Inside the Market’s roundup of some of today’s key analyst actions
RBC Dominion Securities analyst Darko Mihelic lowered his 2024 core earnings per share expectations for large Canadian banks by an average of 2 per cent on Monday after updating his net interest margin forecast.
“At the all-bank level, NIM expansion has been ’best’ at TD, whereas BNS has had NIM declines since interest rates started rising,” he said in a research note. “Looking at recent NIM performance and NIM sensitivity, we note that there were larger differences in the disclosed vs. implied NIMs for BNS and CM than for the other banks in our coverage. “We lower our NIM estimates for BNS but still expect BNS to have the strongest NIM growth in 2024, as it is the only large Canadian bank positioned to benefit from falling rates (RBC Economics forecasts a drop in interest rates next year). Unfortunately, the positive position to lower rates for BNS is much smaller now than historically. ... Although our estimates show a rebound in core EPS growth in 2024, there is still significant uncertainty in the macro environment and on the regulatory front, leaving us with lower than usual conviction on the group.”
Overall, Mr. Mihelic sees valuations across the sector as “fair” and several “challenges,” particularly inflation and interest rates, prevent him from taking a more bullish stance, believing “a higher-for-longer interest rate scenario will at a minimum crimp economic activity and at worst cause a hard economic landing.”
“It seems that 2023 will end with negative EPS growth, lower ROEs, and plenty of trepidation heading into 2024,” he said. “Our forecasts for 2024 show a healthy return to EPS growth and modestly improved ROE but with many caveats. The risks to our forecasts are higher than usual, in our view, given the high levels of interest rates, inflation, and general indebtedness in Canada. We view capitalization as ‘fine’ for the banks, with just one bank in our universe (TD) having significant excess capital. All of the other banks in our universe should be considered adequately capitalized considering that they are currently using a DRIP with stock issuance from treasury, though NA might be close to being considered well-capitalized (NA does not have a discounted DRIP).”
With that view, Mr. Mihelic reduced his targets for Canadian bank stocks on Monday. His changes are:
- Bank of Montreal (BMO-T, “outperform”) to $134 from $138. The average on the Street is $129.78.
- Bank of Nova Scotia (BNS-T, “sector perform”) to $68 from $72. Average: $68.56.
- Canadian Imperial Bank of Commerce (CM-T, “sector perform”) to $66 from $67. Average: $61.35.
- National Bank of Canada (NA-T, “sector perform”) to $105 from $108. Average: $102.80.
- Toronto-Dominion Bank (TD-T, “outperform”) to $92 from $94. Average: $91.55.
“We lower our 2024 core EPS estimates for the large Canadian banks under our coverage by approximately 2 per cent on average,” he said. “Our 2024 core EPS estimate decreases the most for BNS by 6.7 per cent while our 2024 core EPS estimate for CM improves by 1.1 per cent. We model core EPS for the group to increase an average of 8 per cent on average in 2024, then grow 5 per cent on average in 2025.”
Raymond James analysts Frederic Bastien and David Quezada are “going all-in” on Brookfield Infrastructure Partners LP (BIP-N, BIP.UN-T) and Brookfield Renewable Partners LP (BEP-N, BEP.UN-T), raising their recommendations for their shares to “strong buy” from “outperform” following Brookfield’s Investor Day event last week.
“There were a number of topics discussed during last week’s sessions worthy of a published Industry Comment, as usual, but those are not behind our decision to upgrade both LPs,” they said. “After watching their unit prices drift lower with every interest rate increase, we believe it’s time to draw a line in the sand and be more assertive with our ratings. Brookfield Infrastructure and Brookfield Renewable can’t exactly be pitched for their prevailing yields, at 5.0 per cent and 5.3 per cent respectively, but they sure can for their above-average growth prospects. Both entities have been (and in our view will continue to be) growth compounders — the bedrock of any portfolio’s long-term performance.”
Seeing artificial intelligence “boosting operational excellence” and touting its “top-class operational playbook,” Mr. Bastien maintained a US$45 target for Brookfield Infrastructure, emphasizing its valuation screening “very well.” The average on the Street is US$42.33.
“Interest rate headwinds notwithstanding, we view the units’ valuation as unreasonably cheap,” he said. “They are trading at a forward P/FFO multiple of 9.8 times, which is well off the average of 12.5 times they have maintained over the past five years. The last few times Brookfield Infrastructure traded in the single-digit P/FFO range was at the height of COVID pessimism and during the late 2018 year-end tailspin that was fomented by fears of recession in the United States. Our target yield of roughly 3.75 per cent aligns with our belief the infrastructure giant’s diversified, stable and growing cash flows will support a valuation at the low end of the units’ historical trading range. Our $45 valuation also equates to 13.5 times our 2024 FFO forecast, a modest premium to BIP’s 5-year average.”
Mr. Quezada has a US$37 target for Brookfield Renewable. The average is US$34.90.
“With 90 per cent of cashflows contracted (13-year average PPAs), approximately 70 per cent of revenues linked to inflation and 70 per cent plus gross margins, BEP’s cashflows are amongst the highest quality and continue to grow due to diversification of geography and modalities,” he said. “With this, BEP continues to provide optimistic commentary on FFO growth going forward; the sources of which remain the same from last year’s presentation. Specifically, the company’s upside from inflation-indexed contracts (a 2–3 per cent per year FFO lift), margin enhancement related to baseload or dispatchable carbon-free generation (2-4 per cent FFO) and the increased cash flow from development projects in various stages of development (a 3-5 per cent FFO lift). Further, with 5,500 GWh of hydro generation coming off short term contracts, cashflows will benefit from increased pricing (prior $70/MWh vs current $75 MWh) as well as the sale of renewable energy credits from the dispatchable hydro assets—providing potential additional upside to the FFO highlighted last year. Accordingly, the company continues to deploy capital at a record pace while realizing IRRs of 12-15 per cent, heads and shoulders above peers, by competing on factors other than cost of capital.”
In a research note released Monday titled Time to Shake the Money Tree, Raymond James analyst Daryl Swetlishoff made a trio of rating changes to forest products stocks in his coverage universe.
“With sector shares at trough valuations, lumber prices trading below cash costs and the seasonal trade around the corner we encourage investors to revisit the ‘Tree Sector’ investment thesis,” he said. “After a brief summer rally, WSPF lumber prices have retreated with cash sitting at US$403 per mfbm [thousand board feet] (and futures trading at a material discount). This compares to BC interior cash costs of US$500-525. Structural panels have performed much better with OSB spot pricing holding at US$500/msf pushing 3Q23 average prices 65 per cent sequentially higher. Meanwhile, forest company shares have sold off - now trading at the low end of valuation ranges on every metric.
“Trader opinions on market direction vary with Bears citing housing (un)affordability and Bulls pointing to low log and lumber inventories and pending supply cuts. We remain in the bullish camp and see Canadian wildfire-related log shortages in the near term and permanent B.C. lumber mill shuts longer term as powerful catalysts. We also highlight that the seasonal entry point (Halloween) is fast approaching. While log constraints have potential to boost pricing, wildfire impacts also increased 3Q23 costs which (along with more conservative commodity pricing) has led us to reduce estimates – in some cases below consensus.”
After updating his 2023 and 2024 commodity assumptions, including a reduction to Western Spruce-Pine-Fir (WSPF) lumber prices and an increase to his Southern Yellow Pine (SYP) assumption, Mr. Swetlishoff downgraded Canfor Corp. (CFP-T) to “outperform” from “strong buy” based on “high (and increasing) relative B.C. lumber & pulp exposure.” His target for its shares slid to $28 from $32, below the $30.20 average on the Street.
The analyst also downgraded Western Forest Products Inc. (WEF-T) to “market perform” from “outperform” “as the company remains heavily impacted by structurally higher operating costs on the B.C. Coast.” His target slid to 85 cents, below the $1.19 average, from $1.25.
Conversely, Mr. Swetlishoff upgraded Doman Building Materials Group Ltd. (DBM-T) to “strong buy” from “outperform” previously “on the back of our improved gross margin outlook, continued ‘lean & mean’ working capital execution (supportive of additional net debt reductions), along with attractive & stable shareholder returns associated with the dividend (7.6-per-cent current yield). His target rose to $9.25 from $8.75, exceeding the $8.92 average.
The analyst also made these target changes:
- Canfor Pulp Products Inc. (CFX-T, “outperform”) to $2.60 from $3.75. Average: $2.63.
- Conifex Timber Inc. (CFF-T, “outperform”) to $1.50 from $1.80. Average: $1.77.
- Mercer International Inc. (MERC-Q, “market perform”) to US$8.50 from US$9. Average: US$8.50.
“For pulp, implementing commodity downward revisions has prompted target reductions across the sector,” said Mr. Swetlishoff. “While major earnings catalysts are lacking for both Mercer and Canfor Pulp, we highlight CFX remains our preferred pulp pick as shares continue to trade at multi-year lows.
“Importantly, we reiterate that our top pick West Fraser is highly levered to OSB pricing with the company maintaining an average annualized US$58 mln EBITDA sensitivity to a US$10/msf commodity change. With OSB benchmark prices sitting at impressive US$510/msf for the bulk of 3Q23 (averaging US$494 QTD), this has driven significant relative outperformance vs lumber which we expect to disproportionately support WFG earnings over peers. Our revised estimates translate to a 9-per-cent increase in 2023 EBITDA for the company, more than offsetting our expectation of negative pulp earnings through 2H23. With 3 Western Canadian pulp mills sold since July (Hinton, Quesnel River, and Slave Lake), we highlight this has resulted in a 80-per-cent decline in WFG’s pulp capacity – removing future earnings drag. Interfor is seeing 2-per-cent boost to 2023 EBITDA, while Canfor is negatively impacted by falling Euro lumber prices and reduced pulp EBITDA contributions, with earnings coming off 36 per cent.”.
National Bank Financial analyst Shane Nagle said a focus of last week’s Denver Gold Forum was royalty companies’ efforts to highlight the advantage of their business model compared to traditional producers.
“The business model provides asset diversification, exposure to gold with no direct exposure to operating costs, offers inflation protection, and with a commitment to responsible gold mining principles and community investment, the sector screens favourably from an ESG perspective,” he said.” Discussions with management focused on the strong appetite for funding of development-staged projects given inflationary pressures, lack of available equity funding and the high cost of debt. Most potential deals discussed are smaller-scale, typically within the US$100–US$300-million range. Many of these potential deals are earlier in the development process than transactions we’ve seen executed in recent years, with companies looking for funding at the PEA or PFS stage. Competition between royalty companies remains strong; however, driving down returns for higher quality projects, those with strong management teams and/or currently producing assets.
“Given this market backdrop, we continue to see headwinds for smallercap royalty companies lacking significant cash flow as all-share/partial-share deals are less likely to be executed in the current deal environment. Junior royalty companies acknowledge the significant benefit that scale provides in terms of access to capital, suggesting consolidation among smaller-cap companies is forthcoming.”
Noting the royalty sector continues to maintain a premium multiple to conventional mining companies “given asset diversification, strong FCF margins and ability to deploy existing capital on accretive acquisitions,” Mr. Nagle reiterated his top picks for the sector:
* Sandstorm Gold Ltd. (SSL-T) with a $9 target, down from $9.50 previously, and an “outperform” rating. The average target on the Street is $10.18.
“[Sandstorm] is focused on reducing debt after adding growth and diversifying revenue from the acquisitions of Nomad and BaseCore,” he said. “SSL continues to trade at a discounted 1.09 times NAV, compared to junior royalty and streaming peers (TFPM and OR) at 1.18 times. While the company will have to digest recent acquisitions, deleveraging can occur quickly in the current price environment and the more diversified and expanded portfolio warrants a rerating towards larger-cap peers.”
* Osisko Gold Royalties Ltd. (OR-T) with a $27 target and “outperform” rating. The average is $25.21.
“[Osisko] is trading at a discounted 1.03 times P/ NAV relative to Junior royalty peers (TFPM, SSL) at 1.24 times and Senior peers (FNV, WPM and RGLD) at 2.35 times,” he said. “Despite some near-term uncertainty in the CEO role, given the company’s near-term growth pipeline is being driven by expansion initiatives at producing operations, there’s scope for a further re-rating given the depressed valuation relative to royalty peers and significance of Canadian Malartic as a cornerstone asset.”
After updates to his financial models, Mr. Nagle made these target price adjustments:
* Franco-Nevada Corp. (FNV-T) to $210 from $215 with a “sector perform” rating. Average: $213.47.
Analyst: “Our Sector Perform rating, which offsets the company’s stable five-year production growth and industry leading financial strength with its premium valuation. We derive our target price for Franco-Nevada from multiples of 2.80 times NAV (33 per cent) + 30.0x times EV/24E CF (67 per cent). FNV remains a staple name in the gold sector, offers unparalleled portfolio diversification and maintains a strong financial position. With inflationary fears impacting the outlook for operators, the royalty sector stands to benefit from both the fixed-cost nature of royalty/streaming agreements and opportunities for additional acquisitions.”
* Gold Royalties Corp. (GROY-A) to US$2.65 from US$2.85 with an “outperform” rating. Average: $2.30.
Analyst: “Our Outperform rating is supported by the company’s near-term revenue growth, project generation and discounted valuation, all combined with what we believe is overarching favourable market dynamics for further industry consolidation supportive of a re-rating. While Gold Royalty’s discounted valuation and limited cash position makes accretive acquisitions more challenging, the company’s management team has demonstrated an ability to consolidate other smaller royalty companies and assemble an attractive growth pipeline to date.”
* Triple Flag Precious Metals Corp. (TFPM-T) to $23.50 target from $24 with an “outperform” rating. Average: $23.74.
Analyst: “Our Outperform rating accounts for a more diverse asset base and greater FCF generation as a combined company following the acquisition of Maverix. With improved trading liquidity and dilution of Elliott Management, the company’s largest shareholder, TFPM has gained inclusion into a number of indices and benefited from multiple expansion as a result. We continue to see further consolidation of the industry and expect the company’s ambitious management team to play an integral role in adding additional scale/multiple expansion.”
* Wheaton Precious Metals Corp. (WPM-T) to $72.50 from $75 with an “outperform” rating. Average: $74.69.
Analyst: “Our Outperform rating is predicated on WPM’s stable financial position and high-quality, low-cost long-life asset portfolio. Wheaton is set to achieve strong organic growth in the coming years with completion of Salobo and expanded production at Stillwater, Constancia and Voisey’s Bay.”
Ahead of Wednesday’s premarket release of its fourth-quarter financial results, H2O Innovation Inc. (HEO-T) is dealing with “a very Canadian problem,” according to National Bank Financial analyst Endri Leno.
“We expect HEO’s Q4/f23 update to focus on the impact and potential mitigation approaches from the weather-affected 2023 maple syrup season (production down 1 per cent year-over-year in Quebec and HEO’s maple-related revenues are 10-15 per cent of total),” he said. “While a development outside HEO’s control and, as such, not a reflection of its execution ability, 1) it is not necessarily a surprise (we raised this very point at HEO’s Q3/f23 conference call); and 2) the impact will be felt primarily in Q4/f23 and into Q1/f24.
“As a result, we have lowered Q4/f23 and f2024 forecasts. However, we also note that the strategic maple syrup reserve is at its lowest level in a decade while the number of taps is expected to increase by 14 per cent into 2026; hence, there should be increased production and for HEO, demand for equipment over the next couple of years.”
Mr. Leno is now forecasting revenue of $61.4-million, down from $65-million previously but up 18 per cent year-over-year and above the $60.4-million consensus projection. He expects adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to fall 26 per cent year-over-year to $3.5-million from a $6.2-million estimate previously and below the Street’s view of $5.2-million.
However, the analyst emphasized the outlook from the Quebec City-based company’s peers “bodes well” for its non-maple business.
“HEO’s water peers have continued to report positive results with elevated organic growth and margin expansion on higher pricing and volume (the latter not universal),” he said. “The peers’ outlook is similarly resilient with increased or steady guidance. Hence, we expect HEO’s, non-maple business (some 85 per cent plus of top line) to perform well and reflected in year-over-year growth (top and bottom lines) for the WTS and O&M segments.”
Also reducing his 2024 expectations, Mr. Leno cut his target for H2O Innovation shares to $3.25 from $3.50, reiterating an “outperform” recommendation. The average target on the Street is $3.71.
“Our investment thesis is based on 1) HEO continuing to profitably grow as it focuses on recurring revenues and higher margin work; 2) continued multiple expansion; and 3) multiple positive macro trends including aging U.S. water infra, increasing water desalination / reuse needs, municipalities outsourcing operation and maintenance of water facilities, fragmented industry, etc.,” he said.
Elsewhere, Canaccord Genuity’s Yuri Lynk trimmed his target to $3.25 from $3.50 with a “buy” rating.
“We are lowering our estimates ahead of Q4 and full F2023 results ... on this year’s weak maple season,” he said. “We believe Quebec’s 2023 maple season’s 60-per-cent year-over-year reduction in production due to weather conditions, press released by the company early this week, represents a $3 million revenue headwind for the quarter and will likely continue to weigh on the maple business line’s results in H1/F2024. Recall, the maple business drives $25-$30 million in annual revenues for the company or 10-12 per cent of TTM [trailing 12-month] sales.”
Savaria Corp.’s (SIS-T) $92-million equity financing “accelerates debt reduction and puts the focus on value creation opportunities,” according to Desjardins Securities analyst Frederic Tremblay.
“While we did not previously consider the balance sheet to be stressed, we note that the equity financing accelerates the ongoing leverage reduction, which should enhance the focus on operational execution and flexibility for potential growth initiatives,” he said upon resuming coverage. “Our view remains that Savaria can unlock significant value through margin expansion.”
Mr. Tremblay expects the focus of the Laval-based personal mobility product manufacturer will be squarely on management’s 2025 targets of $1-billion in revenue and adjusted EBITDA margin of 20 per cent.
“We view the margin target as aggressive, but not inconceivable,” he said. “We are introducing our 2025 estimates, with revenue of$961-million and adjusted EBITDA margin of 17.5 per cent as we await more visibility on a European turnaround and margin initiatives (including the Savaria One program being implemented with an independent consulting firm).”
Maintaining a “buy” recommendation for its shares, Mr. Tremblay trimmed his target by $1 to $20.50 to account for the increased share count stemming from the offering. The average on the Street is $21.07.
“Based on our analysis updated for the effect of the equity financing, we continue to see margin improvement as key to unlocking value,” he said. “We see a potential share price of $25–32 if a 20-per-cent margin is reached in 2025 ($22–28 at a margin of 18 per cent).”
Elsewhere, others resuming coverage include:
* Raymond James’ Michael Glen with a $19 target, down from $21 with an “outperform” rating.
“Looking medium to long term, the company has communicated aggressive goals of hitting $1 billion in sales by 2025 coupled with a 20-per-cent adjusted EBITDA margin,” he said. “On the top-line, we would say this does feel quite reachable, and coincides with multiple years of top-line growth in the 8-10-per-cent range, with some modest M&A to fill the gap. We would say the 20-per-cent margin target is definitely a much more aggressive goal. It is interesting to note that management believes current capacity and square footage (i.e., 1 million+ square feet) is enough to support this level of sales. As such, a large portion of the bridge from 16 per cent exiting 2023 to 20 per cent in 2025 is explained by operating leverage, but we acknowledge there are other elements to this level of margin expansion that we will be looking for insight on over time (i.e., potential price increases and incremental cost savings). For context, our adjusted EBITDA margin exiting 2024 is 16.4 per cent.”
* Stifel’s Justin Keywood with a $25 target and “buy” rating (unchanged).
“The financing de-levers the balance sheet and provides additional dry powder for M&A (more than $200-million),” said Mr. Keywood. “The company is also in the process of executing on “Savaria One”, a model of continuous improvement as a goal of $1-billion in sales by 2025 comes in sight. Savaria One involves greater coordination across the firm in driving efficiencies, including Kaizen events and in helping to achieve a 20-per-cent EBITDA margin target. The plan has some comparable aspects to ATS’ ABM and Danaher’s DBS but early in deployment and involves third party consultants. Our forecasts assume margins gradually rebound from Q2 (summary below) and should set up for a re-rating.”
Scotia Capital analyst Michael Doumet thinks ATS Corp.’s (ATS-T) $276-million acquisition of Avidity Science LLC, a designer and manufacturer of automated water purification solutions for biomedical and life science applications, “checks all the boxes,” touting the deal’s “reasonably attractive” economics and seeing it “highly consistent” with its M&A expectations.
“ATS expects to realize cost and commercial synergies of US$1.5-million by year three and US$2.6-million by year five,” he said. “On the conference call, management noted that two-thirds of the synergies relate to cost synergies and one-third relate to revenue synergies. Avidity grew its top-line at 8 per cent in the last three years – compared to an industry growth rate in the mid single-digit percentages. In 2023, Avidity is expected to grow 3 per cent, due to delays in certain project timelines. Similar to prior deals, management is targeting a low double-digit-percentage ROIC by year-five. The transaction will be financed with cash/debt and is expected to close in calendar 4Q23.
“In our view, the announced transaction is exactly consistent with ATS’ strategy of expanding its footprint in highly regulated markets (i.e., 70 per cent of revenues). Avidity will expand ATS’ product offering throughout drug development lifecycle, from basic R&D to commercial production and, therefore, provide ATS with cross-selling opportunities with its BioDot and SP Industries (and legacy) offering, by providing complementary equipment and technologies to its customers.”
Believing ATS’s has more room for further acquisitions, estimating it can “comfortably” deploy more than $400-million through the end of its current fiscal year, Mr. Doumet raised his target for its shares by $1 to $70, keeping a “sector outperform” rating. The average is $69.71.
“We expect ATS to achieve organic sales growth in the high single-digit percentage (or more) going forward, as it builds and converts its strong order book. Despite its strong share price performance, we still believe there is meaningful potential upside in the name, as its backlog provides a solid foundation to expand on its growth story,” he said.
Elsewhere, RBC’s Sabahat Kwan maintained a $69 target and “outperform” rating.
“The acquisition of Avidity Science LLC fits squarely within ATS’ M&A playbook and adds to its capabilities in the Life Sciences market,” said Mr. Khan. “Avidity is a leader in a niche market that we’d characterize as having a “high cost of failure”, and from a financial perspective, Avidity has both a sizable base of recurring revenue and an attractive margin profile.”
In other analyst actions:
* CIBC World Markets’ Jacob Bout raised his target for Aecon Group Inc. (ARE-T) to $13 from $11.50, keeping a “neutral” rating. The average is $13.75.
“We are coming off restriction on ARE post the roadbuilding business (ATE) and Skyport stake sales with a $13 price target (previously $11.50) and Neutral rating,” said Mr. Bout. “In the near term, we continue to see risk from the four legacy fixed-price projects that have weighed on 2022 and year-to-date 2023 results. While the company has already taken write-downs associated with the CGL and Finch West projects, we believe further write-downs associated with Eglinton (in H2/23) and Gordie Howe (in 2024) are a possibility. That said, ARE is transitioning away from a P3 model to a collaborative / progressive designbuild model for its larger projects, and this should reduce margin/execution risk longer term. Excluding the legacy projects, the rest of the business is displaying positive revenue and profitability trends, and recent infrastructure and nuclear project awards that are set to add billions to backlog. But given the risk for further legacy project write-downs near term, we expect investors will take a more modest view on valuation, underpinning our Neutral rating at this point.”
* Eight Capital initiated coverage of Coveo Solutions Inc. (CVO-T) with a “buy” rating and $12 target, below the $13 average.
* Raymond James’ Rahul Sarugaser raised his Eupraxia Pharmaceuticals Inc. (EPRX-T) target by $1 to $18 with a “strong buy” rating. The average is $14.75.
“[EPRX] remains on track to read out interim data from its Ph1b/2a clinical trial in eosinophilic esophagitis (EoE) in 2H23,” he said. “Given EPRX’s recent positive readout from its Ph2 trial in osteoarthritis (OA) — and EP-104IAR/GI’s parallel modes of action in both OA and EoE — we view the EoE program as materially derisked. Here, we increase our estimate of the EoE program’s value, and now regard EoE as EPRX’s lead program.”
* Desjardins Securities’ Brent Stadler lowered his EverGen Infrastructure Corp. (EVGN-X) target to $4.25 from $4.50 with a “buy” rating. The average is $5.69.
“Chase Edgelow stepped down as CEO and Mischa Zajtmann has been named interim CEO,” said Mr. Stadler.. “Ford Nicholson will assume the role of interim executive chair. It is unfortunate that Mr. Edgelow is leaving, but both Mr. Zajtmann and Mr. Nicholson have years of experience with EVGN and public company leadership, and we expect a smooth transition. In light of a modest delay at FVB and our conservative assumptions on the ramp to full RNG production, we have reduced our estimates.”
* ATB Capital Markets’ Nate Heywood lowered his Northland Power Inc. (NPI-T) target to $38 from $42 with an “outperform” rating. The average is $35.86.
* Following NorthWest Healthcare Properties REIT’s (NWH-UN-T) late Friday announcement of a 55-per-cent distribution cut and an updated to its strategic review, BMO’s Michael Markidis reduced his target for its units to $6 from $6.50 with a “market perform” rating.
“We believe the distribution adjustment is the right thing to do, however, the new monthly payment implies an annualized yield of only 5.9 per cent,” he said. “Moreover, we believe the commentary within the press release supports our view that the probability of an en-bloc sale is low. Accordingly, we believe the stock could be under pressure in the short-term.”