A roundup of some of the North American equities making moves in both directions today
On the rise
Calgary-based Surge Energy Inc. (SGY-T) jumped on the announcement after the bell on Tuesday of the $160-million acquisition of Astra Oil Corp.
Astra is a privately held, junior oil and natural gas producer focused on assets in southeast Saskatchewan.
In a research note, Raymond James analyst Jeremy McCrea said: “SGY’s above average leverage has been a material barrier to the shares garnering increased investor interest in the recent past. The acquisition of Astra’s Oil’s high quality light oil assets with minimal assumed debt in combination with steadily rising commodity prices will see the company right-size its balance sheet by year-end 2022, with management guiding to leverage of 1.0 times. With its balance sheet repaired, we believe that the company will be well-positioned to become a compelling cash return story for shareholders. The Astra deal also adds meaningful quick return inventory in a new core area (SE SK) which will help drive returns. Overall, the high-return (Frobisher/Midale) targets, in combination of SGY’s other conventional type inventory (Sparky/Doig) should drive meaningful profitability, debt repayment and FCF for years to come. Despite the challenges the company has faced over the last 18 months, the company does hold 10-years worth of what we believe is top-quartile inventory. It likely will take time for investors to recognize SGY’s asset quality given the company’s size (and recent past still fresh in investors’ minds). In time however, the deal looks to be accretive to long-term goals highlighted by the entry into a new core area with substantial inventory and attractive near term FCF profile.”
GlaxoSmithKline plc (GSK-N) rose in the wake of setting out plans on Wednesday to turn its consumer healthcare business into a separately listed company, aiming to strengthen drug development at its pharmaceuticals business with an 8 billion pound (US$11-billion) windfall.
Investors have been waiting for details of the separation, which was first unveiled in December 2018 when GSK agreed a joint venture for consumer brands such as Sensodyne toothpaste and Advil painkillers with Pfizer.
The demerger planned for the middle of next year will allow GSK to focus on bolstering a core drugs business, which has been hit by a lack of fast-growing products and patients deferring treatments due to the COVID-19 pandemic.
Despite being the world’s biggest vaccines maker, GSK has also been beaten by the likes of Pfizer, Moderna and AstraZeneca to making a COVID-19 vaccine.
“I am very aware that GSK shares have underperformed for a long period,” CEO Emma Walmsley told a news conference.
“Together, we are now ready to deliver a step-change in growth for New GSK and unlock the value of Consumer Healthcare,” added Ms. Walmsley, who plans to stay on after the demerger.
PVH Corp. (PVH-N) was higher after it said on Wednesday it would sell its Izod, Van Heusen, Arrow and Geoffrey Beene trademarks in a deal valued at about US$220-million, as it focuses on its Calvin Klein and Tommy Hilfiger divisions.
The deal with Authentic Brands Group includes the sale of some intellectual property and other assets of its heritage brands segment, with PVH exiting the business.
PVH will own and operate the intimates and underwear businesses, as well as the dress shirts and neckwear segments, the company said.
As part of the deal, expected to close in the third quarter of its 2021 financial year, PVH cut its annual sales forecast even as it reaffirmed its adjusted earnings outlook.
The company now expects annual sales growth of 22 per cent to 24 per cent, compared with its prior forecast of 24 per cent to 26 per cent.
On the decline
Empire Company Ltd. (EMP-A-T) slipped despite raising its dividend as it reported its profit in its latest quarter fell compared with a year ago when shoppers stocked up at the start of the pandemic.
The grocer, which operates the Sobeys and Safeway stores in Canada, says it will now pay a quarterly dividend of 15 cents per share, up from 13 cents.
The increased payment to shareholders came as the company says it earned a profit attributable to its owners of $171.9-million or 64 cents per diluted share for the 13-week period ended May 1.
The result compared with a profit of $177.8-million or 66 cents per diluted share in the same quarter last year which was boosted by six cents per share due to an unusual gain on the surrender of lease.
See also: Ottawa should toughen enforcement against wage-fixing in grocery sector, report says
Stocks linked to sports gambling, including Score Media and Gaming Inc. (SCR-T) and Bragg Gaming Group Inc. (BRAG-T), slid lower a day after big gains following the Senate’s approval of Bill C-218, a private member’s bill that amends Criminal Code provisions around gambling on single games — currently illegal except for horse racing — in a bid to win back customers from offshore sites, U.S. casinos and illegal bookmakers.
The upper chamber approved the bill Tuesday by a vote of 57-20. It now awaits royal assent to become law.
Conservative MP Kevin Waugh’s bill garnered renewed enthusiasm from legislators in all four main parties, and marks the third time a would-be law with the same goal has blazed a trail through Parliament — but never this far.
The bill passed the House with multi-party support in February.
Analysts at Credit Suisse said: “The biggest winner here, in our view, is SCR, which we think can generate 20-per-cent-plus share of OSB. While the stock is up materially over the last month, we think it still only captures a fraction of SCR’s long term potential. Legalizing single game betting is also a positive for other B2C operators, such as DKNG, MGM, PENN, which will likely launch in the Ontario market as well. With a population of 14.6 million, Ontario is a larger market than any US state where private operators are live (PA has a population of appoximately 13m, and IL has a population of 12.8m). Canada overall, we believe, is a $5-billion OSB/iGaming revenue opportunity, with Ontario first to allow private operators. Keep in mind SCR is not just an Ontario or Canada gaming play. We think the media business is worth $4-5/share (Action network sold for 6 times revenue and we think other media assets are valued for the same or more), SCR has $4 of cash on the balance sheet, and SCR is also licensed in 14 states in the US. While still early, we think Canada legalization also has implications for the U.S., as SCR now has a cash flow engine to help it opportunistically gain share in the U.S..”
Chipmaker Intel Corp. (INTC-Q) was narrowly lower after it said late Tuesday it would create two new business units that would focus separately on software and high-performance computing and graphics.
Intel also said current executives Sandra Rivera and Raja Koduri will take on new senior leadership roles, while technology industry veterans Nick McKeown and Greg Lavender will join the company.
Mr. Lavender, who most recently served as senior vice president and chief technology officer of VMware, will be the general manager of the new software and advanced technology group, while Mr. Koduri will lead an accelerated computing systems and graphics group.
Mr. Koduri, a veteran of Apple Inc and Advanced Micro Devices Inc, will lead the new group tasked with competing against rival Nvidia Corp, whose graphics chips have gained ground in data centers thanks to the rise of artificial intelligence and machine learning software.
While stumbles in Intel’s manufacturing operations have caused its flagship central processors to lag competitors, the company has taken a different approach with its graphics chips by allowing them to be manufactured elsewhere. Reuters reported earlier this year that Intel plans to tap Taiwan Semiconductor Manufacturing Co to better compete against Nvidia’s chips.
With files from staff and wires
David Leeder