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

Desjardins Securities analyst Michael Markidis is becoming “increasingly bullish” in his outlook for industrial relative to other property segments in 2021, leading him to raise his rating for Granite Real Estate Investment Trust (GRT.UN-T) to “buy” from “hold” after a period of outperformance.

“Year-to-date, GRT is the best-performing stock in our coverage universe (up 22 per cent total return vs down 11 per cent for the S&P/TSX Capped REIT Index),” he said. “However, the FTM FFO [forward 12-month funds from operations] yield spread is 40 basis points wider compared with the beginning of the year, despite: (1) unit price appreciation, and (2) the positive impact that COVID-19 has arguably had on industrial fundamentals globally.”

In a research note titled Giving credit where credit is due, Mr. Markidis emphasized the presence of “visible” organic growth after not having been negatively impacted by the COVID-19 pandemic. He sees “significant firepower,” estimating pro forma net leverage of 25-30 per cent and cash of more than $500-million after several transactions close in the fourth quarter.

Also believing the REIT has “demonstrated the ability to execute” after acquisitions of $1-billion in both 2019 and 2020, Mr. Markidis now projects FFO compound annual growth of 7 per cent from 2020-2022.

With his rating change, he hiked his target for Granite units to $85 from $79. The average target on the Street is $85.19.

“We believe the modest expansion to our target multiple (10–15-per-cent premium previously) appropriately reflects GRT’s (1) improving market cap and liquidity (it is now the third-largest REIT in the S&P/TSX Capped REIT index), (2) leverage profile (lowest in our coverage universe), (3) access to low-cost unsecured debt capital, and (4) distribution growth track record,” said Mr. Markidis.


Pointing to its “attractive” valuation, BMO Nesbitt Burns analyst Joanne Chen upgraded Boardwalk REIT (BEI.UN-T) to “outperform” from “market perform.”

“While we expect the outlook for Alberta to remain somewhat challenging given the depressed energy market, we believe significant further downside risk for BEI.UN is limited at current valuations,” she said.

“We are maintaining our NAV estimate but raising our target price for Boardwalk REIT, based on a lower discount (6 per cent from 10 per cent) to our NAV.”

Ms. Chen’s target rose to $41 from $39.25. The average is $40.48.


With iron ore prices continuing to rise, Raymond James analyst Brian MacArthur raised his financial expectations and target prices for shares of both Champion Iron Ltd. (CIA-T) and Labrador Iron Ore Royalty Corp. (LIF-T) on Monday.

“Iron ore prices continue to increase with P65 prices now over US$170 per ton,” he said. “In our view the recent prices reflect ongoing strong demand, lower-than-expected production forecasts from Vale in 2021 and recent cyclone warnings in Australia which highlight the potential for supply disruptions.”

Maintaining an “outperform” rating for Champion Iron, Mr. MacArthur raised his target to $5.50 from $5, which is the current consensus on the Street.

“We believe Champion offers investors good exposure to premium iron ore through its Bloom Lake asset, which is a long-life, lower-cost asset producing high-grade iron ore concentrate (66 per cent iron) located in Quebec, Canada, a lower-risk jurisdiction,” he said. “In addition, we believe Champion has potential for growth through its Bloom Lake Phase 2 expansion project at favourable capital costs, given the previous owners spent significant capital. Given Champion’s exposure to premium iron ore (which we believe should trade at a premium given structural changes in the iron ore industry), high-quality asset, growth potential, and low jurisdictional risk, we rate the shares Outperform.”

Also with an “outperform” recommendation for Labrador Iron Ore, Mr. MacArthur raised his target to $35 from $32. The average is $33.14.

“We believe Labrador Iron Ore Royalty Corporation offers investors good exposure to premium iron ore through its interest in and royalties on Iron Ore Company of Canada (IOC). Directly and through its wholly-owned subsidiary, Hollinger-Hanna Limited, LIF owns a 15.1-per-cent equity interest in IOC and receives a 7-per-cent gross overriding royalty on all iron ore produced from leased lands, sold and shipped by IOC and a 10-cents per ton commission on sales of iron ore by IOC,” the analyst said. “Given LIF’s exposure to premium iron ore (which we believe should trade at a premium given structural changes in the iron ore market), low jurisdictional risk and attractive dividend yield, we rate the shares Outperform. We also note additional value might be created if the royalty cash flows and other cash flows were split into separate companies in a tax-efficient manner given royalty companies historically trade at a higher multiple given their lower risk.”


Separately, Mr. MacArthur thinks Wheaton Precious Metals Corp.’s (WPM-N, WPM-T) Precious Metal Purchase Agreement with Capstone Mining Corp. (CS-T) in respect to the Cozamin Mine located in Zacatecas, Mexico provides near-term growth and exploration optionality.

Viewing the transaction, which was announced Friday before the bell, “positively,” he increased his target for Wheaton shares by US$1 to US$65. The average is US$60.19.

“Given our positive view of WPM’s high-quality and diversified asset base, high-margin and scalable business model, we rate its shares Outperform,” said Mr. MacArthur.

Elsewhere, BMO Nesbitt Burns analyst Rene Cartier raised his target for Capstone to $2.20 from $2 with a “market perform” recommendation. The average is $2.19.


Seeing sectoral tailwinds providing the potential for further multiple expansion, Laurentian Bank Securities analyst Nauman Satti raised his target for NFI Group Inc. (NFI-T) on Monday.

“As the new administration gears up for the White House, environmental concerns are expected to take center stage resulting in the Battery ETF (LIT) being up 21.5 per cent in one month while the Autonomous & EV ETF (DRIV) is up 25 per cent,” he said. “Although NFI is not a pure EV play, it benefits from a secular shift in industry. 10 per cent of NFI’s backlog is for zero-emission buses (ZEB) and an accelerated replacement cycle to ZEB bodes well for NFI.

“In the U.S., NFI directly competes with BYD, which has seen its NTM [next 12-month] EBITDA multiple expand by 49 per cent in 3-months vs. 24 -per-cent expansion for NFI. We recognize that BYD is also a battery manufacturer with a larger market opportunity but we believe those upsides were already baked into BYD’s higher multiple. We are only considering the percentage expansion of multiples and not the gap, which in our opinion should remain intact. We conservatively increase our target multiple by 7 per cent to 8.0 times, largely in-line with the 5-year NTM average.”

Touting its “downside protection in a world of stretched valuation,” Mr. Satti increased his target to $26 from $23 with a “buy” rating. The average is $21.71.

“Since our initiation in Sep 2020, NFI’s stock price has increased by 32 per cent and seen a multiple re-rating from 8.5 times to 10.5 times on NTM EBITDA,” he said. “We continue to believe that NFI’s EV offerings are not fully reflected in the stock price and we expect further multiple expansion based on the near to medium-term policy tailwinds and NFI trading at a discount to its peer group multiple.”


Though he deemed its updated three-year guidance “disappointing” in comparison to previous expectations, RBC Dominion Securities analyst Josh Wolfson said he continues to view for Kirkland Lake Gold Ltd.’s (KL-N, KL-T) long-term prospects “constructively,” while emphasizing “short-term operating an guidance execution is a key deliverable.”

“KL’s 3-year guidance outlines stable output in 2021/22 (1.3-1.4 million ounces/1.30-1.45 million ounces) and growth in 2023 (up 8 per cent to 1.41-1.55 million ounces),” he said. “Key guidance changes reflect a material downgrade to KL’s prior flagship Fosterville mine in 2021/22 by 190,000 ounces, partially offset by better-than-expected Detour Lake output (no prior guidance issued). KL has outlined Fosterville changes reflect a lengthening of high-grade processing, in our view partially driven by a lack of exploration success having materialized in 2019/20 and a prior material negative reconciliation to reserves in 1Q20 absent an adjustment to the mine plan. KL is seeking to maintain Fosterville production at this 325-400,000 ounces run rate longer-term, although similar to KL’s historical extrapolation of high output of 600,000 ounces, we view this new target output level remaining contingent upon high-grade exploration success. Our forecasts continue to incorporate Fosterville output less than 200,000 ounces by 2025.”

Mr. Wolfson continues to emphasize the potential for “meaningful” upside and an “improving profile” for its Detour Lake mine in Northern Ontario, however he trimmed his earnings per share estimates for 2021 and 20222 to US$3.15 and US$2.83, respectively, from US$3.26 and US$2.83.

That led him to cut his target for Kirkland Lake shares to US$55 from US$64, keeping an “outperform” rating. The current average is US$61.50.

“RBC updated forecasts incorporate slightly negative revisions (1 per cent to NAV and an average 3 per cent to ’21-23 estimated FCF), while KL remains well-positioned financially ($1-billion in net cash projected by year-end), and we forecast to generate competitive FCF of $620-million in 2021 (equivalent to 6.2-per-cent FCF/EV vs. peers at 6.0 per cent),” said Mr. Wolfson. “Our forecasts outline long-term grade headwinds at Fosterville over time and a decline in mine output to less than 200,000 ounces (down 400,000 ounces vs. current), although this could be fully offset by outlined upside at Detour Lake to more than 800,000 ounces by 2025 (up 225,000 ounces vs. current) and Macassa upside to more than 400,000 ounces by 2023 (up 200,000 ounces vs. current).

“Our forecasts exclude this Detour Lake upside, where an updated mine plan is scheduled to be issued in 2022. Prior to this long-term upside, we view execution as a key deliverable for KL, including the resolution of Macassa’s 3Q operating challenges and shaft project advancement, and the ramp-up and optimization of the Detour Lake mine. We note KL guided to weaker 1H21 results, in particular in 1Q, which could represent a short-term overhang.”

Elsewhere, National Bank Financial analyst Michael Parkin cut his target to $71 from $72 with an “outperform” rating.


After its first-quarter 2021 results fell short of his expectations, Canaccord Genuity analyst Doug Taylor Patriot One Technologies Inc. (PAT-T) said he’s “looking for better direction” from the firm’s new leadership team.

“October Q1 results continue to show a slower than anticipated commercial revenue ramp,” he said. “Shares traded down 8 per cent after results were released pre-market on Friday. With a new CEO at the helm – Peter Evans joined a month ago – we are looking for Patriot One to produce evidence that its products are achieving commercial success before we recommend the shares. With no evidence yet in the Q1 results, we are once again flattening our forecast.”

For the quarter, the Vancouver-based company reported revenue of $0.4-million, missing Mr. Taylor’s $0.7-million projection. He attributed the miss completely to its Xtract Technologies subsidiary.

“While the company’s multi-sensor gateway product was released in the quarter, the company continues to pursue initial deployments,” he said. “We note that the impact of COVID-19 on target markets has likely led to ongoing delays in hardware sales.”

Expecting the new management team to reveal an updated strategy to monetize its investments in next-generation threat detection in the months ahead, he trimmed his revenue estimates for both 2021 and 2022.

That led Mr. Taylor to lower his target for its shares to 50 cents from 75 cents. Mr. Taylor, currently the lone analyst on the Street covering the stock, kept a “hold” recommendation.

“Given significant uncertainty as to the timing and trajectory of the growth profile, we assume a relatively high 17.5-per-cent discount rate,” he said.


Citing a “clear uptick” in new machine orders over the past six weeks, Raymond James analyst Steve Hansen raised his target price for shares of Enwave Corp. (ENW-X), seeing “a pattern seemingly underpinned by improved customer confidence in the macro outlook, most notably in the food & snack related sectors.”

“Following an extended period of reduced order flow (since COVID emerged), the cadence (and scale) of EnWave’s machine orders have turned demonstrably higher in recent weeks, evidenced by the 5 new orders announced since early November, including one medium 60 kW machine (NuWave Foods) and one large 100 kW machine(Patatas Fritas),” he said. “Broadly speaking, we view this recent acceleration in new orders as a reflection of improved customer confidence in the macro outlook, most notably with key food-related customers—a theme we expect to carry into 1H21.”

Mr. Hansen also pointed to a “rising opportunity in the recently dormant cannabis sector,” leading him to raise his target to $1.60 with $1.20 with an “outperform” rating. The current average is $1.55.

“While EnWave shares have surged 75 per cent since Oct. 1 2020, we continue to see further upside as machine order momentum carries (accelerates) into 1H21,” the analyst said. “While retail headwinds linger, we are also cautiously upbeat over NutraDried’s 2021 growth prospects, underpinned by new distribution channel wins (i.e. grocery, mass retail) and the commissioning of the segment’s new REVworx platform.”


Calling 2020 an “unforgettable year for bank investors” and expecting to 2021 and 2021 to be “memorable ones” as well, BMO Nesbitt Burns analyst Sohrab Movahedi raised his targets for a trio of banks in his coverage universe on Monday.

“Amidst an unprecedented global economic recession, brought about by the coronavirus pandemic, the ‘Big 6′ delivered 12-per-cent ROE [return on equity] and improved their capital positions,” he said. “Industry profits in 2020 totalled $38.9-billion, down 18 per cent from 2019 with an overall industry CET1 ratio of 12.3 per cent (up from 11.7 per cent last year).

“Given our belief that earnings uncertainty around coronavirus has alleviated even if not completely subsided, we once again rely on P/E multiples to arrive at our target prices, and see potential for some further re-rating notwithstanding the recent multiple expansion since positive vaccine news. We believe the average bank index forward P/E should improve from current levels over the next number of years.”

His changes were:

  • Toronto-Dominion Bank (TD-T) to $75 from $70 with a “market perform” rating. The average target is $75.95.
  • Royal Bank of Canada (RY-T) to $111 from $106 with a “market perform” rating. Average: $111.89.
  • Bank of Nova Scotia (BNS-T) to $75 from $70 with an “outperform” rating. Average: $70.68.


In other analyst actions:

* Scotia Capital analyst Orest Wowkodaw raised his target for Cameco Corp. (CCO-T) to $19 from $16, keeping a “sector outperform” rating, following Monday’s announcement of a temporary suspension at its Cigar Lake uranium mine in northern Saskatchewan. The current average is $17.09.

While negative to near-term estimates, the closure could drive a brighter fundamental picture, with higher prices and more incentive for utilities to re-contract,” he said. “Overall, we view the update as mixed for the shares. CCO shares are rated Sector Outperform based on slowly improving uranium market fundamentals and the company’s well-positioned balance sheet.”

* Credit Suisse analyst Manav Gupta raised his target for Imperial Oil Ltd. (IMO-T) to $29 from $24 with a “neutral” rating. The average on the Street is $23.60.

We see dual tailwinds of wider light-light spread as well as an improvement in performance of Kearl working strongly in its favor. We believe, given the recent rally, the market is giving IMO some credit for the work it has done at Kearl, but the benefits of wider light-light spread to IMO’s refining are still underappreciated,” said Mr. Gupta.

* TD Securities analyst Cherilyn Radbourne lowered Finning International Inc. (FTT-T) to “buy” from “action list buy” with a $32 target, up from $27. The average is $27.13.

* TD’s Daryl Young raised his target for Major Drilling Group International Inc. (MDI-T) to $8.50 from $8, keeping a “buy” rating. The average is $9.71.

* CIBC World Markets analyst Chris Couprie increased his target for Slate Grocery REIT (SGR.UN-T) to $9 from $8.50, keeping a “neutral” recommendation, while BMO Nesbitt Burns’ Jenny Ma raised his target by a loonie to $8.50 with a “market perform” rating. The average is $8.58.

* KeyBanc analyst Eric Gonzalez raised his target for Restaurant Brands International Inc. (QSR-N, QSR-T) to US$66 from US$58 with an “overweight” rating. The average is US$63.70.

* H.C. Wainwright analyst Heiko Ihle cut his target for Western Copper and Gold Corp. (WRN-N, WRN-T) to US$2.25 from US$2.75 with a “buy” rating. The average is $2.42.

* TD Securities initiated coverage of Topaz Energy Corp. (TPZ-T) with a “buy” recommendation and $17 target, falling 63 cents below the consensus.

* BMO Nesbitt Burns analyst Daniel Salmon lowered Walt Disney Co. (DIS-N) to “market perform” from “outperform” with a US$185 target, up from US$165 and above the US$169.73 consensus.

“We believe improved vaccination rates could help DIS continue to be a solid ‘re-opening’ play, but with considerable multiple expansion recently for both initial vaccine news and Thursday’s direct-to-consumer (DTC) investor day, we step to the sidelines and NFLX retakes the Top Pick mantle (followed still by GOOG and AMZN in large/mega cap),” he said.

“To be sure, the Disney+ sub forecasts surpassed the most bullish expectations, and were supported by an incredible amount of new content.”

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