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A roundup of some of the North American equities making moves in both directions today

On the rise

Investment dealer GMP Capital Inc. (GMP-T) jumped 5.9 per cent after reworking the proposed $420-million takeover of its wealth management subsidiary on Thursday to reflect the realities of a post-pandemic market.

Back in February, Toronto-based GMP unveiled plans to swap its publicly traded stock for shares in partly-owned subsidiary Richardson GMP. Both companies feature Winnipeg’s Richardson family as a significant shareholder, and the restructuring has been playing out over the past two years.

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On Thursday, GMP Capital announced that as part of the transaction, its shareholders will receive additional 15 cents per share, or a total of $11.3-million, in a special dividend. GMP also said the Richardson clan will leave additional capital in the company to fund expansion by keeping $32.1-million invested in preferred shares, a holding the family was required to redeem.

- Andrew Willis

Apple Inc. (AAPL-Q) is readying a series of subscription bundles that will let customers sign in for several of the iPhone maker’s digital services at a lower monthly price, Bloomberg News reported on Thursday.

It shares rose 1.8 per cent in response.

The bundles, dubbed “Apple One” inside the Cupertino, Calif.-based company, are planned to launch as early as October alongside the next iPhone line, the report said, citing people with knowledge of the effort.

The bundles are designed to encourage customers to subscribe to more Apple services, which will generate more recurring revenue, according to the report.

Apple did not immediately respond to Reuters’ request for comment.

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Sales in Apple’s services segment, which also includes offerings such as iCloud and Apple Music, rose 14.8 per cent to US$13.16-billion, in the recently reported third quarter.

Natural gas producer Birchcliff Energy Ltd. (BIR-T) finished flat after reporting a $39.5-million second-quarter loss compared with a loss of $9.5-million in the year-earlier period.

The Calgary-based company says its loss in the three months ended June 30 amounts to 15 cents per share versus a loss of four cents a share a year ago and analyst expectations of a 14-cent loss, according to financial data firm Refinitiv.

The company says average production fell to 74,950 barrels of oil equivalent per day (76 per cent natural gas) in the second quarter from 78,450 boe/d in the same period of 2019 due to voluntary curtailments and plant maintenance work.

Birchcliff’s realized price for light oil and condensate fell sharply in the quarter (down 64 and 57 per cent, respectively) compared with the year-earlier period, but natural gas and natural gas liquids prices were slightly higher.

Industrial Alliance Securities analyst Michael Charlton said: “Birchcliff reported a reasonably solid Q2/20 given the overall environment producers had to navigate. Now with virtually all of the planned 2020 capital program completed, Birchcliff’s production should keep rising in the back half of the year with newly drilled wells on production and the liquids handling inlet at the Pouce Coupe plant now completed, and under budget to boot. Now we anticipate that the Company will continue to increase the efficiency of its business as it pushes forward towards free cash flow in 2021. Given that the Company has no near-term debt worries andthe flexibility to switch between rich-gas or oily targets depending on commodity prices, we would view any pullback in trading price as a potential opportunity as it trades at a significant discount to its internal estimated $605-million, or $2.27/share infrastructure asset value and our current estimated PDP less net debt valuation of $3.91/share with FCF on the horizon.”

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Chorus Aviation Inc. (CHR-T) soared 12.4 per cent as it reported its second-quarter profit fell compared with a year ago as the economic impact of COVID-19 took its toll on the company.

The regional aviation company says it earned $29.2-million or 18 cents per diluted share for the quarter ended June 30, down from $38.9-million or 24 cents per diluted share a year ago.

Operating revenue fell to $184.2-million compared with $332.5-million in the same quarter last year.

On an adjusted basis, Chorus says it earned 13 cents per share for the quarter, down from an adjusted profit of 15 cents per share a year ago.

The average analyst estimate had been for an adjusted profit of 11 cents per share for the quarter, according to financial markets data firm Refinitiv.

Canaccord Genuity analyst Doug Taylor said: “While income statement items remain steady, the focus of investors is likely to remain on the balance sheet where leases and the return of some aircraft from distressed airlines are impacting the conversion of profitability to cash flow. Collections have improved post quarter-end and the company has negotiated its own relief from lease portfolio-related debt payments. However, financial distress at certain lessees means the company has at least five aircraft being returned and needing to be released in an uncertain market. As we have said previously, the company’s liquidity combined with ongoing cash flow from the Air Canada CPA provide some insulation and should see the company through to better times.”

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Freehold Royalties Ltd. (FRU-T) increased 2 per cent in response to the release of in-line second-quarter results after the bell on Wednesday.

Raymond James analyst Jeremy McCrea said: “On April 9, FRU announced it would withdraw formal guidance and reduce its dividend by 71 per cent to focus on balance sheet strength. Although 2Q saw little operator activity, management indicated it was starting to hear from 3rd party operators that activity would likely pick up later this year. Combined with limited shut-in production (2Q volumes 16 per cent lower vs 1Q and 13 per cent lower from 2Q19) and commodity prices higher, we believe investors could very well expect to see the dividend be increased later this year. With leverage levels low and financing options limited for many 3rd party operators, we think there are likely many counter-cyclical opportunities that will allow FRU to grow its FFO/sh quicker than what currently is modeled by investors and the Street. With an inexpensive valuation vs. historically, we maintain our Outperform rating.”

AMC Entertainment Holdings Inc. (AMC-N) jumped 14 per cent after it announced it will start its first phase of reopening theaters in the United States from Aug. 20, covering more than 100 venues.

The world’s largest movie theater chain said it plans to open about two-thirds of its more than 600 theaters in the United States in time for the much-anticipated Christopher Nolan film Tenet, that is slated for a Sept. 3 release.

Movie theaters across the world have been shuttered since mid-March when several countries imposed lockdowns and social distancing measures to limit the spread of the COVID-19 pandemic.

Penn National Gaming Inc. (PENN-Q) rose 8.1 per cent after an equity analyst at Goldman Sachs raised the Pennsylvania-based casino and on-line betting company to a “buy” rating, touting its partnership with Barstool Sports.

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“We believe Barstool Sports’ embedded customer base and content creation engine will drive one of the lowest customer acquisition costs in the sports betting industry, allowing PENN to quickly take share within our proprietary iGaming and Sports Betting models,” said Stephen Gramblin.

He added: “”We believe the strength of the new customer has been driven by share of wallet shifts within leisure spending, as many forms of travel and entertainment are restricted. In fact, we estimate that more than $230 billion is up for grabs on an annual basis from these restrictions and changes in behavior.”

ECN Capital Corp. (ECN-T) soared almost 4 per cent after it reported total originations of US$676.4-million for the second quarter compared to US$598-million a year ago.

Its second-quarter net loss attributable to common shareholders of US$1.8-million compared to a profit of US$7.5-million for the same period last year.

Adjusted net income applicable to common shareholders from continuing operations of US$17-million or 7 US cents per share compared to US$16.6-million or 7 US cents per share for the same period last year.

Raymond James analyst Stephen Boland said: “ECN delivered strong results in a tough operating environment. The home improvement market has remained resilient, which was apparent in the results. The outlook for each operating subsidiary seems to be more positive than pre-pandemic, which is a result of new product initiatives and the balance sheet strength of the parent company. Service in particular is taking advantage of their weaker competitors and on-boarding a material number of new dealers. This has continued into July where originations were up 41 per cent year-over-year. We are raising estimates in both 2020 and 2021 as the pipeline for each subsidiary appears robust”

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Pollard Banknote Ltd. (PBL-T) jumped 9.9 per cent reported second-quarter sales of $91.5-million, compared to $97.1-million a year earlier.

Net income increased to $9.2-million $5-million a year ago. Net income per share was 36 cents per share versus 20 cents a year earlier.

Acumen Capital analyst Jim Byrne said: “In our view, the shares are attractively valued given the outlook for strong revenue growth and increasing penetration of iLottery sales, which should lead to some margin expansion over time.”

Thermo Fisher Scientific (TMO-N) rose 0.1 per cent after it said on Thursday it has terminated its agreement to buy Qiagen after its tender offer failed to get enough support from the investors of the German genetic testing company.

Thermo Fisher had in July sweetened its offer, valuing the company at 11.3 billion euros (US$13.38-billion) after pressure from some Qiagen investors, particularly after the German firm said it was seeing strong demand for products related to coronavirus testing.

Still, hedge fund Davidson Kempner had said it would reject the new offer as it “falls short of fair value.”

Thermo Fisher said the number of Qiagen shares tendered into the offer fell short of its threshold of 66.67 per cent. Only 47.02-per-cent Qiagen shares had been tendered by the acceptance period, which led to the offer lapsing, it said.

As part of the sweetened offer, Thermo Fisher had reduced the minimum acceptance threshold from 75 per cent of outstanding ordinary share capital.

Qiagen’s (QGEN-N) U.S.-listed shares were up 0.5 per cent.

On the decline

Brookfield Asset Management Inc. (BAM.A-T) slipped 1.9 per cent after it reported a loss in its latest quarter as it revalued its real estate portfolio lower amid the pandemic.

The alternative asset manager said most of its operations continued to generate favourable operating profits, but some of its operating businesses were affected by the economic shutdown in the second quarter.

Brookfield said the loss for the quarter attributable to shareholders amounted to US$656-million or 43 US cents per diluted share for the quarter ended June 30.

That compared with a profit attributable to shareholders of US$399-million or 24 US cents per diluted share in the same quarter in 2019.

Brookfield said that as emergency government aid put in place at the height of the pandemic tapers, it expects companies will increasingly be in need of cash and there will be opportunities for it to invest.

Brookfield Property Partners LP (BPY.UN-T) fell 1.4 per cent following a Wall Street Journal report that it has joined with Simon Property Group Inc. (SPG-N), the largest mall owner in the United States, in talks to acquire J.C. Penney Co.‘s retail business.

The report said the pair have eclipsed other interested bidders.

On Wednesday, Simon and licensing company Authentic Brands Group said it will purchase Brooks Brothers for US$325-million.

The venture, called Sparc Group LLC, initially offered US$305-million for the clothing company last month. It will continue running at least 125 Brooks Brothers retail locations as part of the deal.

The 200-year-old New York-based clothier, which has dressed nearly every U.S. president, filed for Chapter 11 bankruptcy in July.

Simon shares were down 2.6 per cent.

Lyft Inc. (LYFT-Q) dipped 5.4 per cent in the wake of posting a loss of US$437.1-million during the second quarter, when the coronavirus outbreak led many people to stay home and few were eager to use its ride-hailing service.

The San Francisco-based company’s revenue slumped to US$339.3-million in the April-June quarter, down 61 per cent from the same period last year, the company said Wednesday.

Its number of active riders declined 60% during the quarter as people shied away from travelling in shared vehicles.

“The facts of COVID-19 have been severe for our society and economy, as well as our own business,” said Logan Green, co-founder and CEO, in a conference call with investors. “While the recovery in our ridesharing business has not been a straight line, we’re seeing encouraging progress.”

Riders are increasingly using Lyft for essential trips such as doctor appointments and grocery runs, and as cities are forced to cut budgets and public transit use declines, Green said. He noted that rides were up 78% in July compared to April.

While business gradually improved, rides were down 70 per cent in May, 61 per cent in June and 54 per cent in July compared to last year.

Cisco Systems Inc. (CSCO-Q) fell 11.2 per cent after it forecast first-quarter revenue and profit below Wall Street estimates on Wednesday after the bell and laid out a restructuring plan, as the coronavirus crisis forced its clients to hold back spending.

The restructuring, which includes a voluntary early retirement program and layoffs, will begin this quarter, the company said, adding that it expected to recognize a related charge of about US$900-million.

On a conference call with investors, Chief Executive Chuck Robbins said Cisco also plans to reduce its expenses by US$1-billion on an annualized basis “over the next few quarters.”

Cisco did not specify how many jobs would be cut, but the move follows several previous rounds of layoffs as the company has moved to generate half of its revenues from software, a milestone executives said was achieved in the fiscal fourth quarter.

The company also announced that Chief Financial Officer Kelly Kramer will retire from Cisco, but will remain with the company until a successor is found.

Cisco expects current-quarter revenue to drop between 9 per cent and 11 per cent from last year, implying a range of between US$11.71-billion and US$11.97-billion, while analysts had expected US$12.25-billion.

It also forecast adjusted earnings of 69 US cents to 71 US cents per share, below estimates of 76 US cents, according to Refinitiv IBES data.

Southwest Airlines Co. (LUV-N) dipped 1.5 per cent after Chief Executive Gary Kelly said late Wednesday he does not expect the airline will be profitable in 2020 amid the coronavirus pandemic, snapping a 47-year streak of posting consecutive full-year profits.

“As long as the case counts are high, I think that we have to expect that travel will be relatively modest,” Mr. Kelly said at a Texas Tribune event. “We’re continuing to see traffic and revenues down 75 per cent versus a year ago today and to think that would recover to the point we would be profitable I just think is unrealistic.”

The company last month posted a US$915-million loss for the second quarter. Mr. Kelly said it is still burning through about US$20-million a day.

“We’re still losing cash every single day,” he said. “We’ve got a long way to go before we can feel like we are out of intensive care.”

With files from staff and wires

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