On today’s TSX Breakouts report, there are 11 stocks on the positive breakouts list (stocks with positive price momentum), and 73 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that is neither on the positive breakouts list nor the negative breakouts list – it is a stock that is holding is value, resilient and steady in the face of market volatility.
The security highlighted today is Rogers Sugar Inc. (RSI-T). Analysts are forecasting a potential total return of nearly 18 per cent over the next year.
A brief outline is provided below that may serve as a springboard for further fundamental research.
Vancouver-based Rogers Sugar has two business segments, sugar and maple syrup. The company has sugar refineries in Montreal and Vancouver, and a sugar beet processing facility in Taber, Alta. The company manufactures sugar products such as granulated, icing, cube, yellow and brown sugars, liquid sugars, and specialty syrups, which are sold under the brands, Lantic in eastern Canada, and Rogers in western Canada. The sugar segment represents the majority of the company’s total revenues.
After the market closed on Feb. 1, the company reported solid first-quarter fiscal 2018 financial results (the company’s fiscal year-end in 2017 was Sept. 30). The company reported revenues of $204.9-million. Adjusted earnings per share came in at 15 cents, a penny ahead of expectations. The following day, the share price rallied nearly 2 per cent on high volume.
On the earnings call, President and Chief Executive Officer John Holliday commented on management’s priority for the year, stating “Our acquisition strategy remains an important part of our long-term business plan and vision for broadening our product portfolio and becoming a leading natural sweetener supplier. However, understandably, our focus this fiscal year will be turned towards integration of newly acquired business.”
Back in August 2017, the company announced the $160-million acquisition of L.B. Maple Treat Corp., one of the world’s largest branded and private label maple syrup bottling and distribution companies. This purchase marked the company’s entry into a new vertical, the maple syrup market. Months later, the company announced a $40-million acquisition of Decacer, a bottler and distributor of branded and private label maple syrup and maple sugar. On a pro-forma basis, management estimated that this acquisition would take the company’s maple syrup business segment up to more than 20 per cent of total sales. Integrating these acquisitions and realizing synergies are key objectives by management for 2018.
Chief Financial Officer Manon Lacroix provided management’s outlook for fiscal 2018, “Once again, I will start with the Sugar segment. We now expect total volume for the current year to be approximately 10,000 metric tonnes higher than fiscal 2017, 5,000 metric tonnes higher than our previous expectations. As indicated before, a large portion of the expected gain for the year will realize in the first quarter. The main increase is expected in the liquid market segment, where we anticipate the recovery of some volume lost in fiscal 2017 to high fructose corn syrup and additional demand from existing customers to have a positive impact when compared to 2017, potentially resulting in an increase of approximately 10,000 metric tonnes.” Looking at its maple syrup segment, management expects to realize adjusted EBITDA of approximately $18.4 million.
Rogers Sugar pays its shareholders a quarterly dividend of nine cents per share, or 36 cents per share yearly, equating to an annualized dividend yield of 5.8 per cent.
The company has maintained the dividend at this level since 2012, and paid shareholders a special dividend of 36 cents per share in 2013. On last month’s earnings call, CFO Manon Lacroix indicated that the company has “no intention of increasing it” at this point in time.
There are six analysts that cover this consumer staples stock, of which one analyst (from Scotia Capital) has a “sector outperform“ recommendation, two analysts have hold recommendations and one analyst (from EVA Dimensions) has an “underweight“ recommendation. The remaining two analysts are currently restricted on the stock; however, prior to being restricted, these two analysts had buy recommendations.
The six firms providing research coverage on the company are as follows in alphabetical order: BMO Capital Markets, Desjardins Securities, EVA Dimensions, National Bank Financial, Scotia Capital, and TD Securities.
Recommendations and stock prices have been relatively stable.
Prior to being restricted on the stock, last month, Frederic Tremblay, the analyst at Desjardins Securities, lifted his target price to $7.50 from $7.25.
The consensus EBITDA (earnings before interest, taxes, depreciation and amortization) estimates are $109-million in fiscal 2018 and $112-million in fiscal 2019. The Street is forecasting earnings per share of 54 cents in fiscal 2018 and 57 cents in fiscal 2019.
Over the past several months, forecasts have been relatively steady. To illustrate, four months ago, the Street was anticipating EBITDA of $104-million for fiscal 2018 and $110-million for fiscal 2019. The consensus earnings per share estimates were 54 cents in fiscal 2018 and 57 cents in fiscal 2019.
According to Bloomberg, shares of Rogers Sugar are trading at an enterprise value-to-EBITDA (EV/EBITDA) multiple of 8.9 times the consensus fiscal 2019 estimate. This is at a slight discount to its three-year historical average forward multiple of 9.2 times.
The consensus one-year target price is $7.00, implying the stock price may appreciate nearly 12 per cent over the next 12 months. The potential total return, including the dividend yield, is nearly 18 per cent. Individual target prices currently provided by three firms are as follows in numerical order: $6.75, $7, and $7.25.
Insider transaction activity
Looking back over the past month, there has not been any buying or selling activity reported by insiders.
The stock price has been resilient during times of market weakness. Year-to-date, the share price is relatively unchanged, down 1 per cent.
Since the summer of 2016, the share price has traded principally between $6 and $6.50, occasionally spiking to just below $7. In the near-term, the share price appears as if it will remain in this trading channel.
This small-cap stock with a market capitalization of $661-million has reasonable liquidity. The three-month daily average trading volume is approximately 243,000 shares.
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.