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

National Bank Financial analysts Shane Nagle and Rabi Nizami expect a “tighter market balance” for copper in 2024, pointing to the closure of the Cobre Panama mine as well as supply challenges from major operations and upcoming labour negotiations throughout Chile.

“In the near term, given the supply side disruptions due to closure of Cobre Panamá, decreased guidance at Los Bronces and Quellaveco from Anglo American guidance, we see potential for a modest deficit of 38,000 tonnes in 2024 (compared with a surplus of 476,000 tonnes previously),” they said. “Despite forecasting continued soft demand into 2024, supply disruptions have led us to expect more support for copper prices throughout 2024 than previously envisioned.

“Names within our coverage that offer the most sensitivity to copper price movements are Taseko and Hudbay while Teck, Hudbay and Lundin all exhibit the most compelling valuation at higher copper prices.”

David Berman: Is First Quantum a takeover target? Here we go again

In a research report released Monday, the analysts predicted investors can expect to see the impact of several notable growth initiatives this year “aimed to drive a re-rating.

“Names best situated to deliver transformational growth and drive share price re-rating in coming years are Capstone, Ero, Metals Acquisition and Teck,” they said. “Based on current equity valuations, Capstone and Metals Acquisition offer the most re-rating potential upon delivering results while Ero Copper and Teck Resources have valuations pricing in more probability of success suggesting some potential for negative re-rating upon any material operational challenges.”

They also continue to see “favourable” longer-term conditions for the metal, citing “the lack of transformational development projects in the pipeline leading to anticipated shortfall in supply coinciding with improved demand tied to the Global energy transition.”

“Near-term price volatility and favourable long-term fundamentals create a market environment where major producers will continue to shop for opportunities to add long-term copper growth to their portfolios at attractive valuations,” the analyst said. “Recent transactions have been taking place at premium multiples for free cash generating assets in politically stable jurisdictions suggesting the market for high-quality copper growth remains competitive and has helped drive up junior valuations.

“Ideal Targets/Possible Acquirers: Within our coverage, we highlight Teck Resources and Metals Acquisition as being well positioned to consolidate assets given their strong FCF generation and low leverage. Filo Mining, Solaris Resources and Capstone Copper screen favourably as targets. Additionally, given Teck’s copper growth portfolio and pending a favourable resolution at Cobre Panamá, FM’s copper portfolio would both be attractive to a global diversified company looking to bolster its copper pipeline.”

The analysts made a number of target price adjustments to stocks in their coverage universe on Monday and named their top picks for the year ahead.

For producers, they like three companies:

* Capstone Copper Corp. (CS-T) with an “outperform” rating and $8.25 target, up from $6.50. The average target on the Street is $7.83.

Mr. Nagle: “Our Outperform rating remains supported by our positive long-term growth outlook for the company as we continue to see expansion opportunities and potential cost savings through the Mantoverde-Santo Domingo district integration plan in the coming years. Management is solely focused on delivering the Mantoverde and Mantos Blancos expansion projects in 2024 and in doing so, we believe CS will be the name investors will pivot to under an improved backdrop for copper prices given several transformational growth projects in the pipeline and a management team in place to deliver its stated growth objectives.”

* Metals Acquisition Ltd. (MTAL-N) with an “outperform” rating and US$15 target, up from US$14 and above the US$14.25 average.

Mr. Nagle: “Our Outperform rating is supported by the company’s position as a growing pure-play copper company located in a politically stable jurisdiction (Australia), continued optimization of the existing mine plan, near-mine exploration potential and management’s expertise in reducing operating costs to drive higher-margin production growth in the near term. A number of catalysts are anticipated in the coming months including an updated reserve/resource statement, improved 2024 operating guidance and an equity offering on the ASX.”

* Teck Resources Ltd. (TECK.B-T) with an “outperform” rating and $68 target, down from $70 but above the $63.72 average.

Mr. Nagle: “Our Outperform rating is based on Teck’s strong financial performance and robust copper growth pipeline. Divestiture of the steelmaking coal business in 2024 will provide significant cash to bolster the balance sheet ahead of delivering the next leg of copper growth as well as returning cash to shareholders - supportive of a re-rating. Teck’s base metal portfolio remains attractive to potential acquirers, leading to multiple expansion of the business following separation from its coal assets.”

For developers, the analysts chose Filo Corp. (FIL-T) with an “outperform” rating and $35 target (unchanged). The average is $31.02.

Mr. Nizami: “A multi-billion tonne coppergold porphyry whose limits have yet to be found. The renewed 40,000m drill program in 2024 aims to step out across more of the 9 kilometre prospective strike length that is owned by Filo, of which the focus to date had been primarily on a one-to-two-kilometre core at Aurora and many other areas still require intensive drilling. Competitive tension for M&A is heightened (BHP already invested approximately 6 per cent), especially considering that Filo is nearby Lundin Group sister projects at Caserones, Josemaria and Los Helados. The region is shaping up to be a globally significant new copper district, with potential for multiple mines and shared infrastructure over many decades. The majority of our valuation is driven by our assumption for a 2 billion tonne sulfide resource around the higher-grade core of the Aurora Zone, which could be conservative, considering the ~6 cubic kilometre volume now being discussed.”

The analysts’ other target changes are:

  • Adventus Mining Corp. (ADZN-T, “outperform”) to 60 cents from 75 cents. Average: 96 cents.
  • Altius Minerals Corp. (ALS-T, “outperform”) to $23 from $24. Average: $23.88.
  • Arizona Metals Corp. (AMC-T, “outperform”) to $6.50 from $7. Average: $7.75.
  • First Quantum Minerals Ltd. (FM-T, “sector perform”) to $15.50 from $18. Average: $19.24.
  • Hudbay Minerals Inc. (HBM-T, “sector perform”) to $8.50 from $8.25. Average: $9.75.
  • Lundin Minerals Corp. (LUN-T, “outperform”) to $13 from $12. Average: $12.78.
  • Sherritt International Corp. (S-T, “sector perform”) to 55 cents from 60 cents. Average: 80 cents.
  • Solaris Resources Inc. (SLS-T, “outperform”) to $8 from $10.50. Average: $19.14.
  • Taseko Mines Ltd. (TKO-T, “sector perform”) to $2.25 from $2.20. Average: $2.89.
  • Trilogy Metals Corp. (TMQ-T, “sector perform”) to 75 cents from $1. Average: $1.40.


Raymond James analyst Brad Sturges expects a “relatively better backdrop” for Canadian real estate investment trusts in 2024 to generate positive total returns.

“For covered Canadian REIT/REOCs, we are forecasting average 2024 total returns in the 20-25-per-cent range, reflecting average distribution yields of 5 per cent, average 2024 AFFO [adjusted funds from operations] per unit growth of 9 per cent, and a potential P/AFFO multiple recovery in the 2-3 times range (equal to 5-10-per-cent average unit price appreciation),” he said in a research report titled Don’t Call it a Comeback, Cdn REITs Offer Attractive Returns For Years.

“The S&P/TSX Capped REIT Index (Capped REIT Index) has outperformed the TSX in 13 out of last 24 years (approximately 55 per cent of the time), averaging 3 percentage points (pp) in annual outperformance. However, the Capped REIT Index underperformed the TSX in the last two consecutive years of 2022 and 2023 by 11 pp and 9 pp, respectively. Since 2000, the Capped REIT Index has relatively underperformed the TSX for 2 consecutive years in only 1 other time period, which was heading into the global financial crisis (GFC) in 2007 and 2008. We believe the best case scenario for the Canadian REIT sector to generate improved 2024 total return performance year-over-year after 2 consecutive years of underperformance would be a shallow, soft-landing Canadian economic recession, combined with a relatively stable or declining interest rate environment.”

After 2023 was “another year of relative sector underperformance in a volatile interest rate environment,” Mr. Sturges thinks defensive investment attributes, including strong balance sheet metrics and the potential to generate above-average AFFO per unit growth, are likely to be important for relative outperformance in the current calendar year.

“While we are generally forecasting modest refinancing headwinds for the majority of covered Canadian REIT/REOCs, both NexLiving and InterRent are uniquely positioned to possibly benefit from AFFO/unit tailwinds from refinancing 2024E maturing debt at lower average interest rates,” he said. “Overall, we forecast NexLiving (up 23 per cent year-over-year), Minto (up 18 per cent), InterRent (up 16 per cent), Tricon (up 14 per cent), and StorageVault (up 14 per cent),” he said.

“Our preferred Canadian property sector rankings include: 1) Canadian multifamily rental (MFR); 2) industrial; 3) US residential; 4) retail; 5) storage; and 6) office. Our Strong Buy rated stocks include Granite, InterRent, and Tricon. We also highlight Outperform rated stocks DIR, Flagship, Killam, Minto, NexLiving, and Primaris to round out our current list of preferred stocks. Our preferred Canadian REITs generally feature strong balance sheets (e.g., low financial leverage, ample balance sheet liquidity, and limited floating rate debt), below-average AFFO/unit payout ratios, portfolios weighted towards ‘high-growth’ markets, above-average organic and AFFO/unit growth prospects, NAV/unit and AFFO/unit discount valuations, and may benefit from 1 or more near-term positive catalysts.”

Slightly raising his 2024 iFFO/unit and AFFO/unit estimates by 1-2 per cent, leading to modest increases to many of the target prices of equities in his coverage universe, Mr. Sturges also made a pair of rating changes on Monday.

He upgraded PRO REIT (PRV.UN-T) to “outperform” from “market perform” with a $6 target, up from $5.50. The average on the Street is $5.81.

“PROREIT experienced various non-recurring items in 2023 including one-time CEO succession costs and a large transitional vacancy in its Montreal industrial facility portfolio that impacted its 2023E AFFO/unit results,” he said. “When normalizing for these items, we estimate that PROREIT’s normalized 2024E AFFO/unit growth to be more in the 11-12-per-cent year-over-year range, supported by healthy re-leasing rent spreads available to the REIT with respect to its 2024 lease expiries. At December 2023, PROREIT had re-leased 90 per cent of its 2023E lease expiries at an 44-per-cent average re-leasing rent spread over expiring rents, and 26 per cent of its 2024E lease expiries at an average 28-per-cent re-releasing rent spread versus prior in-place rents psf. We also believe PROREIT offers small-cap, income-oriented investors an attractive 9-per-cent distribution yield and a compelling discount valuation relative to its NAV/unit estimate and to its larger-cap Canadian industrial REIT peers.”

Conversely, he downgraded European Residential REIT (ERE.UN-T) to “market perform” from “outperform” with $2.85 target, up from $2.75 but below the $3.17 average.

“In December, ERES announced the conclusion of its strategic review, which did not produce a M&A privatization transaction,” he said. “While we do not view this near-term outcome as surprising given we expected a fairly lengthy process, we believe another sales process may not be revisited until 2H24 at the earliest if market conditions for private market transactions in the Netherlands improve. In the meantime, we forecast ERES to generate only modest 2024E AFFO/unit growth YoY, as same-property rental income (SP-NOI) growth YoY could be largely offset by higher financing costs YoY based on the potential for ERES to face above-average financing costs headwinds in the next few years as the REIT refinances maturing debt at higher market interest rates..”


In a report titled Back in the USA for 2024, Susquehanna analyst Bascome Major downgraded Canadian Pacific Kansas City Ltd. (CP-N, CP-T) to “neutral” from “positive” on Monday, believing its “valuation should compress back to a Canadian rail baseline as the KSU merger ‘story’ becomes ‘steady-state.’”

“We upgraded CP to Positive in early 2022, shortly after the financial close of the KSU acquisition and over a year before the STB approved the deal last March and integration began in earnest,” he said. “Since then, CP shares have outperformed railroad peers (CP up 9 per cent vs. other Class I’s up 2 per cent to down 23 per cent) and broader indices (XLI up 5 per cent, S&P 500 down 1 per cent). That said, CP’s outperformance over that period has been fueled by multiple expansion (CP’s forward 12-month blended P/E 8 per cent higher today vs. early 2022, while rest of rails average 12 per cent lower), with 2024 consensus EPS revisions for CP at the low end of the group over the same period (down 25 per cent vs. peers down 8 per cent to down 22 per cent). Keith Creel has more than earned his reputation as the most respected CEO in rails, and we continue to see a long runway for top- and bottom-line growth at CPKC. That said, we’re now over two years past the financial close of the CP-KSU merger, and we believe valuation will gradually compress back to a Canadian rail baseline as the ‘story’ becomes ‘steady-state’ to investors. To this point, in 2023 the average F12M P/E dispersion among the Class I rails was over seven P/E turns and 40 per cent of the group’s average P/E, which was over 3 times as wide compared to the same metrics in 2018-19 (2.1 times turns dispersion, 12 per cent of group average P/E). We continue to value CP at a target multiple above the other rails with a 22 times P/E on our 2025E, one turn below our prior target multiple but still above all others at 18 times to 21 times. At this slightly narrower premium, we no longer see enough upside to warrant our Positive rating.”

The analyst cut his target for CP shares to US$87 from US$90. The average is US$86.36.

Mr. Majors raised his Canadian National Railway Co. (CNI-N, CNR-T) to US$143 from US$115, keeping a “neutral” recommendation. The average is US$125.81.

“We feel good about transport demand into 2024, both domestically within rail (seasonality solid) and beyond rail (truckload volume holding up), and in international trade (real-time air cargo and ocean),” he said. “Transports’ lingering challenge is stubborn excess truckload capacity (tender rejections still near lows) and the pressure on contractual pricing weighing on profits for truckload carriers, brokers, and intermodal providers that live by this volatile procurement cycle. No, rail isn’t entirely immune to truckload pricing, which shows up in some long-term intermodal contracts and modal competition for ‘jumpball’ freight. But the U.S. rails’ challenges that tempered our long-held bullishness in 2022 were more industry-specific (union wage increases, headcount investment to drive better service, active regulators), and we believe they’ve largely played out as rail shares dramatically underperformed since mid-2022 (average price return down 16 per cent vs. XLI, down 13 per cent vs. S&P 500; consensus EPS for 2023/24 both down 16 per cent).”

Elsewhere, seeing limited returns, TD Securities’ Cherilyn Radbourne lowered both CP and CN to “hold” from “buy” on Monday.

Her CN target remains $180, while her target for CP shares slid to $110 from $115.

“Union Pacific and Norfolk Southern have been the major beneficiaries of recent investor fund-flows, and we believe investors see both as offering unique economyinsensitive EPS growth potential,: he said. “We have downgraded both CN and CPKC to HOLD from Buy, based on limited implied upside to our target prices, but we continue to favour CN over CPKC. We see CN’s valuation and the underlying EPS assumptions as more reasonable/achievable, and we believe CN’s sector-low balance-sheet leverage offers downside protection in the event that the economy flirts with/enters a hard-landing scenario.”


Seeing more realistic expectations on the Street, BMO’s Ben Pham raised his recommendation for Algonquin Power and Utilities Corp. (AQN-N, AQN-T) to “outperform” from “market perform” on Monday and added to its shares to his “Top 5 Best Idea Roster.”

“We are upgrading AQN shares to Outpeform from Market Perform due to our view that further downside to consensus estimates will be more modest, our improved confidence in AQN’s ability to monetize its renewables portfolio given the decline in long bond yields, and also the attractive relative valuation (approximately 30-per-cent P/E discount),” he said.

“To reinforce conviction in this recommendation, we are also elevating AQN to our Top 5 Best Idea Roster which is now as follows: NPI, ALA, PPL, AQN, and ACO.X (previously was ALA, TA, NPI, H, and PPL).”

Calling the consensus expectations more “reasonable,” Mr. Pham also expressed increased confidence in the sale of its renewables business.

“While there could still be some friction to consensus expectations, we believe the magnitude will be more limited,” he said.” Over the past year, 2024E consensus EPS has dropped from US$0.85 EPS to US$0.54 (US $0.53 in 2025), an unprecedented revision for a utility and renewable power company. Rising interest rates, overly aggressive assumptions on new growth, and unsustainable benefits (i.e., HLBV income, low tax rates) were the key drivers of the downswing. The 77 million increase in share count mid-year (mandatory conversion) will weigh on earnings this year, but AQN has a very active utility rate case calendar and recently placed 200MW of renewable power projects in-service.”

“We have recently noted that the macro backdrop is increasingly turning to the renewable sector’s favor, particularly the expected decline in long bond yields. As such, we believe AQN could fetch at least 10 times EBITDA for the renewable power assets (i.e., US$2.5-billion EV ex tax equity or US $1.40-billion equity). Key also is we do not believe AQN is a forced seller and that Atlantic Sustainable Infrastructure (AQN owns 42 per cent) will only be sold at the right price.”

Calling its valuation “too inexpensive to ignore,” Mr. Pham now has a US$7.50 target, up from US$7. The average is US$7.18.

“At approximately 12 times forward P/E (consensus), AQN shares offer attractive value (Canadian utility peers trade between 14-19 times),” he said.” Assuming renewables are sold, AQN should morph into mainly a utility company across various geographies with ‘at least’ a mid-single digit rate base CAGR [compound annual growth rate]. As a comparison, CU is trading at 14 times with 2-per-cent rate base growth and is not as diversified; FTS who is more diversified and has a 6-per-cent rate base growth is trading at 17 times P/E. We acknowledge a discount is warranted for AQN given the dividend cut last year, however, a 30-per-cent variance looks overdone in our view.”


Following Friday’s release of Precision Drilling Corp.’s (PD-T) year-end financial and operational update, ATB Capital Markets analyst Waqar Syed sees “solid” deleveraging and “positive” Canadian and international activity trends.

However, calling its near-term forecast for its U.S. segment as a “negative,” he lowered his earnings before interest, taxes, depreciation and amortization (EBITDA) forecast through 2026.,

“Adjusting our estimates to align with guidance, we have reduced the average active rig count by approx. four rigs per quarter for 2024, though our forecast for the Canadian and International markets is largely unchanged,” said Mr. Syed. “Year-end financial updates painted positive color for Q4/23 as the share-based-compensation and asset decommissioning charges came in below our estimates. Therefore, our 2023 EBITDA was increased 1.4 percent despite one to two rig decrease for the U.S. and Canada markets. For 2024, 2025, and 2026, our EBITDA decreased 6.0 per cent, 9.3 per cent, and 9.4 per cent, respectively, owing to a negative revision to PD’s U.S. activity forecast.

“Overall, the operational and financial updates were a mixed bag, and while the EBITDA estimate is lowered, which is a negative, the Company continues to generate solid FCF, and its FCF outlook and debt reduction targets are unchanged, which is a key positive.”

The analyst does expect better-than-anticipated results for Precision’s 2023 fourth quarter, raising his EBITDA projection to $143.3-million from $135-million previously due to lower share-based compensation and a decommissioning charge.

“PD successfully paid off $152-million of debt in 2023, meeting its target of $150-million, and remains committed in deleveraging with the target to repay $500-million between 2022 and 2025,” he added. “The Company also allocated $30-million for share buybacks in 2023 and we anticipate this allocation to increase in 2024. PD will release more details on its capital allocation plans in early February. We forecast PD to generate $273-million in FCF in 2024. The Company should have ample capacity to pursue shareholder return strategies on top of substantial deleveraging.”

Maintaining an “outperform” recommendation for the Calgary-based company’s shares, Mr. Syed cut his target to $126 from $140. The average target on the Street is $128.16.

Others making changes include:

* CIBC’s Jamie Kubik to $115 from $120 with an “outperformer” rating.

* Piper Sandler’s Luke Lemoine to US$100 from US$107 with an “overweight” rating.


Desjardins Securities analyst Benoit Poirier reaffirmed TFI International Inc. (TFII-T) as his “favourite transportation name” following the late December announcement of the acquisition of Daseke Inc. for US$8.30 per share, saying he’s “quite pleased with the straightforward cost improvement opportunities” at the U.S. flatbed and specialized transportation company as well as the “open-mindedness in relation to spinning out the TL [truckload] segment (helps remove the conglomerate discount).”

“We are pleased with the price paid considering the control premium, the company’s depressed EBITDA estimates and the plethora of low-hanging fruit in terms of straight-forward improvement opportunities at TFII’s disposal ([including] cutting interest expense and corporate costs, streamlining operations),” he said. “We calculate that if TFII can get the adjusted OR down to its specialized TL level of 86 per cent (for context, TFII during its investor day unveiled a long-term OR target for the Canadian and specialized TL segments of 80–85 per cent), the multiple paid would drop to 3.5 times post improvements—demonstrating the opportunity which TFII management can capitalize on.”

Mr. Poirier said he’s “conservatively” projecting adjusted earnings per share accretion of 56 US cents in 2025 with “further upside potential.”

“We calculate slight EPS dilution in 2024 to US$7.30 (from US$7.49) and are introducing our 2025 EPS estimate of US$9.34 (which represents US$0.56 of EPS accretion above a vanilla EPS number, based on our calculation),” he said. “he main reason for the EPS dilution in 2024 is that we lowered our U.S. LTL [less-than truckload] revenue forecast to US$2.649-billion (from US$2.697-billion) and adjusted our U.S. LTL OR estimate to 88.5 per cent (from 86.6 per cent) following the dip in mid-4Q operating metrics reported by TFII’s LTL peers XPO, ARCB and ODFL. Moreover, industrial freight demand (which accounts for roughly two-thirds of LTL volume) remains under pressure—the US ISM PMI was in contraction territory for the 14th straight month in December, coming in at 47.4 (the ISM PMI has historically been a strong leading indicator for LTL tonnage). Excluding these adjustments, we calculate that the transaction would have been relatively in line with TFII management’s initial expectations of its being EPS-neutral in 2024 (and accretive by at least US$0.50 in 2025). Lastly, from a capex standpoint, we have not changed our estimates as DSKE’s large fleet is in very good shape and the acquisition will likely enable TFII to slow down its previously planned specialized TL refresh.”

Maintaining his “buy” recommendation for Montreal-based TFI, he raised his Street-high target to $208 from $182. The average is $175.52.

“We continue to like the stock as we see sizeable potential opportunities for value creation as management executes on its capital deployment strategy over the long term (M&A, dividend and buybacks),” Mr. Poirier said.

Elsewhere, BMO’s Fadi Chamoun raised his target to US$130 from US$122 with a “market perform” rating.

“FII’s planned acquisition of Daseke (DSKE) is positive from a strategic perspective and is expected to be accretive by 2025,” said Mr. Chamoun. “The transaction propels TFII to a market-leading position in the North American specialized truckload segment. With this, management is contemplating a spinoff of its Truckload operations into a standalone company by late 2025 or early 2026, which we see as dependent on both (1) successfully integrating/ optimizing DSKE and (2) delivering significant profit improvement in U.S. LTL.”


In a 2024 outlook report, CIBC’s energy infrastructure analyst Robert Catellier raised his target prices for four stocks in his coverage universe on Monday.

“2023 was another flat year for our pipeline and midstream coverage list; however, we see reason to be optimistic for 2024,” he said. “We see the midstreamers on the precipice of a period of new capital projects, with the potential for projects to be sanctioned in 2024 centering around the two new primary egress options, LNG Canada and Trans Mountain Expansion. Longer-term, the recently sanctioned DOW, Inc. ethylene cracker should generate growth projects for supporting infrastructure as well, including low-carbon hubs. A recession could modestly slow the pace of activity; however, capacity utilization is quite high in key areas of the value chain, notably fractionation, where new capacity is needed.

“Larger market cap pipelines seem likely to continue avoiding larger capital projects in favor of asset or tuck-in M&A. We also expect asset sales to figure prominently in 2024, including the spinoff of TC Energy’s liquids business. Modest dividend growth remains likely, with opportunistic share repurchases a possibility, although with growth emerging in the midstream area, repurchases are likely to slow in favor of capex and balance sheet flexibility.”

His changes are:

* Gibson Energy Inc. (GEI-T, “outperformer”) to $27 from $26. The average is $24.85.

* Keyera Corp. (KEY-T, “neutral”) to $35 from $33. Average: $35.58.

* Superior Plus Corp. (SPB-T, “outperformer”) to $15 from $14. Average: $13.23.

* TC Energy Corp. (TRP-T, “neutral”) to $55 from $54. Average: $53.24.

“We see interest rates as both a catalyst and a potential risk factor for 2024,” said Mr. Catellier. “Yields are generally expected to soften through 2024 and 2025, with consensus forecasts suggesting a slight increase in the early part of 2024 before settling near current levels by the end of the year and through 2025. This would not only help ease shorter-term borrowing costs but could also trigger revisions to longer-term forecasts if there is cooling of inflation. If likely central bank rate cuts do not meet expectations, we see the risk of an eventual recognition that rates might be higher for longer, especially given the recent decline in rates and corresponding higher share prices.

“Overall, we see mid-single-digit increases in fee-based EBITDA in our newly introduced 2025 estimates. Valuations are generally still at a modest discount to historical averages, but this is likely appropriate given higher rates and the possibility of a recession.”


National Bank Financial analyst Zachary Evershed sees Jamieson Wellness Inc. (JWEL-T) maintaining its momentum in North America and poised to benefit from opportunities in China.

“Though we consider Jamieson products to be in a mature phase in Canada, that does not preclude robust organic growth,” he said. “Management notes that the company’s large market share was achieved despite being underindexed on physical shelf space. Pushing for shelf presence more in line with overall market share would allow JWEL to place more products in front of customers, which we believe may drive organic growth of 4-5 per cent annually. Growth drivers also include sustained innovation through new products and Canadian demographic tailwinds.

“In the U.S., we expect youtheory to generate growth of 10-15 per cent annually moving forward, as management targets expansion in retailers, having already built a strong presence in the club channel. The company has also gained traction in e-commerce in 2023, which is expected to carry forward to 2024. E-commerce will be pivotal in the U.S., as it represents over 20 per cent of sales in the industry.”

After hosting institutional investor meetings recently, Mr. Evershed expects the Toronto-based company to also gain further traction with the Chinese market “on a health kick.”

“On the back of the DCP Partnership as well as the distribution asset acquisition in China, the company expects growth to accelerate in Asia,” he said. “Growing within the domestic retail market, increasing penetration in club, and especially expansion via its e-commerce platform are expected to put JWEL’s sales on a 20-30-per-cent growth trajectory over the next several years. Cross-border ecommerce opportunities remain extremely attractive in retail, with online penetration of 40-50 per cent in VMS [Vitamins, Minerals and other Supplements]. We estimate that the VMS category has grown at a 10-per-cent CAGR [compound annual growth rate] over the last five years, providing a significant growth runway for a small player. Weighing a potential global economic downturn, management notes its Chinese clientele is actively seeking foreign products for their superior quality over domestic products and are generally affluent, and thus, are less likely to compromise on their healthy habits.”

Pointing to “favourable demographics, ongoing expansion plans and growth catalysts,” Mr. Evershed reiterated his “outperform” rating with Jamieson shares while cutting his target by $5 to $38.50 after introducing changes to his valuation methodology. The average is $38.40.


Stifel analyst Bill Papanastasiou sees Hut 8 Mining Corp. (HUT-Q, HUT-T) merger with US Bitcoin Corp. as “transformational,” seeing it established a “market leader with scale, diversification, and a robust growth pipeline.”

“In our view, the deal forms one of the largest public Bitcoin operators with more than 21 EH/s [exahashes per second] of hashrate under management, while also expanding the level of diversification with uncorrelated and fiat-based revenue streams that drive margin expansion,” he said. “We also expect synergies at legacy HUT mining sites following the implementation of USBTC’s proprietary software to improve efficiencies and remediate operational headwinds. The company also has a unique pipeline of near-term growth opportunities, most notably vertical integration if approval to acquire four natural gas power plants is cleared. HUT has maintained one of the largest Bitcoin treasuries (valued at more than US$400-million), which continues to serve as a significant liquidity cushion. The lower revenue volatility profile may make this stock attractive to certain institutional investors seeking exposure to Bitcoin.”

While the combined company trades at a premium to peers, the analyst thinks that gap is “warranted given strong operating profitability and an attractive margin profile; a scaled self-mining fleet with near-to-medium term growth optionality to capture upside in an improved mining environment; as well as a robust pipeline of growth opportunities.”

He kept a “speculative buy” rating for Hut 8 shares with a US$15 target, up from US$3.25 previously. The average is $14.95 (Canadian).


In other analyst actions:

* Touting its “high margin business model offering lower risk exposure to precious metals,” Raymond James’ Brian MacArthur initiated coverage of Vancouver-based Elemental Altus Royalties Corp. (ELE-X) with an “outperform” rating and $1.75 target. The average on the Street is $1.93.

“We believe royalty companies like ELE offer equity investors exposure to precious metals prices while mitigating downside risk given limited exposure to operating and capital costs,” he said. “ELE’s portfolio now consists of over 80 royalties including 10 producing royalties— that is precious metals focused (although we note over 40 per cent of its NAV is base metals), with a favourable jurisdictional risk profile. ELE’s portfolio offers growth as adjusted GEOs are expected to grow about 50 per cent in 2024 partly reflecting additional revenue from milestone payments on the sale of Diba. In addition, many of ELE’s main assets have a current reserve/resource life of 10 years or longer. ELE also has longer-term potential growth from royalties on numerous development assets such as Cactus. Finally, ELE also has a flexible balance sheet. Given ELE’s high margin business model, near-term growth profile, longer-term growth optionality, flexible balance sheet, and current valuation, we rate the shares Outperform.”

* Bernstein’s Bob Brackett upgraded Barrick Gold Corp. (ABX-T) to “outperform” from “market-perform” and raised his target for its shares to $30 from $26. The average target on the Street is US$21.79.

* BMO’s Michael Markidis bumped his Boardwalk REIT (BEI.UN-T) target to $78 from $75 with an “outperform” rating. The average is $78.22.

* Seeing a “strong” start to 2024, RBC’s Thanos Moschopoulos raised his Constellation Software Inc. (CSU-T) target to $3,900 from $3,400, above the $3,330.63 average, with an “outperform” rating.

“Constellation deployed an estimated $235-million capital on 23 acquisitions Q4, which brings FY23 capital deployed on acquisitions to a record $2.27-billion, well above the $1.69-billion in FY22,” he said. “Moreover, Constellation has already entered into agreements to deploy an estimated $600-million capital on acquisitions in Q1/FY24, which equates to 1/3 of our estimate for all of FY24.”

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 12/04/24 2:26pm EDT.

SymbolName% changeLast
Altius Minerals Corp
Algonquin Power and Utilities Corp
Arizona Metals Corp
Barrick Gold Corp
Canadian National Railway Co.
Canadian Pacific Kansas City Ltd
Capstone Mining Corp
Constellation Software Inc
Elemental Altus Royalties Corp
European Residential Real Estate Invs. Trust
Filo Mining Corp
First Quantum Minerals Ltd
Gibson Energy Inc
Hudbay Minerals Inc
Hut 8 Corp
Jamieson Wellness Inc
Keyera Corp
Lundin Mining Corp
Metals Acquisition Corp Cl A
Precision Drilling Corp
Pro Real Estate Investment Trust
Sherritt Intl Rv
Solaris Resources Inc
Superior Plus Corp
Taseko Mines Ltd
TC Energy Corp
Teck Resources Ltd Cl B
Tfi International Inc
Trilogy Metals Inc

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