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

A pair of equity analysts on the Street downgraded Secure Energy Services Inc. (SES-T) after the Competition Tribunal ordered the divestiture of 29 of the 103 facilities acquired in connection with its 2021 merger with Tervita Corp, citing a failure to meet “the requirements of the efficiencies defence that it invoked.”

Late Saturday, the Calgary-based company announced it will file a notice of appeal within 30 days and said the “order to divest of the Facilities, if not overturned or modified on appeal, could have a material impact on the business, financial condition or results of operations of the Corporation.”

“Net of the six landfill divestitures already modelled in (i.e., less than 5 per cent of pro forma EBITDA based on prior guidance), we estimate the incremental 23 Midstream facilities ordered to be divested represents over 25 per cent of our prior run rate Midstream segment contributions ($115-million),” said National Bank Financial analyst Patrick Kenny. “On the synergies front, we expect corporate overhead cost savings will remain (approximately 40 per cent of the more than $75-million), while any reversal of the operational synergies achieved to date would depend on SES deciding to reopen some of its previously shut-in redundant facilities.”

“Based on an assumed price tag range of 4-6 times for the 23 Midstream facilities, we modelled in $570-million of asset sale proceeds by early 2024. Meanwhile, we modelled in a Substantial Issuer Bid (SIB) for 2024, redeploying the full proceeds into share buybacks with our 2024eD/EBITDA of 1.5 times (was 1.1 times) remaining well below the company’s target of 2.0-2.5 times.”

Pointing to an “impressive more than 50-per-cent run-up in share price over the past 12 months, and in recognition of the appeal process likely taking approximately one year to resolve,” Mr. Kenny moved Secure shares to a “sector perform” recommendation from “outperform” and lowered his target to $8 from $10. The average on the Street is $10.27.

“Given the expected weakness from the news, we highlight below $7.00 as an attractive long-term entry point (less than 5.0 times 2024 estimated P/AFFO valuation),” he added.

Elsewhere, Canaccord Genuity’s John Bereznicki lowered Secure to “speculative buy” from “buy” and reduced his target to $9 from $10.50.

“We are estimating a potential negative EBITDA impact of 10 per cent to 23 per cent (excluding legal costs) from a full divestiture but note our analysis is limited by a lack of granular financial disclosure,” said Mr. Bereznicki. “We also believe any divestiture would be deleveraging for Secure and note a lack of buyers could limit sales proceeds for the company. We expect an adverse market response to the Tribunal’s decision and are adjusting our estimates to reflect an assumed January 1, 2024 divestiture. We are lowering our price target ... and adding a Speculative qualifier to our Buy recommendation given the significant unknowns related to the Tribunal’s decision and Secure’s appeal.”

Analysts making target changes include:

* TD Securities’ Aaron MacNeil to $7 from $9 with a “hold” rating.


Following weaker-than-anticipated fourth-quarter financial results, Desjardins Securities analyst Benoit Poirier pushed back his timeline for SNC-Lavalin Group Inc. (SNC-T) to turn free cash flow positive until 2024.

However, he still sees “significant potential for value creation.”

“The two key pillars of our long-term investment thesis on SNC remain intact — significantly reduced LSTK backlog by the end of 2023 of $377-million and acceleration of revenue growth for the core Engineering Services business,” he said. “We reiterate our Buy rating and look forward to obtaining more visibility through the year as these projects are tested/commissioned.”

Despite the disappointing results and guidance, shares of SNC rose 1.3 per cent on Friday after the Montreal-based engineering giant announced the launch of a strategic review to optimize the company’s portfolio of businesses to make sure capital and human resources are directed to areas with the highest profit and growth potential

“While the lack of clear CFO guidance could be seen as a sign of low visibility to management, we view the strategic review of the portfolio as a positive and much-needed step given SNC’s margin underperformance (excluding LSTK) vs engineering peers,” said Mr. Poirier. “Management will be looking at all business units (it signalled that it is disappointed with the Linxon performance) with a focus on profitability. Once this is complete, management indicated that nothing is off the table and it will review all options, possibly opening the door to a potential sale of underperforming segments or assets (407 sale unlikely until it is consistently FCF positive, in our view, as it is non-core and currently key to balance sheet stability). We believe this will be welcomed by investors as peers in the engineering space approach adjusted EBITDA in the high teens.”

“We are moving the inflection point for FCF to 2024. Given SNC is guiding for CFO in 1H23 to be similar to 1H22 (roughly in the negative $250-million range), we believe it is fair to assume that the company will not be able to make up the difference by that amount in 2H to end the year FCF-positive. We now forecast the inflection point for positive FCF generation being pushed to 2024; we forecast negative $201-million in 2023.”

While he reduced his full-year earnings expectation, Mr. Poirier raised his target for SNC shares by $1 to $38 with a “buy” rating. The average is $36.33.

Others making changes include:

* ATB Capital Markets’ Chris Murray to $37 from $36 with an “outperform” rating.

“Core segments within SNCL Services delivered healthy organic growth and margins in the quarter,” said Mr. Murray. “Management confirmed that it has completed construction activities on two Ontario-based LSTK projects that have been the source of cost reforecasts. Management issued guidance for mid-single-digit organic growth from SNCL Services in 2023 and initiated a strategic review, as they continue to reposition the Company. Book-to-bill trends remained strong in Engineering Services and Nuclear, which we expect to support longer-term growth trends and a more durable FCF profile beginning in H2/23.”

* Canaccord’s Yuri Lynk to $41 from $45 with a “buy” rating.

“We continue to peg SNCL Engineering Services earnings power in the $2.00 per share range on a standalone basis, which supports a long-term value in excess of our target,” he said. “As the two money losing LSTK projects have reached physical completion, we anticipate much more predictable, not to mention higher, bottom line results. With an underlying FCF profile not unlike other professional services companies, we expect SNC to close its substantial valuation gap versus peers over the next year.”

* Raymond James’ Frederic Bastien to $37 from $36 with an “outperform” rating.

“SNC-Lavalin laid another egg in 4Q22, but the Street seemed satisfied with management’s assertions that the big LSTK Projects loss incurred during the period was the very last material cost reforecast it would see,” said Mr. Bastien. “Although we have reservations with such bold statements — after all, we have been disappointed in the past — we continue to see a compelling set-up for the stock given how strong the demand environment for engineering consultancies is, and how hard WSP Global and Stantec have run versus SNC over the past several years. The company may not be painted with the same high-quality brush as its Canadian peers for some time, but it might just be the better one to own over the next 12 months.”

* CIBC’s Jacob Bout to $31 from $30 with a “neutral” rating.

“SNC reported Q4/22 results that were not too dissimilar from prior recent quarters (i.e., good performance from the core SNCL Services segment, offset by higher-than-expected losses from the LSTK Projects construction segment),” said Mr. Bout. “Management expects this to be the last material cost reforecast as the construction portion on Eglinton and Trillium projects are largely complete, though CFO and capex guidance imply negative FCF for F2023 (note that remaining LSTK backlog did increase quarter-over-quarter due to cost reforecasts). The outlook for SNCL Services remains largely positive, with SNC guiding for Services revenue growth of 5-7 per cent year-over-year (slightly below Canadian peers) and relatively flat year-over-year margins (peers pointing to margin expansion) in 2023. We have made only modest changes to our forward estimates.”

* TD Securities’ Michael Tupholme to $38 from $34 with a “buy” rating.

“We remain constructive on SNCL Services’ outlook (SNC’s future focus). We see remaining LSTK Projects run-off risks as more than adequately priced into the stock. We continue to view SNC’s valuation as compelling,” said Mr. Tupholme.

* BMO’s Devin Dodge to $30 from $25 with an “outperform” rating.


Stifel analyst Martin Landry urges investors to revisit Sleep Country Canada Holdings Inc. (ZZZ-T), pointing to its “unchanged earnings power and depressed valuation” following better-than-expected fourth-quarter 2022 financial results.

Shares of the Toronto-based retailer surged 5.9 per cent on Friday after it reported earnings per share of 70 cents, topping the 67-cent estimate of both Mr. Landry and the Street “despite weak demand trends.” He noted gross margins “showed continued improvements,” expanding 1.44 per cent year-over-year to 37.5 per cent.

“Demand softness continued in Q4/22 for Sleep country driven by continued macroeconomic challenges and further heightened by a difficult year-over-year comparable period due to a strong second half in 2021, which led to a decline in same-store sales of 11.5 per cent year-over-year,” said Mr. Landry.

“Demand patterns in Q4/22 were mixed according to management. Black Friday and Cyber Monday sales performed well, which aligns with our recent channel checks but were offset by weaker than normal sales activity in October and December. Weak demand trends have continued into January and February, with consumers likely delaying big purchases such as mattresses as a result of the economic uncertainty. Accessories sales, which tend to be less affected during economic downturn have been performing better and finished the year at a 9-per-cent year-over-year growth.”

The analyst did warn “visibility on 2023 remains limited” as management expects continued demand issues in the first half with growth increasing later in the year. However, he raised his earnings per share forecast by 4.1 per cent (to $2.72 from $2.61) “on the back of increased same-store sales and higher gross margins.” His 2024 projection rose by 8 cents to $2.89.

“Our visibility remains limited, but demand trends appears to be stronger than previously expected,” he said. “We expect same-store sales decline of 6.5 per cent in H1/23 before returning to growth in H2/23 as ZZZ begins to lap easier comparable periods. Additionally, we expect product costs to decline in 2023 driven by lower freight and commodity costs, offsetting the expected increase in promotional activity to stimulate demand. As a result, we have increased our gross margins assumptions by 60 basis points in 2023 to 36.3 per cent.”

With his higher estimates, Mr. Landry raised his target for Sleep Country shares by $2 to $30, maintaining a “buy” rating. The average target on the Street is $29.83.

“At approximately 5.5 times forward EBITDA, Sleep Country’s valuation is 30 per cent lower than its 5-year average and 40 per cent lower than its 10-year average, despite an unchanged earnings power,” he said. “A return to its 5-year EV/EBITDA valuation average would bring the stock price 50 per cent higher than currently. While the macroeconomic outlook is not inspiring, mattress purchases are not lost but rather delayed, which could lead to catch-up demand in the coming years. The long-term thesis on Sleep Country is unchanged; (1) Industry leader with growing market share, (2) healthy balance sheet providing flexibility, (3) mattress industry expected to outpace GDP growth supported by strong health and wellness trends.”

Elsewhere, others making target adjustments include:

* BMO’s Stephen MacLeod to $34 from $38 with an “outperform” rating.

“Unsurprisingly, accelerated macro uncertainty weighed on Q4 SSSG vs. a very robust 2- year stacked comp; however, we view the quarter constructively as SSS were better than expected and operating results were in line,” said Mr. MacLeod. “While we expect the macro backdrop to remain challenging through 2023, Sleep Country appears well-positioned to weather macro weakness and achieve market share gains for everything ‘sleep’. We estimate the stock is discounting a 20-25-per-cent 2023 revenue decline and see attractive risk-reward.”

* CIBC’s John Zamparo to $29 from $26.50 with an “outperformer” rating.

“Sleep Country’s Q4 was far better than our Street-low expectations and, though two more quarters face difficult comparisons, we see potential catalysts for later this year, including store upgrades or a possible expansion of individual brands,” said Mr. Zamparo. “We recognize near-term risks but see compelling value in ZZZ, which has lagged most small-cap discretionary names and trades well below its U.S. peers, despite superior margins and far lower leverage.”

* National Bank’s Vishal Shreedhar to $29 from $28 with a “sector perform” rating.


After “a clean beat” in the fourth quarter of 2022, National Bank Financial analyst Zachary Evershed warns Park Lawn Corp. (PLC-T) now faces a “challenging comparable period,” but the Toronto-based funeral home operator is “executing on pre-need sales like it’s 2019.”

“As the COVID-19 trigger effect has mostly waned, management notes a return to a pre-pandemic operating environment for pre-need sales,” he said. “In order to drive growth and ensure the sales force is aligned with the company’s objectives, Park Lawn has moved seasoned M&A team member Bill Hudson to SVP Sales.”

“Given the stiff year-over-year organic growth headwind Park Lawn faces in Q1/23 due to a robust comparable period, management expects 2023 volumes to be down low-single digit, offset by slight pricing improvements year-over-year and mid-single digit cemetery growth. This aligns with our forecast of 0.4-per-cent organic growth in 2023, with the largest decline in the first quarter (down 11.9 per cent year-over-year). We forecast gradual margin improvements through the year, also in line with management commentary, yielding margin expansion of 120 basis points year-over-year in 2023.”

Shares of Park Lawn jumped 8.6 per cent on Friday after it revenue of $86.1-million, up 9.1 per cent year-over-year and above the Street’s expectation of $84.8-million. Adjusted earnings per share slid 19.7 per cent to 24 cents, beating the consensus by 2 estimate cents.

“We view the beat in Q4 especially positively as it demonstrates simultaneously that PLC’s organic growth can outperform the broader vagaries in death rates (down 11.7 per cent in PLC’s geographies), and that the company’s margins, while down 230 basis points year-over-yeary from a tough comp, are up 60 basis points quarter-over-quarter and expanded beyond pre-pandemic levels (22.5 per cent) without the benefit of excess COVID-19 deaths,” said Mr. Evershed. “With the pre-need sales lever to be supported by onsite projects and inventory buildouts, positive organic growth should be back on the menu as soon as Q2/23, with upside built on top of demographic volume drivers.”

“COVID-19 deaths in the U.S. remain in a mostly steady endemic state and notwithstanding any surprise outbreaks rapidly spiking March death tolls, Park Lawn will face another difficult volume comp in Q1/23. Should COVID-19 related deaths continue at a cadence of 400-500 deaths daily, we estimate a volume headwind of approximately 15 per cent in Q1/23.”

Seeing Park Lawn adding flexibility with a new $60-million tranche on its credit facility, Mr. Evershed expects it to reach its goal of $75-125-million in annual acquisition spending “fairly easily given management’s bullish tone and the increased flexibility offered by additional borrowing capacity.”

With “minor upward estimate revisions” to his forecast, he raised his target for Park Lawn shares to $32.50 from $32, reiterating an “outperform” rating. The average is $35.75.

Others making changes include:

* Scotia Capital’s George Doumet to $33.50 from $32 with a “sector outperform” rating.

“Q4 marks the second consecutive beat following the significant miss in Q2,” said Mr. Doumet. “Margins continue to climb (up 240 basis points since Q2) with another 130 basis points improvement expected in 2023 and 150-plus basis points over the longer-term. Organic volumes should be muted over the near-term, before resuming its normal low single-digit cadence in 2H/23. We continue to expect the recovery in the multiple to occur ahead of the recovery in margins. PLC shares are currently trading at 11 times EV/2023 estimated EBITDA (vs. historically closer to 12 times) and a 1-times discount to SCI (vs. historically trading in line). Our estimates to not reflect M&A, which could comfortably add 15-per-cent-plus upside to our 2023 EBITDA.”

* CIBC’s John Zamparo to $30 from $28 with a “neutral” rating.

“Park Lawn has deftly navigated a difficult environment resulting from a declining death rate (which will intensify in Q1) and has registered early gains from its FaCTS implementation. We believe the stock could be set up for an attractive back half of the year, but we see [Friday’s] 9-per-cent reaction as appropriately reflective of an improved outlook, and valuation prevents us from being more constructive,” said Mr. Zamparo.


Citing “confidence” in its track record, Eight Capital analyst Adhir Kadve thinks Open Text Corp. (OTEX-Q, OTEX-T) offers “an attractive entry point for investors” at its current level, pointing to “re-rating potential as the company executes on its plan to integrate Micro Focus.”

He initiated coverage of the Waterloo, Ont.-based software company with a “buy” recommendation on Monday.

“With OpenText closing the Micro Focus transaction on January 31st, we can’t help but notice that investors remain overly pessimistic about the acquisition discounting OpenText’s experience with acquisitions and thus its ability to successfully integrate the asset,” said Mr. Kadve. “This is despite, what we believe to be, a well-defined plan to stabilize and return Micro Focus to growth, improve adj. EBITDA and FCF generation and a clear path to de-leveraging its balance sheet. This pessimism has led to OpenText shares trading at levels witnessed only a handful of times over the past decade (9 times NTM [next 12-month] EV/EBITDA or 8 times calendar 2024 estimated EV/EBITDA versus an average of 11 times historically).”

Mr. Kadve said the company’s progress in integrating Micro Focus, which was acquired in a US$5.8-billion deal that closed last month, is likely to be the primary drive of its share price moving forward.

“We believe that a re-rating towards its 10-year average of 11 times NTM EV/EBITDA, vs current 8 times, is achievable as OpenText shows progress towards its stated goals of returning Micro Focus to organic growth, via improving renewal rates, immediately uplifting Micro Focus customers to the OpenText Private cloud, and de-leveraging the company’s balance sheet from 3.8 times to less than 3 times,” he said. “In our view, OpenText’s successful track record of integrating prior acquisitions should not be ignored and drives our confidence in the company’s ability to execute.”

Also touting its “defensive financial profile supported by strong ARR, profitability and FCF generation,” he set a target of US$45 per share. The average is US$44.89.

“Greater than 80 per cent of OpenText’s revenues are recurring, the company has adj. EBITDA margins in the mid-to-high 30-per-cent range, generated approximately $780-million in TTM [trailing 12-month] FCF, and offers investors a 2.7-per-cent dividend yield,” said Mr. Kadve. “In our view, this is an enviable financial profile with strong defensive characteristics. As such, given the current macroeconomic backdrop and shifting investor preference towards profitability, we see OpenText as a safe haven for investors who are seeking technology exposure. That said, we acknowledge that these metrics will be somewhat depressed as a result of the Micro Focus integration, but note that this is transient, and that we model OpenText trending back towards historical levels.”

“Not to be lost amidst the Micro Focus opportunity, we want to remind investors that growth in Cloud Services remains a key organic growth opportunity for OpenText. With targeted investments and the upcoming release of Cloud Editions (CE) 23.2 or Project Titanium in April, OpenText aims to drive 15-per-cent growth in Enterprise Cloud bookings giving strong visibility to driving 7-9-per-cent organic growth in Cloud Services by F26.”


In other analyst actions:

* RBC Dominion Securities analyst Keith Mackey upgraded Enerflex Ltd. (EFX-T) to “outperform” from “sector perform” with a target of $16, rising from $12 and above the $13.61 average on the Street.

“4Q22 results were noisy given the October close of the Exterran acquisition. We believe Enerflex has achieved two of our three key criteria for re-rating, with the third in sight. Therefore, we are comfortable upgrading the stock,” he said.

* Mr. Mackey raised his target for Ensign Energy Services Inc. (ESI-T) to $5 from $4.25 with an “outperform” rating. The average is $6.11.

“Ensign’s 4Q22 adj. EBITDA was slightly ahead of our estimates. Notably, the company outlined debt reduction targets for the next three-years, which should ultimately bode well for equity value accretion,” he said.

* TD Securities’ David Kwan downgraded Softchoice Corp. (SFTC-T) to “hold” from “buy” with a $21 target, down from $25 and below the $22.67 average.

* JP Morgan’s John Royall hiked his target for Alimentation Couche-Tard Inc. (ATD-T) to $66 from $54 with an “overweight” rating. The average is $71.12.

* Raymond James’ David Quezada lowered his AltaGas Ltd. (ALA-T) target to $35 from $35.50 with an “outperform” rating. The average is $31.77.

“We maintain our constructive stance on ALA — a function of a differentiated midstream business, solid utility rate base growth, and continued progress on deleveraging,” he said. “We are also fans of the company’s strong organic growth profile and self-funded capex program. We have made a modest reduction to our price target reflecting model adjustments on the quarter.”

* RBC’s Walter Spracklin bumped his Andlauer Healthcare Group Inc. (AND-T) target to $48 from $47, remaining below the $56 average, with a “sector perform” rating, while TD Securities’ Tim James raised his target to $58 from $57 with a “hold” rating.

“AND finished the year strong with a solid Q4 result, with good organic growth trends into 2023. While we have taken our estimates higher to reflect this trend, we continue to anticipate a broader economic slow down and lower vaccinerelated revenue in 2023,” said Mr. Spracklin. “Key is that we see AND faring much better than peers during a recession, and its clean balance sheet provides excellent optionality on the M&A front. From a valuation perspective, we build in M&A activity into our multiple; and at current levels, we believe the market is valuing AND appropriately. Maintain SP on relative return.”

* Canaccord Genuity’s Matthew Lee increased his Black Diamond Group Ltd. (BDI-T) target to $8.50 from $8 with a “buy” rating, while Acumen Capital’s Trevor Reynolds raised his target to $9.75 from $8.50 with a “buy” rating. The average is $8.67.

“Black Diamond Group reported Q4/22 results [Thursday] with revenue and EBITDA both beating forecasts,” said Mr. Lee. “Our key takeaway from the quarter was the potency of BDI’s rate increases, which continue to flow through as the firm renews contracts. We believe there is more room for rate expansion in F23 given that only a third of contracts renew each year and market rates continue to climb. By backing out the acquired Ontario assets, we believe that BDI’s core MSS business delivered a rental rate of over $800 per month, which was far above our expectation and reflects the continued demand for modular solutions across North America. Additionally, we were impressed by the surging demand in WFS across various end markets, which drove the utilization rate to 62 per cent (Q4/21: 49 per cent). We expect the utilization rate will continue to improve in F23 with new projects coming online even as large-scale projects end. We have increased our rental rate and margin estimates, leading to a target price increase.”

* CIBC’s Dean Wilkinson lowered his Chartwell Retirement Residences (CSH.UN-T) target to $11 from $12, keeping an “outperformer” rating, while TD Securities’ Jonathan Kelcher bumped his target to $11.50 from $11 with a “buy” rating. The average is $11.20.

* RBC’s Paul Treiber raised his target for Enghouse Systems Ltd. (ENGH-T) to $49 from $42 with an “outperform” rating. The average is $41.13.

* RBC’s Pammi Bir lowered his Extendicare Inc. (EXE-T) target to $7, matching the average, from $7.50 with a “sector perform” rating.

“After another round of results that were short of our call, driving conditions for EXE remain difficult. Insufficient government funding continues to create significant volatility in quarterly results, while cost pressures remain elevated. That said, as the impact of the pandemic continues to recede, coupled with the anticipated closing of the transaction with Revera, we expect a cash flow recovery to take hold through our forecast period,” he said.

* In a research note titled The portfolio is running like a well-oiled machine, Desjardins Securities’ Chris MacCulloch moved his Freehold Royalties Ltd. (FRU-T) target to $22 from $21.50 with a “buy” rating.

“There is no denying that FRU is ideally positioned for the current environment with robust oil prices (and tightening WCS differentials in Canada) likely to drive strong activity on both sides of the border, as reflected in guidance,” said Mr. MacCulloch. “In fact, we could see capital migration toward the company’s U.S. royalty lands following the recent collapse in natural gas prices. That is not to say that we would not eventually like to see FRU add the type of commodity price diversification that it has geographically through additional exposure to the Montney, Alberta Deep Basin and/or Haynesville, which in our view provides superior longer-term production growth visibility. But all M&A opportunities are appropriately viewed through an economic return lens, and oil is the place to be in 2023, which is a clear positive for FRU as the most oil-weighted Canadian royalty player.”

* RBC’s Michael Harvey cut his Kelt Exploration Ltd. (KEL-T) target to $8 from $10, while Stifel’s raised his target to $7 from $6.50 with an “outperform” rating. The average is $8.42.

“Kelt’s Q4/22 results were as expected and largely pre-released; Kelt also reduced 2023 capex (and volumes) reflective of lower natural gas prices while reshuffling project work to oilier targets. We remain supportive of Kelt’s long-term strategy aimed at delineation and development of its Montney land base, and update our estimates (and target price) to account for lower output in 2023 and 2024,” said Mr. Harvey.

* PI Financial’s Ben Jekic raised his Martinrea International Inc. (MRE-T) target to $20 from $16 with a “buy” rating. The average is $17.38.

* ATB Capital Markets’ Chris Murray lowered his target for NFI Group Inc. (NFI-T) to $14 from $18 with a “speculative buy” rating. The average is $11.63.

“While Q4/22 results were in line with consensus, guidance for 2023 and 2024 came in below our expectations,” said Mr. Murray. “Management reiterated that macro pressures are expected to weigh on production levels and margins in H1/23, with a larger recovery expected in H2/23 and 2024. Management expects savings achieved under NFI Forward to offset expected inflationary pressure in the coming years. A constructive bidding and pricing environment positions NFI to deliver on its longer-term targets (2025). Our estimates call for manufacturing EBITDA to remain negative until Q4/23 before more significant improvement occurs in 2024, with aftermarket volumes providing some stability in 2023 as operating conditions and margins normalize within bus manufacturing. Management commentary reinforced that its backlog and overall pipeline remain healthy and that NFI Forward continues to progress well, which we see positioning the Company to deliver a meaningful recovery in 2024.”

* Scotia Capital’s Kevin Krishnaratne raised his Nuvei Corp. (NVEI-Q, NVEI-T) target to US$50 from US$46 with a “sector outperform” rating. The average is US$52.17.

“We believe NVEI is a uniquely positioned FinTech leveraged to a diverse set of markets ranging from high growth (N.A. eCom, online gaming, and social gaming were up year-over-year in Q3 40 per cent, 21 per cent, and 16 per cent, respectively) to highly niche and underserved (B2B, Healthcare, Government) via the acquisition of Paya,” he said.” Our first cut at the combined entity points to organic growth in the mid-to-high teen range at an Adj. EBITDA margin 40 per cent. Although this is below prior targets (30-per-cent growth mid-term, 50-per-cent margins long-term), we have yet to model any revenue synergies, while it’s still very early in the U.S. gaming opportunity (not likely fully captured in estimates) and NVEI’s global TAM remains large and untapped (just launched Australia March 5; TAM is more than $47-billion).”

* Following in-line fourth-quarter results, National Bank’s Vishal Shreedhar bumped his Parkland Corp. (PKI-T) target to $37 from $36 with an “outperform” rating. The average is $39.31.

“We remain constructive on PKI given attractive valuation and ongoing growth supported by fuel margins, refinery margins and acquisition contribution (integration and synergy capture of completed deals),” he said. “That said, we believe PKI must demonstrate sustained operational execution before the market more fully rewards the valuation multiple.”

* Stifel’s Cole Pereira cut his Pason Systems Inc. (PSI-T) target to $17 from $19.50, keeping a “hold” rating. Others making changes include: RBC’s Keith Mackey to $21 from $25 with an “outperform” rating and Barclays’ J. David Anderson to $14 from $15 with an “underweight” rating. The average is $18.50.

“The company highlighted that there may be continued near-term volatility in rig counts, but that super spec rig demand should remain strong, which should reinforce demand for its ancillary services,” said Mr. Pereira. “Our EBITDAS forecasts increase 3 per cent in 2023 and 2 per cemt in 2024 as we offset stronger-than-expected margins with the expectations for a potentially weaker 2H23. However, we have also reduced our target price ... as we compress our target multiple for PSI alongside many of its OFS peers. We are maintaining our Hold rating, but acknowledge its valuation at 4.8 times 2024 estimated EV/EBITDAS is starting to become more compelling.”

* Credit Suisse’s Kevin McVeigh cut his Q4 Inc. (QFOR-T) target by $1 to $4 with an “outperform” rating. The average is $3.38.

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