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

ATB Capital Markets analyst Chris Murray has increased confidence that Bombardier Inc.’s (BBD.B-T) operations and recent refinancing moves will provide “a three-year window for operating results to grow into the balance sheet.”

Accordingly, following last week’s announcement of an order for 20 Challenger 3500 private jets valued at US$534-million, he upgraded his rating for its shares to “outperform” from “speculative buy.”

“While the buyer was not disclosed, we believe that it is likely one of the larger fractional operators placing the order,” said Mr. Murray. “We continue to see demand continuing to remain robust, with expectations that backlogs are likely to grow as we enter an upswing in the cycle. We are expecting additional news flow and additional orders in the coming weeks with the NBAA Business Aviation Convention & Exhibition from Oct. 10 to 14 and the upcoming earnings report scheduled for Oct. 28. Historically, share prices and valuation have correlated with backlog growth, which we see accelerating this year and into 2022.”

In response to the order, Mr. Murray raised his book-to-bill ratio projection to 1.4 times in 2021 (from 1.2) and 1.2 times in 2022 (from 1.1), which he projects will lead to a backlog of $12.6-billion and $13.7-billion, respectively.

“While we are not forecasting any additional production rate increases (we maintain our 135 aircraft 2022e for deliveries up from our 2021e of 120 aircraft) we believe the higher order intake level would support run rate increases in late 2022 and 2023 as the Company looks to keep delivery lead times in the 12 to 18-month window. With higher order intake, we also make modest cash flow assumption tweaks with a higher level of advance.”

With the recent derisking of its balance sheet, Mr. Murray raised his target for Bombardier shares to $2.50 from $2. The current average on the Street is $1.89, according to Refinitiv data.

“After closing a series of new debt issues in Q2/21 and Q3/21, the Company repaid remaining maturities through 2024. These transactions provide for greater financial flexibility on a go-forward basis, allowing investor focus to shift towards operational factors and management’s ability to deliver to its longer-term growth and FCF targets, which are increasingly looking attainable given the strength in demand.”


In his weekly research note on TSX-listed energy infrastructure companies, IA Capital Markets analyst Elias Foscolos made a pair of ratings changes.

Citing its elevated related risk profile, he lowered Secure Energy Services Inc. (SES-T) to “speculative buy” from “buy” after a change to his coverage universe. He maintained a target price of $6.50, which falls below the current average target of $6.73.

“With the pending privatization of Inter Pipeline (IPL-T) by Brookfield Infrastructure Partners L.P. (BIP-N/BIP.UN-T, US$56.71, Strong Buy, Target US$70.00; covered by Naji Baydoun) we have elected to discontinue coverage,” said Mr. Foscolos. “This, among other events, has led us to reclassify Secure Energy Services as a Midstream comparable as its merger with Tervita has positioned the Company as a more direct comparison to Midstreamers as opposed to Energy Services. ALA’s business resilience and utility concentration highlighted by its dividend increase last year have motivated us to formally reclassify it as a utility.”

He added: “For risk-tolerant investors, SES provides significant potential upside.”

In response to recent share price weakness, he upgraded Superior Plus Corp. (SPB-T) to “buy” from “hold” with a $16 target, down from $16.50 and below the $16.40 average.

Mr. Foscolos also made these target changes:

  • Enbridge Inc. (ENB-T, “buy”) to $56 from $55. Average: $54.84.
  • Canadian Utilities Ltd. (CU-T, “buy”) to $38 from $39. Average: $37.19.
  • Hydro One Ltd. (H-T, “buy”) to $34 from $35. Average: $33.17.
  • Parkland Fuel Corp. (PKI-T, “strong buy”) to $50 from $52. Average: $50.25.

“During Q3, returns in our coverage universe averaged the TSX with variation within sub-sectors,” he said. “Overall, the Pipelines, Midstreamers and Utilities outperformed with the exception of ALA and GEI. The Fuels stocks, PKI and SPB, declined 10 per cent. Compared against our E&P coverage universe, which posted an average return of approximately 15 per cent during Q3, returns in our Infrastructure coverage universe did not benefit from the underlying surge in commodity prices.”

“Although Fuels stocks PKI and SPB had a rough Q3 (and year-to-date for PKI), we believe this sector has the most upside when compared to our coverage universe. At current valuations, both companies are now at risk of being taken private. Pipelines still have a positive fundamental outlook with solid upside and attractive dividend yields while the Midstreamers vary in outlook with differing risk profiles. We remain constructive on our outlook for the Utilities sector as it provides what investors crave, stability, despite FX and inflationary headwinds.”

Mr. Foscolos reaffirmed a trio of top picks: TC Energy Corp. (TRP-T, “strong buy” and $72 target), AltaGas Ltd. (ALA-T, “buy” and $30) and Parkland Fuels.


GFL Environmental Inc. (GFL-T) is likely to continue to benefit from a deep acquisition pipeline combined with a favorable outlook for the waste sector, which bodes well for organic growth and improving FCF conversion,” according to CIBC World Markets’ Kevin Chiang.

He was one of several equity analysts on the Street to raise his target for the Vaughan, Ont.-based company following an update to its M&A plans on Friday that coincided with the acquisition of Peoria Disposal Company and affiliates.

“At the beginning of the year, GFL provided guidance that included opportunities to acquire up to $280-million of revenue through incremental M&A,” said Mr. Chiang. “With the 31 acquisitions closed year-to-date, together with another acquisition expected to close in mid-October, GFL has acquired $715-million of revenue, or $340-million of revenue excluding the acquisition of Terrapure. The key asset acquired in GFL’s recent update was Peoria Disposal Company Acquisition (PDC). PDC owns a vertically integrated network of assets in Central Illinois and Eastern Missouri. We estimate PDC’s revenue is US$120-million with margins in the mid-30-per-cent range. While GFL did not disclose the purchase price, the company has indicated in the past that platform/vertically integrated assets typically transact in the low-double-digit EBITDA multiple range. We also see synergy upside as GFL integrates PDC, including optionality around landfill gas capture.”

To reflect its recent M&A and financing activity and updated FX outlook, the analyst increased his 2021 and 2022 EBITDA projections to $1.434-billion and $1.702-billion, respectively, from $1.401-billion and $1.636-billion. He also introduced a 2023 forecast of $1.845-billion.

That led Mr. Chiang to raise his target for GFL shares to $53 from $48 with an “outperformer” rating. The average is $44.68.

Others making adjustments include:

* BMO Nesbitt Burns’ Devin Dodge to US$42 from US$40 with an “outperform” rating.

“Industry M&A remains elevated and we expect GFL will continue to be one of the more active consolidators. Layering in a favourable outlook for organic growth in its solid and non-solid waste operations, margin improvement potential and strengthening FCF profile, we believe the shares offer compelling upside. GFL is one of our preferred ideas in our Industrials coverage,” he said.

* Scotia Capital’s Mark Neville to US$45 from US$41 with a “sector outperform” rating.

“The company continues to cite a robust M&A pipeline, with additional debt and committed equity capacity – so, expect more to come. We also view GFL Renewables as a large (i.e., multi-billion value) opportunity,” said Mr. Neville.


Stifel analyst Alex Terentiew thinks Great Bear Resources Ltd.’s (GBR-X) Dixie gold project in the Red Lake District of Ontario has “not only what it takes to become a mine, but become a coveted asset in any gold producer’s portfolio.”

After a recent site tour, he called it “a gold project that will be built, has too many positive attributes to ignore for the serious, committed companies in the industry, and if Great Bear isn’t the ultimate owner, a third-party bidder for the company and project will eventually emerge.”

Touting its grade, size, location, long-life and development and operating optionality, Mr. Terentiew sees the potential for “a cornerstone asset, with strong margins, in a coveted jurisdiction.”

Keeping a “speculative buy” rating, he hiked his target to $27 from $22. The average on the Street is $26.53.

“As we have previously stated, we believe Dixie’s grade, tonnage (size), location and, importantly, development and operating flexibility, create valuable options for any gold miner looking to generate high margins and a quick payback,” he said. “For these reasons, we believe Dixie has attractive attributes that most other projects simply don’t have.”


Desjardins Securities analyst David Newman expects Ag Growth International Inc. (AFN-T) to benefit from an “acceleration” in backlogs and trade sales, particularly in its Commercial U.S. and International businesses.

In a research report previewing its third quarter, he raised his earnings before interest, taxes, depreciation and amortization (EBITDA) by $1-million to $44-million (versus a $51-million consensus).

“The margin headwind from steel remains (vs a relatively muted impact in 2Q21; AGI has substantially executed price increases to cover),” said Mr. Newman. “Backlogs continue to build, with 4Q likely to reap the golden fields of demand (higher than 3Q), aided by margin normalization.”

“Backlogs have increased sequentially (vs an already-robust 2Q level of up 69 per cent year-over-year), with generally strong momentum across the board, aided by low global crop supplies, elevated crop prices, supply challenges and the need for redundancy. Despite drought conditions impacting crop yields in western Canada (may impact storage sales (less than 10 per cent of AGI’s sales), Canada has been resilient, with overall strength in Farm North America (skewed to U.S.). The Commercial U.S. backlog should maintain its triple-digit year-over-year growth, with Food platform demand rising unabated. The backlog in Brazil is extremely strong given rising acreage and yields, strong demand and market share gains (AGI holds a 15-per-cent share, behind Kepler Weber, but is gaining ground). India continues to grow quickly, while EMEA is also witnessing an improvement in backlog and sales. AGI may eventually consider further investment in Brazil and site consolidation in India (create low-cost mega-sites).”

Though he thinks the response to a pair of legal claims related to a silo collapse at North Vancouver’s Fibreco Export Inc. terminal have been “overdone,” Mr. Newman cut his target for Ag Growth shares to $49 from $54 in response to steep share price depreciation. The average on the Street is $45.38.

He reiterated a “buy” rating.

“While we have lowered our target price, we are increasingly bullish on AGI’s robust momentum across the globe, especially toward 4Q21 as sales accelerate and margins normalize. AGI offers a potential return of 80 per cent,” he said.

“We believe the name is a strong Buy at current levels.”


RBC Dominion Securiries analyst Joseph Spak raised his financial forecast for Tesla Inc. (TSLA-Q) following stronger-than-anticipated third-quarter delivery results.

On Saturday, it announced it delivered 241,300 vehicles in the three-month period, its highest quarterly total thus far. It’s an increase of 20 per cent from the second quarter and a 73-per-cent year-over-year rise. The result beat both Mr. Spak’s estimate of 233,500 and the 222,000 consensus forecast on the Street.

“This represented a new quarterly record, increasing substantially from 2Q21 (previous record) driven by benefits from the ongoing MIC M3 and MIC Model Y ramp amid a very difficult supply environment and a sequential rebound in S/X deliveries from a particularly low 2Q21,” said Mr. Spak. “Model 3/Y deliveries of 232.0k (up 87 per cent year-over-year, 16 per cent quarter-over-quarter). Model S/X deliveries of 9.28k (down 39 per cent y/y, up 391 per cent q/q) better than 2Q21′s depressed levels. Production, which we believe was again an increased focus this quarter given ongoing (and worsening) semi (and other components) shortages, came in at 237.8k (8.94k S/X, 228.9k 3/Y). This represented a 15-per-cent q/q increase, aided by ramping S/X production, but 3/Y standalone also up 12 per cent q/q, a positive in our view and driven (we believe) by increasing Model Y output in Shanghai.”

Based largely on those results, Mr. Spak bumped up his third-quarter revenue estimate to US$14.4-billion from US$12.7-billion with his earnings per share projection moving to US$1.95 from US$1.68.

“We now model 262.5k deliveries in 4Q21 (consensus at 254k) bringing our 2021 forecast to 890k,” he said. “For 2022, we are at 1.2 million (low-single-digit percentages above consensus) though we did push out Cybertruck and Semi deliveries until 2023. Our 2025 delivery forecast remains 1.8 million units (consensus is 2.4 million) but we do forecast slightly higher revenue, EBITDA and EPS than prior as we tweaked ATP and margin assumptions.”

Keeping a “sector perform” rating for Tesla shares, Mr. Spak raised his target to US$755 from US$745. The average is US$687.84.

Elsewhere, Cowen and Co. analyst Jeffrey Osborne increased his target to US$580 from US$562 with a “market perform” recommendation.


Calling its Elmer project in Quebec “a company-changing deposit,” Paradigm Capital analyst Don Blyth initiated coverage of Azimut Exploration Inc. (AZM-X) with a “speculative buy” recommendation.

“Azimut Exploration has historically been a project generation company utilizing its proprietary big data analytics (AZtechMine system) to sort through publicly available data and generate exploration targets,” he said. “The common approach has been to modestly advance the targets and then attract third-party companies with joint ventures to let other companies do the bulk of the exploration spending. This business plan has served the company well, but Azimut has now found a project compelling enough to spend its own money to advance — the Elmer project.

“Azimut’s big data analysis had identified the Elmer project as highly prospective several years ago, but the project was already owned. When the prior owners let the exploration leases lapse, Azimut immediately re-staked the ground in mid-2018. The results of the first drilling campaign, reported in January 2020, hit on all seven holes, the best of which returned a core intersection of 102.0 metres at 3.15 grams per ton gold. Results to date appear to be showing a nice central thick high-grade core of mineralization developing at the Patwon zone. While a resource estimate has not been completed yet, we estimate the discovery is likely already close to 1Moz, and remains wide open at depth, and Patwon is just a small part of the larger Elmer property which we believe has multi-million-ounce potential.”

Currently the lone analyst covering the Longueuil, Que.-based company, he set a target of $3.25 per share.


In other analyst actions:

* With reductions to his estimates due to lower iron prices, Raymond James analyst Brian MacArthur cut his target for Labrador Iron Ore Royalty Corp. (LIF-T, “market perform” to $41 from $49 and Champion Iron Ltd. (CIA-T, “outperform”) to $7.50 from $8.50. The averages on the Street are $45.21 and $8.01, respectively.

* After lowering his third-quarter revenue due to ”softer demand through the summer months as the continued re-opening from the pandemic shifted some consumer demand,” Haywood Securities analyst Neal Gilmer cut his Cresco Labs Inc. (CL-CN) target to $20 from $20.40 with a “buy” rating. The average is $23.92.

“Cresco continues to drive growth in its wholesale business while simultaneously delivering impressive retail metrics. We remain positive on the outlook for continued growth and expanding margins,” he said.

* Eight Capital analyst Graeme Kreindler reduced his Trulieve Cannabis Corp. (TRUL-CN) target to $95 from $100, keeping a “buy” rating. The average is $86.40.

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