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

In response to increases in his firm’s gold price desk assumptions, Echelon Capital Markets analyst Ryan Walker raised his rating for Wesdome Gold Mines Ltd. (WDO-T) to “buy” from “hold,” emphasizing it has strengthened its cash position ahead of a decision on when to restart production at its Kiena complex in Quebec.

On Tuesday, the Toronto-based miner reported second-quarter financial results that fell in-line with Mr. Walker’s expectations. Earnings per share of 13 cents fell a penny below his forecast, while cash flow per share of 22 cents topped his estimate by 5 cents. Cash costs and all-in sustaining costs of US$637 per ounce and US$879 per ounce, respectively, were also better than he anticipated (US$668 and US$908).

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“WDO ended Q220 with $66.7-million in cash and equivalents (Q120: $49.4-million, Q419: $35.7-million) and working capital of $54.96-million (Q120: $38-million),” said Mr. Walker. “The Company also has an undrawn $45.0-million senior secured revolving credit facility, providing a liquidity buffer for any eventual positive Kiena mine restart decision (a Q220 PEA there estimates preproduction capex at $35-million).

Mr. Walker pointed to four potential share price catalysts in the near-term: exploration drilling results from both its Eagle River and Kiena complexes in September or October; an updated resource estimate at Kiena (Q4); prefeasibility study at Kiena and a product restart at Kiena (both in the first half of 2021)

With his rating change, he raised his target for Wesdome shares to $16 from $13.75. The average on the Street is $15.62.

“We contend that the deserved premium valuations reflect continued production growth at Eagle River, increasing visibility on production growth via the Kiena mine complex, bolstered by significant exploration success at both the high-grade Eagle and Kiena mine complexes, both situated in geopolitically stable Canada,” the analyst said.


In a research note titled “From Midstream ‘Meh’ to Midstream ‘Eh’,” Citi analyst Timm Schneider raised his rating for Enbridge Inc. (ENB-T) to “buy” from “neutral” and named it his top Canadian pick, replacing TC Energy Corp. (TRP-T).

“ENB and TRP are the two largest (by market cap) Midstream C-corps under coverage at Citi, and are widely ‘comped’ – which we believe encourages a ‘Head-to-Head’ comparison,” said Mr. Schneider. “We come away from this exercise with an appreciation for the quality of the underlying cash flows – and ‘premium’ valuation – that both have enjoyed through the cycle. Notably, negative revisions at both ENB at TRP have been essentially nil through the COVID outbreak, far better than the broader market and much of our coverage, suggesting these names are worth a closer look for generalists willing to be selective.

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“We prefer ENB here as favorable valuation and a confluence of relative tailwinds makes this a core Energy Infrastructure holding. Timing and likelihood of major projects (L3R and KXL) at ENB and TRP remain debated and are enough to swing relative valuation. However our focus here has been to look ‘through’ these contingencies (note: we are modeling L3R and KXL at ENB and TRP) to the ‘right’ EV/EBITDA, and also compare valuation on a DDM and forward P/E basis. We come away with the view that ENB looks modestly more attractive here even assuming a P/E discount and lower terminal growth, and are upgrading ENB.”

Mr. Schneider raised his target for Enbridge shares to $50 from $46. The average on the Street is $51.82.

Maintaining a “buy” rating for TC Energy, he hiked his target by $3 to $72. The average is $72.30.

He also kept a “neutral” rating and US$35 target for TC Pipelines LP (TCP-N), which falls short of the US$38.89 consensus.

“We are recommending a directional trade: Overweight ENB versus Underweight (yes, NOT TRP but…) KMI,” said Mr. Schenider. “While both stocks offer similar ETRs on paper, we believe incremental fund flows will favor ENB. We still believe TRP is attractive, and WMB also remains a core holding. We remain less constructive on Neutral-rated OKE, where we believe a dividend cut is likely in 2H'20. Summing it up, we prefer owning a basket of ENB / TRP & WMB over KMI & OKE.”


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Raymond James analyst Daryl Swetlishoff sees Conifex Timber Inc. (CFF-T) in a “stable financial situation with cash on the balance sheet” following recent asset sales.

Also expecting it to benefit from the rally in lumber, he raised his rating for the Vancouver-based company to “outperform” from “market perform.”

“With 100 per cent of lumber assets in Canada, favourable FX moves and potential for lower export duties are also earnings tailwinds,” he said.

On Wednesday, Conifex reported second-quarter EBITDA of a loss of $1.1-million, beating Mr. Swetlishoff’s projection of a $2-million deficit, due in part to production curtailments.

“While lumber markets are hitting new records with WSPF benchmark pricing reaching an all-time high of $675/mfbm [thousand board feet] and futures skyrocketing above $700/mfbm, Conifex’ earnings were impacted by the curtailments of its Mackenzie sawmill, for which the company took 12 weeks of COVID-19 induced downtime throughout 2Q20,” the analyst said. “With the company reporting the reinstatement of the mill in July paired with positive housing market outlook due to historically low mortgage rates, surging Repair & Reno demand and V-shaped home-buying activity, we expect CFF to benefit from the lumber rally in 3Q20. Given the company’s stable balance sheet as a result of recent asset sales, we see investors giving credit to Conifex’ prudent crisis management with CFF shares exceeding pre-COVID levels, up 297 per cent from March 2020 lows (vs. the TSX up 48 per cent).”

Mr. Swetlishoff increased his target for Conifex shares to $1.25, matching the consensus, from $1.

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Elsewhere, RBC Dominion Securities analyst Paul Quinn upgraded Conifex to “outperform” from “sector perform” with a $1.50 target, up from $1.


CAE Inc. (CAE-T) has “done a commendable job of ‘controlling the controllables’,” said RBC Dominion Securities’ Steve Arthur in response to quarterly results that were “deeply impacted” by the COVID-19 pandemic.

The analyst emphasized the Montreal-based flight-training company has “acted to conserve cash, implement structural cost changes, and capitalize on its leading technology and market position to resume long-term, compounding growth.”

On Wednesday, CAE reported revenue for the quarter of $551-million, falling short of Mr. Arthur’s $563-million but above the $512-million consensus. Adjusted earnings per share of an 11-cent loss was 6 cents below the analyst’s expectation and 2 cents worse than the Street’s view.

“FQ1 results illustrate severe COVID-19 impact … and strong mitigating actions to resume long-term growth: It’s no surprise that CAE was severely impacted by COVID shutdowns in its key end-markets,” said Mr. Arthur. “FQ1 figures were shy of our and consensus expectations, but given the magnitude of uncertainty and change through the quarter, we consider the results essentially inline with dampened expectations.

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“While carefully watching short-term metrics, our focus remains on the longer-term opportunity for CAE to deliver outsized returns.”

After trimming his revenue and earnings expectations for fiscal 2021 and 2022, Mr. Arthur lowered his target for CAE shares by a loonie to $27, keeping an “outperform” rating. The average on the Street is $23.55.

“At 10.7 times calendar 2021 estimated EV/EBITDA, valuation looks attractive for a high-quality business with multiple longterm earnings drivers,” he said.

Elsewhere, Scotia Capital analyst Konark Gupta upgraded CAE shares to “sector outperform” from “sector perform” with a $30 target, up from $29.

Desjardins Securities analyst Benoit Poirier increased his target to $24 from $21 with a “hold” rating (unchanged).

Mr. Poirier said: “As expected, the COVID-19 pandemic had a severe impact on CAE’s operational and financial results in 1Q. While CAE believes the worst of the pandemic is now behind it, the recent deterioration of the outlook for the Defence segment adds to the level of uncertainty related to the eventual recovery of the commercial aerospace industry. We prefer to remain on the sidelines while waiting for greater clarity on the outlook.”

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In response to a “big run” in its share price thus far in 2020, Raymond James analyst David Quezada lowered Northland Power Inc. (NPI-T) to “market perform” from “outperform” following the release of weaker-than-anticipated second-quarter results.

"With the stock now up 35 per cent year-to-date and an impressive 78 per cent from March 23 lows (vs. the TSX down 3 per cent year-to-date and up 48 per cent since March 23), NPI has charted new highs in recent trading sessions," he said. "We attribute this to the company's global portfolio of world-class offshore wind assets, strong ESG attributes and the low bond rate environment. While we continue to see longer term upside in NPI's substantial development portfolio, recent strength in the stock and reduced upside to our target price prompts our move."

On Wednesday after the bell, Toronto-based Northland reported adjusted EBITDA of $227-million, missing the projections of both Mr. Quezada and the Street ($235-million and $236-million, respectively.

“Relative to 2Q19′s EBITDA of $194-million, NPI saw a lift primarily from a full quarter’s contribution at Deutsche Bucht (”DeBu”, completed March 31) and Colombian Utility EBSA (acquired January 2020),” the analyst said. “These positives were offset by higher project development costs, lower wind resource and unpaid curtailments at Nordsee One, as well as lower wind resource and wholesale market prices below the SDE floor at Gemini. While lower wholesale power prices and unpaid curtailments at Nordsee One and DeBu are issues that we had harbored concerns about, the company also reaffirmed guidance of $1.1-$1.2-billion in EBITDA and FCF/share of $1.70-$2.05. Thus, while the results were below Street estimates, we expect the impact to NPI’s share price will be modest.”

With the downgrade, Mr. Quezada kept a target price for Northland shares of $38. The average on the Street is $35.82.

“We remain big fans of NPI’s ambitious global offshore wind expansion strategy and continue to expect the company will add significant value for shareholders in the long run,” he said. “That said, the sizable run in the stock in recent weeks prompts our more measured stance as it has brought the stock within shooting distance of historical valuation peaks of 12.5 times EV/EBITDA (current 2020 and 2021 estimated EV/EBITDA multiples of 12.4 times and 11.7 times respectively). We acknowledge the potential for fund flows from ESG focused investors may well render this view conservative, and push valuations beyond prior peaks; however, this is difficult to quantify and has likely already played a significant role in the stock’s run year-to-date.”


Though North American gold miners have enjoyed record free cash flow, Citi analyst Alexander Hacking warns risks are “increasingly elevated.”

“Gold equities had a strong sell-off earlier this week; a timely reminder that investing in miners at elevated metals prices comes with risk,” he said. “Large-caps are currently discounting $1700 per ounce, in our view; spot but above long-term average. Citi’s global commodity team remains bullish expecting gold to remain higher than $2000 per ounce into 2022. The Fed will be the ultimate arbiter, in our view; the eventual hint of higher rates may spark a major sell-off.”

In a research note released Thursday, Mr. Hacking raised his target prices for a trio of miners to reflect the firm’s latest gold price forecasts as well as improved investor sentiment.

His changes were:

  • Agnico Eagle Mines Ltd. (AEM-N/AEM-T, “neutral”) to US$80 from US$64. The average on the Street is US$80.74.
  • Pretium Resources Inc. (PVG-N/PVG-T, “neutral”) to US$12 from US$9. Average: US$11.84.
  • Buenaventura SAA (BVN-N, “neutral”) to US$13 from US$9. Average: US$13.01.

He maintained his targets for these stocks:

  • Newmont Corp. (NEM-N/NGT-T, “buy”) at US$70. Average: US$77.34.
  • Barrick Gold Corp. (GOLD-N/ABX-T, “neutral”) to US$27. Average: US$32.18.

“Sector leadership remains in very good hands with NEM, GOLD and AEM all on the right track,” he said. “FCFs are forecast at record levels with costs under control and sensible capital allocation – unlike in the 2010-13 price rally. The best yield in the group is PVG at 10-15-per-cent spot. We update our models post 2Q results and continue to see similar valuations on the larger caps – NEM, GOLD and AEM. Smaller caps – PVG and BVN – have underperformed and are trading on higher FCF yields. Our preferred exposure remains NEM seeing the cleanest play on elevated gold, including industry-leading dividends, and we are Neutral elsewhere.”


Following better-than-anticipated second-quarter results, Tamarack Valley Energy Ltd. (TVE-T) is “set up well with improving commodity prices,” according to Raymond James analyst Jeremy McCrea.

That prompted him to raise his rating to "outperform" from "market perform."

"Volatility, fear, and insolvency concerns have gripped energy investors and operators over the last few months," said Mr. McCrea. "Despite oil prices beginning to rebound, there is still some uncertainty in debt refinancing and we believe those with stronger balance sheets will likely start to take advantage of the current market dynamics. Although Q2 was relatively quiet, investors should be increasingly pleased with the company's recent Pembina acquisition in early July. Overall, with production ahead of expectations, results pending on its recently completed Banff well, low leverage and relatively attractive valuation on various methodologies vs. peers (i.e., EV/EBITDA: 3.3 times vs. peers at 5.8 times), we are moving to Outperform."

He raised his target for Tamarack Valley shares to $1.35 from $1.25. The average target is $1.67.


Granite Real Estate Investment Trust’s (GRT.UN-T) second-quarter results were “rock solid – in the face of one of the most difficult economic times in modern history,” said RBC Dominion Securities analyst Neil Downey.

The Toronto-based REIT reported funds from operations per unit of 97 cents, up 9 per cent year-over-year (from 89 cents) and in-line with Mr. Downey’s 98-cent forecast while matching the consensus on the Street. He attributed the result to “high and steady” occupancy (99.1 per cent) and “strong” same-property net operating income growth (5.5 per cent).

“Modern warehouse, logistics and distribution space remains a highly sought after property class,” he said. “Through the economic ‘trough’ of the COVID-19 pandemic occupancy and rent collection held-up better than any other property sector. Currently and looking ahead, the sector fundamentals are likely to remain strong.”

“One unique attribute at GRT is how its defensive financial positioning (excellent liquidity; low leverage) also places it so well to play offence.”

Keeping an “outperform” rating, Mr. Downey increased his target for Granite units by $6 to $82. The average is $77.

“Granite’s TSX-listed peers are now trading at an average 7-per-cent premium to NAV [net asset value],” he said. “The U.S. peer set is trading, on balance, at 12 per cent above NAV. Moreover, across the North American group, a number of entities are trading at premiums to NAV of 15-20 per cent. We believe Granite REIT stacks-up well against the peers on many fronts, including low leverage and earnings growth. As such, we have increased our Price Target ... Our revised Price Target is derived via the application of a 15-per-cent premium (previously 10 per cent) to our NAV/unit one-year hence. Our revised Price Target equates to 21 times our 2021 FFO/unit estimate.

“In light of the sector’s strength and Granite’s solid execution, we believe our target valuation metrics are reasonable and reflective of factors such as Granite’s property portfolio mix (special purpose properties, multi-purpose properties, and, modern logistics and warehouse/distribution properties), geographically diversified footprint, tenant concentration, tax efficiency, low financial leverage, and overall franchise value.”


Boyd Group Services Inc.‘s (BYD-T) expense control has bridged a return to its growth trajectory, said ATB Capital Markets analyst Chris Murray.

On Wednesday, the Winnipeg-based company reported revenue and adjusted fully diluted earnings per share of $426.5-million and a 33-cent loss, respectively, beating Mr. Murray’s estimates of $400.1-million and a $1.21 loss.

“We view the release positively with results surpassing our expectations, and with $1-billion-plus in dry powder as a result of the firm’s recent oversubscribed financing, we expect a refined M&A process allowing for additional remote due diligence and integration work to support inorganic growth through H2/20 and 2021 at or above historical levels,” he said.

“With the worst of the pandemic behind it, the company has seen demand improve steadily since April and even stabilize in certain markets. As the economy continues to reopen, the firm has resumed converting locations into full production facilities from temporary intake facilities, and better than expected operating cost control and cash flows have allowed the Company to reduce its debt load, with net debt of $709-million exiting the quarter. Excluding lease liabilities, the firm reduced net debt to $170-million from $399-million in Q1/20.”

With demand starting to return, Mr. Murray sees Boyd poised to return to accretive growth.

“Despite lower revenues due to COVID, the Firm delivered positive operating cash flow and with demand for its services increasing, it is now looking to continue pursuing accretive growth, both organically and inorganically,” he noted. “Management noted that quarter-to-date, same-store sales activity is 14-16 per cent lower year-over-year versus down 33 per cent (ATB estimate: down 40 per cent for Q2/20)., and that it expects certain operating expenses and personnel costs, as well as weaker demand year-over-year, to continue to impact Adjusted EBITDA. Management indicated that it would also be releasing a new five-year strategic plan, the first under the company’s new President & CEO, Tim O’Day likely with Q3/20 results. We believe the company’s focus on operational performance and growth via acquisition are likely to remain unchanged and given the company’s relatively small market share, a focus to remain on growth in the U.S..”

Despite trimming his earnings projections for 2020 and 2021, Mr. Murray raised his target for Boyd shares to $250 from $235, keeping an “outperform” rating. The average on the Street is $229.43.

Elsewhere, Desjardins Securities’ David Newman raised his target to $240 from $220 with a “buy” rating.

Mr. Newman said: “There is no ‘speed limit’ on the recovery highway for BYD. We continue to highlight this name as a quality compounder which should get back on track on SSSG, margins and acquisitions after the brief COVID-19 detour in 2Q, backstopped by its ample liquidity and a pristine balance sheet. BYD offers a potential return of 12 per cent.”


Having completed much of its 2020 capital program already, Industrial Alliance Securities analyst Michael Charlton thinks Birchcliff Energy Ltd. (BIR-T) has “minimized execution risk and free cash flow ahead.”

“Birchcliff reported a reasonably solid Q2/20 given the overall environment producers had to navigate. Now with virtually all of the planned 2020 capital program completed, Birchcliff’s production should keep rising in the back half of the year with newly drilled wells on production and the liquids handling inlet at the Pouce Coupe plant now completed, and under budget to boot,” he said. “Now we anticipate that the Company will continue to increase the efficiency of its business as it pushes forward towards free cash flow in 2021. Given that the Company has no near-term debt worries and the flexibility to switch between rich-gas or oily targets depending on commodity prices, we would view any pullback in trading price as a potential opportunity as it trades at a significant discount to its internal estimated $605-million, or $2.27/share infrastructure asset value and our current estimated PDP less net debt valuation of $3.91 per share with FCF on the horizon.”

On Wednesday after the bell, Calgary-based Birchliff announced quarterly production of 74,950 barrels of oil equivalent per day, falling short of Mr. Charlton’s 77,575 boe/d estimate. Cash flow per share of 8 cents topped his forecast by 3 cents.

“With the majority of its planned 2020 capital program now in the rearview mirror, Birchcliff has removed substantially all execution risk from the program and has completed the required supporting infrastructure to handle new production,” the analyst said. “As such, the company looks to be able to meet production guidance of 78,000-80,000 boe/d on the year, with Q4/20 to average 81,000-83,000 boe/d.”

Keeping a “buy” rating for Birchcliff shares, he increased his target to $2.25 from $2. The average is $2.36.


After “blowout” second-quarter financial results, Echelon Capital Markets analyst Andrew Semple raised his financial estimates for Trulieve Cannabis Corp. (TRUL-CN), declaring “the star of the Sunshine State is moving at lightspeed.”

“Trulieve has amassed an impressive share of Florida’s medical cannabis market, where it accounts for 50 per cent of volume sold,” he said. “The company’s dispensaries are 2.5 times more productive than those of its peers in that market (based on volume), which we believe is indicative of a very deep competitive moat. A key factor in the Company’s success, in our view, has been its ability to maintain adequate supply in the face of surging patient demand. Meanwhile, tough capital markets conditions have left many of its peers unable to pursue large capacity expansion projects to keep pace, whereas Trulieve’s early success has allowed it to reinvest positive operating cashflow into further production capacity, compounding that competitive edge.

“Coupled with pro forma available capital of $150-million and positive FCF, we feel Trulieve has inherent optionality to pursue M&A, develop organically, or further press the attack in Florida.”

On Thursday before the bell, the Tallahassee-based company reported revenue of US$120.8-million, up 25.7 per cent quarter-over-quarter and exceeded the expectations of both Mr. Semple and the Street (US$100.7-million and US$106.2-million, respectively). Adjusted EBITDA also blew past forecasts (by 46 per cent and 35 per cent, respectively) due to “solid” sales and margins.

With the results, Trulieve raised its sales and EBITDA guidance, however Mr. Semple thinks their targets are “still beatable” and expects to see M&A activity given its “swelling” cash balance.

“The Company reported a cash balance of $150-million as of June 30th, rising by nearly $50-million quarter-over-quarter on strong FCF [free cash flow] generation and as sale-leaseback reimbursements helped offset capex,” he said. “We believe this positions Trulieve favourably to conduct a sizable M&A transaction withing the next 12-months. Management remarked on the earnings call that the northeastern corridor of state cannabis markets – typically characterized by limited license regimes and the ability to be vertically integrated – have becoming increasingly attractive for M&A considerations.”

After raising his projections for 2020 and 2021 in order to “reflect the exceptional quarterly results, management’s bullish commentary, and the post-quarter momentum in industry data that suggest further growth ahead,” Mr. Semple hiked his target for Trulieve shares to $33 (Canadian) from $23. The average on the Street is $38.

“With a dominant market share in Florida, industry leading margins, and $150-million pro forma available capital, we think investors are getting one of the best operators in the U.S. cannabis industry at an attractive valuation,” he said. “While we do not think Trulieve deserves the same multiples as the 10+ state US MSOs due to its more limited market presence, we foresee the Company trading at a multiple well above other single state operators, many of which do not have the requisite scale or adequate capital to sustain a meaningful competitive moat.”


Seeing it as a potential M&A target Citi analyst Anthony Pettinari raised Domtar Corp. (UFS-N, UFS-T) to “buy” from “neutral” with a US$34 target, up from US$22 and above the US$30 consensus.

“In 10 years covering the company, this is the first time we’ve had a Buy rating on the stock,” said Mr. Pettinari. “Data released Wednesday night by PPPC [Pulp and Paper Products Council] indicates North American uncoated freesheet shipments fell 16.9 per cent year-over-year in July to 437kt, better than our expectations of a 20-per-cent-plus decline. The July data represents the second month of sequential improvement from what looks like a demand trough in May (down 34.6 per cent year-over-year). Similarly July op rates (73 per cent, up 500 basis points month-over-month) are well above May’s historic lows (59 per cent). The demand recovery, coupled with UFS’s recent announcement it will permanently close 720kt (8.7 per cent of North American capacity), limits 2H freesheet price risk, in our view. The closures, along with UFS’s conversions into containerboard & pulp and the strategic review of Personal Care announced last week, suggest all options are on the table to create value for shareholders. While it’s not our base case, we think it is possible UFS could be acquired.”


In other analyst actions:

* Following a second-quarter earnings beat, CIBC World Markets analyst Stephanie Price upgraded Altus Group Ltd. (AIF-T) to “neutral” from “underperformer” with a $43.50 target, up from $36. The average is $47.22.

“Altus continues to struggle with its Analytics cloud transition, with the division seeing negative constant-currency growth in Q2 and an 8-per-cent cloud adoption rate. However, the weakness was more than offset by Q2 annuity billings in the Tax division. With the UK Government announcing the extension of its tax cycle until 2023, we expect the Tax division to continue to offset weakness in Analytics through our forecast period. We are upgrading Altus ... given our revised forecast.”

* Scotia Capital analyst Trevor Turnbull upgraded Lundin Gold Inc. (LUG-T) to “sector outperform” from “sector perform” with a $14 target, which falls 88 cents below the consensus.

* RBC Dominion Securities analyst Geoffrey Kwan raised ECN Capital Corp. (ECN-T) to “outperform” from “sector perform” and raised his target to $7 from $5, exceeding the $6.37 average.

* Raymond James analyst Stephen Boland initiated coverage of Toronto-based Quisitive Technology Solutions Inc. (QUIS-X) with an “outperform” rating and $1 target. The average on the Street is $1.31.

“Quisitive is a full service digital technology consulting firm whose mission is to acquire and integrate companies to become the leading provider of Microsoft cloud services in North America,” he said. “Quisitive is one of 35 companies that earned the designation of National Service Provider (NSP). To obtain this designation takes years and the company must have capabilities in multiple business lines, scale and a diverse geographic presence. LedgerPay is a proprietary product which delivers cloud-based payments intelligence and payment processing platform. The product is designed to provide retailers with a more complete view of customer buying behavior and preferences while making payment options more reliable and cost effective. We believe investors are buying a premium consulting business with the optionality of LedgerPay.”

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