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

Citi analyst Alexander Hacking sees the current valuation on Agnico Eagle Mines Ltd. (AEM-N, AEM-T) as “significantly more attractive today than in recent history.”

“Agnico Eagle has underperformed the broader gold mining group over the past 12 months,” he said. “This appears to be driven by a combination of factors. First, AEM reduced 2020 guidance during 2019 due to mine plan revisions, the first cut in forward guidance we can remember. The guidance cut itself was relatively minor and 2021+ was unchanged but AEM stock was susceptible given its premium to peers. Second, large caps Newmont and Barrick have broadly outperformed expectations, driving the index and setting a high bar.

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“On a longer-term view, AEM continues to be the best performer mostly due to superior capital allocation and successfully doubling production since 2012.”

In a research note to update his projections for the Toronto-based miner, Mr. Hacking noted the Street and sell-side firms, including Citi, remain bullish on gold. Citi’s commodity team now expects prices to top US$2000 per ounce in the second half of 2021.

“The playbook is clear – lower rates for longer – and arguably mirrors the last big crisis in 2008-09,” he said.

“Virtually nobody seems outright bearish gold, although some long-term investors have been taking profits.”

With that view, he increased his 2021 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) estimate by 31 per cent to US$2.3-billion. However, his 2020 projection slid 14 per cent to $1.4-billion.

He maintained a “neutral” rating and US$64 target for Agnico shares. The average on the Street is US$69.18.

“Underperformance versus large-cap peers has reduced AEM’s premium and de-risked the stock, in our view,” said Mr. Hacking. “We still calculate a small NAV [net asset value] premium, but in the 10-20-per-cent range vs previous 50 per cent. This level is justified, in our view, considering AEM’s lower-risk geographies, superior grade profile & growth optionality. AEM looks relatively attractive on a FCF basis, requiring $1,550 per ounce to generate 5-per-cent yield vs large-caps at $1,600 per ounce. Looking ahead, capital allocation in 2022+ will be critical; but we have high confidence in AEM management which has the longest track record of success in the group.”

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Citing its recent share price appreciation, Scotia Capital analyst Orest Wowkodaw lowered Ero Copper Corp. (ERO-T) to “sector perform” from “sector outperform.”

“With the shares up an impressive 134 per cent from the March 2020 lows, the current price implies only a negligible 1.7-per-cent remaining return to our unchanged 12-month target of $20.00 per share,” he said. “While ERO shares warrant a premium valuation based on the company’s peer leading exploration upside, strong management team, very low cost position, and solid balance sheet, we believe that the risk-reward proposition at the current share price appears significantly more balanced. ERO shares are currently trading at a P/ NAV [price to net asset value] of 1.67 times, essentially in line with our target multiple of 1.70 times. On a positive note, the company has done a brilliant job navigating the operating risks associated with the COVID-19 pandemic in Brazil to date.”

Mr. Wowkodaw’s $20 target falls 14 cents below the consensus.


Industrial Alliance Securities analyst Elias Foscolos now expects Enbridge Inc.‘s (ENB-T) 2020 financial results to fall at the low end of its guidance range.

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Ahead of the release of its second-quarter results, he trimmed his financial projections for the company to account for a string of recent news.

“Enbridge is showing progress on its L3 replacement project in Minnesota but the company has faced some challenges in Michigan due to the damage caused to one of the twin pipelines of Line 5 that crosses under the Straits of Mackinac,” he said. “We have updated various assumptions surrounding current oil production volumes through the Mainline System and the Line 3 project which resultsin lower estimates for 2020 and 2021.”

Mr. Foscolos lowered his 2020 earnings per share estimate to $2.35 from $2.44. His 2020 and 2021 projections rose to $2.57 and $2.99, respectively, from $2.45 and $2.82.

“We have tightened our model to more accurately represent the impact of production curtailments affecting Enbridge’s Mainline System. Additionally, we have extended our expected in-service date for Line 3 by one quarter,” he said.

Keeping a “strong buy” rating for Enbridge shares, he trimmed his target by a loonie to $52. The average on the Street is $51.35.


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Polaris Infrastructure Inc. (PIF-T) “appears undervalued” and trades at a “substantial” discount to its peers, said Industrial Alliance Securities analyst Naji Baydoun following virtual investor meetings Toronto-based renewable energy company.

“Looking at PIF’s relative valuation, the shares are currently trading at a relative valuation discount to Canadian independent power producer (IPP) peers (FY2E P/FCF of 6 times, which represents a substantial 8-9-times discount to peers),” he said. “While PIF’s shares are likely to continue trading at a relative valuation discount to peers in the near term given the uncertainty related to the political situation in Nicaragua, we believe that the shares could experience valuation multiple expansion as the Company continues to execute on its diversified growth strategy over time.”

In a research note released Thursday, Mr. Baydoun introduced a sum-of-the-parts valuation for Polaris. He said it indicated its shares could be worth $23-27. They closed trading on Tuesday at $14.44.

“Based on PIF’s current share price, we believe that investors are applying a substantial discount to the value of the Company’s e San Jacinto asset given the uncertainty related to the political situation in Nicaragua; we note that the SJ power plant has not been directly affected by the ongoing political unrest in Nicaragua at this time,” he said. “We see significant potential upside in PIF over the medium term as the Company continues to execute on its diversified growth strategy, and as sentiment around the political situation in Nicaragua improves.”

Mr. Baydoun maintained a “speculative buy” rating and $25 target. The average on the Street is $26.25.

“PIF continues to offer investors (1) cash flow stability from contracted power operations, (2) near-term and longer-term growth opportunities linked to organic developments and potential acquisitions, (3) a healthy dividend (6-per-cent yield, 35-45-per-cent FCF payout), and (4) a deeply discounted valuation compared with larger power producer peers,” he said. “We continue to see organic development and M&A activity as potential catalysts for shareholder value creation as PIF grows and diversifies its asset portfolio, ultimately leading to potential valuation multiple expansion over time. We continue to view the current share price as an attractive entry point into an undervalued name.”

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Desjardins Securities analyst Maher Yaghi thinks Mediagrif Interactive Technologies Inc. (MDF-T) has altered its strategy “completely” with its recent leadership changes, focusing on revenue growth at the expense of the bottom line in the short term.

He thinks the change could deliver "solid" upside upside for investors if executed well, however he cautions it "increases risk as it will require careful financing and operational execution."

"Mediagrif is undergoing a significant shift in its operations and this transition will take a few quarters for a sustainable lift in revenue growth and profitability," said Mr. Yaghi. "Management is leveraging the improved balance sheet post equity financing to invest both internally to improve organic growth and to look for additional acquisitions.

“For 4Q FY20, however, organic growth of the B2B business did not improve significantly. Management provided bullish insights on recent trends that could lead to improved organic growth in the coming quarters. We will be looking to see if these trends do lead to an inflection point. In the meantime, investments in sales and marketing are expected to continue.”

Keeping a “hold” rating for the Longueuil, Que.-based tech firm, Mr. Yaghi increased his target to $7 from $6.50. The average on the Street is $8.

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Luminex Resources Corp. (LR-X) possesses an “enviable portfolio for resource growth and development potential,” said Haywood Securities analyst Geordie Mark, emphasizing the “momentum” for mining investment in Ecuador.

He initiated coverage of the Vancouver-based company with a "buy" rating.

"We highlight Luminex as an exploration-development stage company focused on delivering value from the drill bit to manifest resource growth and discovery across its asset portfolio in Ecuador, and leverage to exploration targeting and expenditure through its Joint Ventures with BHP Billiton and Anglo American," he said.

Currently the lone analyst on the Street covering the stock, Mr. Mark set a $1.80 target.


Seeing financing as the near-term focus, Canaccord Genuity analyst Aravinda Gallappatthige trimmed his target for Cineplex Inc. (CGX-T) shares to $12 from $17, keeping a “speculative buy” rating. The average on the Street is $14.31.

“Our characterization of Cineplex is one of a degree of near-term uncertainty (around financing) which could lead to some volatility until the liquidity and balance sheet situation is stabilized. On the other hand, we see considerable upside potential to valuation as we consider the 2021 film slate, free cashflow generation post 2020, topped with the optionality around the litigation against Cineworld and other strategic options,” said Mr. Gallappatthige.


In other analyst actions:

* TD Securities analyst Linda Ezergailis cut Inter Pipeline Ltd. (IPL-T) to “hold” from “buy” with a $13 target. The average target is $12.81.

* TD’s Graham Ryding lowered Atrium Mortgage Investment Corp. (AI-T) to “hold” from “buy” with an $11 target. The average on the Street is $12.92.

* Laurentian Bank Securities analyst Furaz Ahmad resumed coverage of Uni-Select Inc. (UNS-T) with a “buy” rating and $12 target. The average on the Street is $7.38.

“While the last several quarters for Uni-Select have no-doubt been challenging, we believe the current valuation presents an attractive risk-reward,” he said. “It is our view that the company has made material progress to alleviate liquidity and capital concerns, and will ultimately benefit in the long-run from the cost cutting initiatives recently announced. Our long-term view is based on our belief that management’s efforts to right-size the business during the pandemic will ultimately lead to long-term margin expansion, and increased financial flexibility.”

* Jefferies initiated coverage of Aimia Inc. (AIM-T) with a “buy” rating and $9.50 target. The average on the Street is $6.25.

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