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

IA Capital Markets analyst Elias Foscolos thinks third-quarter earnings season for Canadian energy infrastructure companies held “few surprises,” falling largely in line with his expectations.

“From the market’s perspective, the day post-release of their results, eight stocks outperformed the TSX, two stocks were in line, and three underperformed,” he said. “Since reporting results, only four stocks, EMA, H, FTS and PPL, have outperformed, all by less than 2 per cent.

“On a relative performance to peers basis, the widest variance was seen in the Pipeline space where PPL was the outperformer while TRP underperformed. We attribute PPL’s outperformance to the fact that the outlook for 2022 EBITDA has strengthened. On the other hand, we peg TRP’s underperformance to the fact that it reset its dividend growth rate from 5-7 per cent to 3-5 per cent and for the time being, it is absorbing cost overruns on the Coastal GasLink pipeline.”

In a research note released Monday, Mr. Foscolos raised his rating for shares of AltaGas Ltd. (ALA-T) to “strong buy” from “buy” in response to recent share price weakness ahead of its first annual Investor Day event on Dec. 15, which he hopes will bring positive revisions its 2022 EBITDA guidance, a dividend increase, and growth capital program.

His target for AltaGas shares remains $30. The average target is $29.80.

“Despite the beat in Q3 EBITDA, we would generally categorize the overall financial results and near-term outlook as in line,” said Mr. Foscolos. “Approximately $20-million of the EBITDA pick-up in Q3 originated from the timing of a propane export cargo which will negatively impact Q4 results. ALA reiterated its 2021 normalized EBITDA guidance of $1.475-1.525-billion and its normalized EPS guidance of $1.65-1.80. Additionally, the Company is on track to reduce its debt ratio by 0.5 times by year-end. The Company revised its 2021 CAPEX program to $850-million (previously $910-million) with the difference attributed to a strong CAD and project timing. Approximately 85 per cent of capex is allocated to Utilities.”

Mr. Foscolos also raised his target for Emera Inc. (EMA-T) shares by $1 to $63 with a “hold” rating.

“EMA is on track to achieve its 2021 capital spending plan as it aims to grow its rate base at 7.5-8.5 per cent per year through 2023, and during the quarter the Company extended its 4-5-per-cent annual dividend growth guidance out to 2024,” he said. “We project it will take EMA beyond 2024 to lower its payout ratio into the desired 70-75-per-cent range. We believe EMA has a strong organic growth platform, mainly underpinned by its Florida-weighted rate base, which we believe provides positive investment fundamentals from the perspective of (a) energy transition, (b) population and economic growth, and (c) strengthening the grid against extreme weather events. However, we are cautious of the effect on earnings growth under a scenario where we see further relative strengthening of the Canadian dollar to the US dollar. Based on a multiple refresh we are increasing our target.”

He also reduced his targets a pair of stocks:

* Enbridge Inc. (ENB-T, “buy”) to $56 from $58 after a reduction to his 2023 EBITDA projection and a multiple reduction. Average: $55.75.

* TC Energy Corp. (TRP-T, “buy”) to $70 from $72 on a multiple refresh. Average: $68.33.

Looking at the macro picture, there are basically three tailwinds and two headwinds that will impact sector performance,” he said. “The tailwinds are: (a) the COVID-induced economic slowdown appears to be (mostly) behind us and consequently GDP growth is returning, (b) the underinvestment in oil and gas production has finally caught up with demand, forcing prices higher which should result in a buildout of infrastructure, and (c) decarbonization, which is a tailwind because the companies best positioned to lead this transition on a large scale are embedded in our coverage list. On the headwind side of the ledger are: (a) rising interest rates/inflation, and (b) supply change issues. Finally, a key issue virtually every will company face is the balance between organic growth opportunities versus dividend growth. In our opinion, the allergic reaction to issuing equity has to be put on the backburner if growth projects are as attractive as stated.”


After a third-quarter earnings miss, Canaccord Genuity analyst Aravinda Galappatthige downgraded EQ Inc. (EQ-X) to “speculative buy” from “buy,” citing “low near-term visibility” around its Paymi application and the fiscal 2022 impact of supply chain issues on the auto sector).

On Friday, the Toronto-based company, which provides real-time technology and analytics for Web, mobile, social and video advertising, reported revenue of $3.1-million, up 9 per cent year-over-year but missing Mr. Galappatthige’s $3.9-million estimate. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of a loss of $1.1-million also fell below the analyst’s forecast (a $0.1-million loss), due largely to an increased investment on Paymi.

“We believe that the top-line miss was largely due to the impact from the auto sector on account of the supply chain challenges affecting the broader space. Management indicated that purchase orders to the tune of $500k were paused in the quarter on this account,” said Mr. Galappatthige.

“In light of the soft quarter, we have lowered our estimates for F2021, and also moderated F2022. The company expects an incremental $1-million in headwinds emanating from supply chain issues in Q4. However, we still see 100-per-cent growth in the data solutions line from $4-million in F2021E to above $8-million in F2022E (ex Paymi). Much depends on the contribution from Paymi, which upon successful execution could contribute $3-5-million in revenue to F2022.”

Though he sees its balance sheet remaining in “decent shape,” the analyst also cut his target for EQ shares to $2 from $2.50. The average on the Street is $6.13.

Elsewhere, Echelon Capital analyst Rob Goff lowered his target to $2.15 from $2.40 with a “speculative buy” rating.

“We see our prior PT as a more likely 24 month objective,” said Mr. Goff. “We remain bullish on the optionality afforded to the recently relaunched Paymi loyalty platform. Unfortunately, the roughly $1-million investment estimated to relaunch and promote user growth on the Paymi platform coincides with a time where the supply chain headwinds are negatively impacting the growth of EQ’s core data analytics. Consequently, we have taken a modest trim to our PT and reduced near-term financials. The Company’s $9.8-million of cash leaves more than adequate flexibility for ongoing operations although it could lead EQ to raise additional funds should it successfully identify a larger on-strategy acquisition.”


Ahead of the start of fourth-quarter earnings season, CIBC World Markets analyst Paul Holden raised his financial projections for Canadian banks, expecting “positive” results driven by “loan growth, fee income, benign credit and capital distribution announcements.”

“We generally expect trends to be consistent with the previous quarter: solid loan growth, little movement on NIMs, fee growth, performing allowance releases, and softer capital markets revenue,” said Mr. Holden. “Overall, our estimates imply that adjusted EPS will be down nearly 4 per cent, on average, for the Big 6 relative to last quarter. Our forecasts have PTPP increasing 9 per cent year-over-year, on average.

“This is another quarter with a high degree of earnings uncertainty and a wide range of analyst estimates, but we have observed that the range of estimates for F2022 has narrowed. We calculate a range in estimates (high to low) of 17 per cent, on average, for FQ4. Our adjusted EPS estimates are 3 per cent higher than consensus, on average, which considering the range is not that far off from average.”

He raised his fiscal 2022 earnings per share projections by 2 per cent and 2023 by 6 per cent, pointing to “1) higher credit releases in F2022 (timing impact); 2) higher assumed mortgage growth in F2022; 3) NIM expansion from expected rate hikes; and, 4) additional share repurchases.”

“The group is trading at 9.5 times our F2023 estimates, on average, suggesting further upside when the market starts to price in NIM expansion and share repurchases. Our top picks are TD, BNS and CWB,” he said.

With those changes, Mr. Holden also increased our price targets for bank stocks by an average of 6 per cent.

His changes were:

  • Bank of Montreal (BMO-T, “outperformer”) to $157 from $148. The average on the Street is $146.25.
  • Bank of Nova Scotia (BNS-T, “outperformer”) to $96 from $90. Average: $89.13.
  • Canadian Western Bank (CWB-T, “outperformer”) to $46 from $44. Average: $42.33.
  • National Bank of Canada (NA-T, “neutral”) to $112 from $102. Average: $106.32.
  • Royal Bank of Canada (RY-T, “neutral”) to $149 from $145. Average: $144.63.
  • Toronto-Dominion Bank (TD-T, “outperformer”) to $108 from $99. Average: $95.23.


Credit Suisse analyst Fahad Tariq made a series of target price changes to gold stocks in his coverage universe.

His changes include:

  • Alamos Gold Inc. (AGI-N/AGI-T, “neutral”) to US$7.50 from US$8. Average: US$10.69.
  • Eldorado Gold Corp. (EGO-N/ELD-T, “underperform”) to US$9.50 from US$8.75. Average: US$15.32.
  • Iamgold Corp. (IAG-N/IMG-T, “neutral”) to US$3 from US$2.50. Average: US$3.34.
  • Kinross Gold Corp. (KGC-N/K-T, “outperform”) to US$8 from US$7.50. Average: US$9.51.
  • Kirkland Lake Gold Ltd. (KL-N/KL-T, “neutral”) to US$42 from US$44. Average: US$45.25.
  • New Gold Inc. (NGD-N/NGD-T, “neutral”) to US$1.70 from US$1.30. Average: US$1.80.


Solaris Resources Inc.’s (SLS-T) wholly owned Warintza copper-molybdenum-gold project in Ecuador is “quickly shaping up to be a top-tier asset with the potential to offer size, grade, and growth in proximity to established infrastructure,” according to BMO Nesbitt Burns analyst Rene Cartier.

Seeing it also benefitting from benefits from “supportive and established” equity backers, he initiated coverage of the Vancouver-based company with an “outperform” recommendation on Monday.

“An inferred resource was previously disclosed at the asset; however, given the significant amount of drilling by Solaris, we expect to see meaningful growth when an updated resource is released,” said Mr. Cartier. “In our view, we see an initial mine life in excess of 30 years based on a 30Mtpa processing facility, and supporting attractive cash costs. Solaris’s updated resource will feed into a preliminary economic assessment for the project.”

“Despite much of the focus on Warintza Central, Solaris has a number of prospective targets within close distance, including Warintza East, Warintza West, Warintza South, and Yawi. Solaris has a 12-rig drilling fleet that has been recently redirected towards aggressive step-out growth and discovery-oriented drilling over the balance of the year and into 2022.”

Seeing its valuation as “attractive,” he set an $18 target, which is 14 cents lower than the consensus.

“In our view, Solaris’s continued exploration success to further define and expand the potential of Warintza, readily available access to infrastructure for development, supportive shareholder base, and near-term catalysts warrant a move higher in Solaris’s multiple. Further underpinning our rating is potential for M&A with Solaris,” said Mr. Cartier.


H.C. Wainwright’s Patrick Trucchio sees the potential for Field Trip Health Ltd.’s (FTRP-T) FT-104, its lead drug candidate, to “emerge as [a] best-in-class psilocybin-like therapy.”

He raised his assumed probability of success for the novel psychedelic compound, used for treatment-resistant depression and postpartum depression, based on “positive” data released on Nov 9 from recent trials.

“FT-104′s potency and pharmacology profile appears similar to psilocybin, though with a shorter duration psychedelic trip time; for these reasons, we believe the differentiation for FT-104 as compared to varied formulations of psilocybin currently in development is the potential to demonstrate psilocybin-like safety and efficacy in mood disorders with a shorter duration of action of four hours vs. six hours for psilocybin,” said Mr. Trucchio. “Thus, a planned Phase 1 trial that in addition to safety and tolerability data should also include details on treatment duration could be a key de-risking event for the program, in our view. Moreover, FT-104 could soon have among the most robust intellectual property protection in the space; patents are pending on FT-104′s structure, formulation, and use in treating a variety of central nervous system disorders. Assuming positive Phase 1 results emerge in 2022, we believe the Phase 2 program in either TRD, PPD or both indications could begin shortly thereafter, further validating the pipeline.”

Suggesting an ongoing strategic review could result in a split of its drug discovery and clinics businesses, he raised his target to $25 from $20, reiterating a “buy” rating. The average is $13.53.


In other analyst actions:

* National Bank Financial analyst Rupert Merer raised his target for Altius Renewable Royalties Corp. (ARR-T) to $13 from $12.50 with an “outperform” rating. The average is $13.83.

* Stifel analyst Andrew Partheniou cut his target for Cybin Inc. (CYBN-NE), a Toronto-based biopharmaceutical company, to $8.25, exceeding the average by 4 cents, from $10 with a “speculative buy” rating.

“Following Q2FY22 results, which we believe were largely immaterial given the company’s early stage, we are updating our drug development timelines,” he said. “Recall, CYBN announced the drop of its CYB001 program (natural psilocybin on thin film for depression) to instead focus on its 2nd generation programs CYB003/CYB004/CYB005 which have potential for stronger IP and better patient experiences. In addition, CYB003 is expected to target depression vs only alcohol addiction previously, resulting in no change in addressable market and the potential for greater long-term market share. However, guidance has not yet been fully updated leading us to leverage information from peers with similar drugs and indications, resulting in a longer time to approval and our lower target. Nevertheless, we retain a positive outlook as CYBN’s overall strategy to treat indications with large market sizes remains intact, but with different tactics, which could potentially be more beneficial for our DCF terminal values.”

* National Bank Financial’s Michael Parkin lowered his target for Equinox Gold Corp. (EQX-T) to $13.50 from $13.75, keeping an “outperform” rating. The average is $14.73.

* Mr. Parkin cut his Yamana Gold Inc. (YRI-T) to $6.75 from $7 with an “outperform” rating. The average is $8.38.

* Desjardins Securities analyst David Newman lowered his target for Greenbrook TMS Inc. (GTMS-T) to $18.50 from $20 with a “buy” rating. The average is $20.01.

“3Q was a challenging quarter as patients delayed treatment (summer vacations and Delta variant) and GTMS normalized its spending following COVID-19 cost-control measures. We believe the seasonal impact was temporary, with management noting a bounceback in patient volumes in October, with strong indications for November and December, tracking toward previous record volumes in 2Q,” he said.

* BMO Nesbitt Burns analyst Jackie Przybylowski raised her Hudbay Minerals Inc. (HBM-T) target to $18 from $17.50 with an “outperform” rating. The average is $12.93.

“Hudbay hosted a very well-attended investor and analyst tour to Snow Lake where it demonstrated successful execution on key projects and highlighted future growth optionality,” she said. “After completion of the New Britannia mill refurbishment project, further growth could include incremental production additions or increase to mine life or production supported by future exploration successes. Hudbay also reiterated its preliminary work on tailings reprocessing at 777, an innovative project that can make use of infrastructure and defer reclamation.”

* Ahead of the Nov. 29 release of its third-quarter results, Mr. Newman cut his target for shares of Think Research Corp. (THNK-X) to $4 from $5, keeping a “buy” rating, after reducing his earnings projection. The average is $4.85.

“3Q was a challenging quarter due to COVID-19-related cancellations and rebookings at BioPharma and Clinic 360, which should be one-time events,” he said. “BioPharma runs more than 100 studies at anytime across Phase 1 clinical trials and bioequivalence studies, and recognizes revenue based on a percentage of completion. An elevated level of no-shows/cancellations has resulted in lower revenue and a duplication of costs. Similarly, Clinic 360 volumes improved vs 2Q but are still below normal levels ($0.7–0.8-million monthly revenue vs $1-million typically), which THNK expects to reaccelerate in 4Q.

“We believe THNK is still on track to reach its pro forma revenue of $82-million by 2H22; however, EBITDA profitability could be delayed to 1Q22 (from 4Q21) as it works through BioPharma synergies (some cost savings should be realized in 4Q; it is on track to roll out digitization in 1Q and realize $3-million in run-rate synergies six months after closing).”

* Piper Sandler analyst Gregory Tuttle raised his Lithium Americas Corp. (LAC-N, LAC-T) to US$32 from US$22, reiterating a “neutral” rating. The average is US$32.83.

* Scotia Capital’s Ovais Habib increased his I-80 Gold Corp. (IAU-T) target to $4.75 from $4.25, keeping a “sector outperform” rating. The average is $5.36.

“On Nov 17, i-80 Gold hosted a site visit to Granite Creek and Lone Tree in Nevada,” he said. “Overall, we were impressed with the local team that has been assembled to ensure the smooth transition from a developer into a producer via the execution of permitting and ramp up of processing plants and mining operations. We believe management is taking all the necessary steps to set up realistic budgets and timetables to systematically restart mining and milling operations (initially using contractors to further reduce execution risk). We see i80 in an enviable position with 14moz gold in resources delineated in Nevada; 4 permitted stage assets (three high-grade (10 gpt) underground deposits) with a central milling facility (owning one of only 3 autoclaves in Nevada) with a strong balance sheet, following closing of the financing package (expected shortly). i80 is well positioned to move forward with aggressive growth plans and in our view could be an attractive takeover target.”

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