.S. energy major Exxon Mobil (XOM-N) increased 1.1 per cent after it said on Monday it plans to start producing lithium by 2027 in Arkansas, amid growing demand for the metal used in electric vehicle batteries.
Exxon’s expansion into the sector comes as emerging technologies aim to boost global production of the ultralight metal by filtering it from salty brine deposits found across the globe and supplying it to battery makers eager for fresh sources.
The company had acquired the rights to 120,000 gross acres of the Smackover formation in southern Arkansas earlier this year.
Exxon, which invented the rechargeable lithium-ion battery in the 1970s, but stepped away from the technology, said the product offer will be branded as Mobil Lithium.
Exxon said it would use conventional oil and gas drilling methods to access lithium-rich saltwater from reservoirs about 10,000 feet underground and then use direct lithium extraction (DLE) technology to separate lithium from the saltwater.
The company has also been testing unproven DLE technology that will be crucial for commercial operations, according to a source cited in the report.
Boeing Co. (BA-N) gained on Monday after a report said China was considering ending its freeze on purchases of the planemaker’s best-selling 737 MAX aircraft after more than four years.
This, coupled with bumper jet orders from Middle Eastern airlines at the Dubai Airshow, sent Boeing shares up 4 per cent. Supplier Spirit Aerosystems (SPR-N) also rose 2 per cent.
China is considering resuming purchases of Boeing’s 737 MAX aircraft when the U.S. and Chinese presidents meet this week at the APEC summit, Bloomberg News reported on Sunday, citing people familiar with the matter.
The resumption of 737 orders from China would be meaningful to Boeing’s bottom line over the next six to 18 months, said Thomas Hayes, chairman of hedge fund Great Hill Capital.
Deliveries of Boeing’s bestselling 737 MAX to Chinese airlines were halted following two deadly crashes.
Boeing also secured orders for 125 widebody jets worth more than $50 billion from Emirates and its sister airline flydubai at the opening of the Dubai Airshow on Monday.
Demand for the industry’s biggest jets that dominated the region’s airports is humming after a prolonged cyclical downturn followed by the damaging effect of COVID-19 on long-haul travel.
Carriers have been placing orders with urgency as planemakers’ backlogs have grown and as jet deliveries have been pushed out toward the end of the decade.
“Potential reopening of the 737 in China for Boeing and the contracts at the Dubai Airshow is all kind of the perfect combination of optimism and positive outlook that the stock has been needing for many months where it has underperformed,” Mr. Hayes added.
Trading app operator Robinhood Markets Inc. (HOOD-Q) was up 1 per cent after Google-parent Alphabet (GOOGL-Q) said on Monday it had dissolved its stake in the company.
The disclosure comes months after Alphabet slashed its stake in the company by nearly 90 per cent. It had around 612,214 Robinhood shares after that sale.
Alphabet had reportedly invested in Robinhood when the latter was an unlisted startup that had captured the enthusiasm of retail traders with its commission-free trades and easy-to-use interface.
As economic conditions turned murky because of the Federal Reserve’s rate hikes last year, the app lost some of its charm as its customer base stayed on the sidelines.
In its third-quarter earnings report last week, Robinhood missed Wall Street estimates for revenue, weighed by a slowdown in trading.
On the decline
First Quantum Minerals Ltd. (FM-T) slid almost 4 per cent after saying it has started to reduce ore processing operations at its Cobre Panama mine due to a blockade by small boats at the mine’s port as protests against the company’s new mining concession agreement continue.
The company says it is ramping down one ore processing train while two remain operational.
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Shares in First Quantum have plunged in recent weeks as people in Panama have been protesting the operating agreement between the company and the government for the mine.
The scale and scope of the deal have raised nationalist anger as well as environmentalist objections.
First Quantum says the blockade by the boats has affected the delivery of supplies for the mine’s on-site power generation plant, which is necessary for full operations.
It has also affected the loading of copper concentrate onto ships.
Mississauga’s Cargojet Inc. (CJT-T) dipped 1.6 per cent after announcing founder and chief executive Ajay Virmani is stepping down and moving to the role of executive chair at the start of next year.
In his new job, the air cargo carrier says Mr. Virmani will focus on strategy, strategic customer partnerships, acquisitions of major assets including aircraft and corporate governance.
Mr. Virmani will be replaced by a pair of longtime Cargojet executives.
The company says chief corporate officer Pauline Dhillon and chief strategy officer Jamie Porteous will become co-chief executives, effective Jan. 1, 2024.
Both Ms. Dhillon and Mr. Porteous have been with the company since its start 22 years ago.
Cargojet provides air cargo services across North America with a fleet of over 40 aircraft.
Novo Nordisk shares (NVO-N) closed 0.4 per cent lower on Monday as the market reacted to data the drugmaker presented over the weekend showing that the heart protective benefits of its popular obesity drug Wegovy are not solely due to weight loss.
The data presented on Saturday at a major medical meeting in the United States gave investors and analysts even more confidence in the cardiac benefits of Wegovy after Novo released preliminary data in August from its large study, sending its shares soaring 17 per cent on the day to record highs.
The data released in August from the Danish drugmaker’s Select trial demonstrated that Wegovy, which has been shown to help patients lose an average of 15 per cent of their weight, also reduced incidence of heart attack, stroke or death from heart disease by 20 per cent.
Full results from the study showed that the heart risk difference between patients who received Wegovy, known chemically as semaglutide, and those on placebo began to appear almost immediately after starting treatment.
Markus Manns, a portfolio manager at Union Investment in Germany and Novo shareholder, told Reuters that the early cardiovascular benefit was a “positive surprise” that could be an important differentiator against competing drugs being developed by companies including Amgen (AMGN-Q) and Pfizer (PFE-N).
U.S. meatpacker Tyson Foods (TSN-N) forecast revenue for its next fiscal year below Wall Street estimates after fourth-quarter sales missed expectations due to falling chicken and pork prices and slowing demand for its beef.
The biggest U.S. meatpacker by sales beat expectations for quarterly profit though, and said performance at its businesses improved during the second half of fiscal 2023, but its shares turned lower in afternoon trading and finished down 2.8 per cent.
Tyson’s beef, pork and chicken units all faced challenges simultaneously in 2023 from supplies that were either excessively tight or large, executives said.
Demand also suffered from a strong dollar limiting U.S. beef exports and American consumers cutting back on some meat purchases as higher food prices and interest rates pressured household budgets.
Tyson is operating more efficiently, however, and demand for protein remains strong, CEO Donnie King told analysts on a call.
“We expect fiscal ‘24 to be better year-over-year in cash flow and profitability,” he said.
Tyson has been cutting jobs and closing U.S. chicken processing plants to control costs, and sources said in August the company was planning to sell its China poultry business.
Chief Financial Officer John R. Tyson said in an interview on Monday that it is “business as usual” in China. When asked whether the meatpacker will close more U.S. plants, he said “we continue to evaluate everything.”
Tyson reported operating margins of 1.8 per cent in its chicken business in the quarter ended Sept. 30, after losses during the previous two quarters.
“It appears investors are encouraged by the sequential improvement this quarter and are optimistic that the protein market bottomed a few quarters ago,” said Arun Sundaram, senior equity analyst at CFRA Research.
Tyson expects total sales to be flat in fiscal 2024 from the previous year’s US$52.88-billion. Analysts on average expect sales of US$54.40-billion, according to LSEG data.
Fourth-quarter sales fell 2.8 per cent to US$13.35-billion, below analysts’ estimates for US$13.71-billion. Adjusted profits were 37 US cents per share versus analysts’ expectations for 29 US cents.
With files from staff and wires
David Leeder