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

“The math just adds up” on Intact Financial Corp.'s (IFC-T) $12.4-billion joint proposal to acquire Britain’s RSA Insurance Group PLC, according to Desjardins Securities analyst Doug Young.

That led him to raise his target for the Canadian automobile and property insurance provider to “buy” from “hold” on Thursday.

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“Based on our calculations: (1) 5–10 per cent/3–14 per cent NOIPS [net operating income per share] accretion/operating ROE [return on equity] in the first full year post close,” said Mr. Young. "(2) 20 per cent — what the UK and international businesses would represent of pro forma consolidated operating earnings, so the businesses we have concerns with are a manageable size, in our opinion. “(3) 75-per-cent plus — the value creation coming from RSA’s Canadian operations, which we view as a lower-risk part of the transaction. (4) 2.5 times — the price/book value multiple at which IFC trades, which allows for all of the above. (5) 0 — the number of material negative surprises from acquisitions IFC has done since going public. (6) 24 per cent — total potential return to our C$165 probability weighted target; this implies a 2.2 times price/pro forma one-year-out book value.”

Mr. Young also said Intact’s management team has a “long history of executing and creating value” through acquisitions and noted the outlook for the company’s Canadian and U.S. operations has improved."

He raised his target for Intact shares to $165 from $155. The average on the Street is $164.


Pointing to the “challenging” operating environment faced by casinos due to the COVID-19 pandemic, Canaccord Genuity analyst Derek Dley thinks U.S. private equity firm Apollo Global Management Inc.'s $39 per share bid to acquire Great Canadian Gaming Corp. (GC-T) represents “good value” for shareholders.

He lowered his rating for the Toronto-based company to “hold” from “buy.”

“We note the transaction price of $39.00 equates to 9.6 times Great Canadian’s attributable 2019 EBITDA, which we view as a more appropriate gauge of the company’s medium-term profitability levels given the severe negative impact COVID-19 has had on Great Canadian’s recent results,” said Mr. Dley.

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“On that note, Great Canadian reported Q3/20 revenue and EBITDA attributable to the company of $43 million and $5 million, respectively. This, in our view, demonstrates the near-term challenges Great Canadian is facing due to facility closures and patron restrictions at its facilities.”

After a Wednesday earnings call that he called “one of the more dynamic” he’s been a part of as shareholders expressed their opposition to the bid, Mr. Dley thinks a competing offer is unlikely.

“Great Canadian entered the pandemic in a strong financial position with liquidity of $1.5-billion at the end of Q3/20,” he added. “The company was able to reduce its free cash outflow to $55 million during Q3/20 from $123 million in Q2/20. We believe that, on its own, Great Canadian would have been able to withstand the COVID-19 related impact on its business, and now with a partner such as Apollo, the company is well positioned to ‘wait out’ the near-term challenges.”

He moved his target to $39 to reflect the offer from $27 previously. The average is $35.50.


Though it continued to see double-digit, year-over-year declines in revenue and EBTIDA in its first fiscal quarter of 2021, Scotia Capital analyst Jeff Fan thinks Wildbrain Ltd. (WILD-T) is “making progress on many of its initiatives and financial results should start to move in the right direction starting next quarter.”

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That prompted him to upgraded his rating for the Halifax-based media company to to “sector perform” from “sector underperform” on Thursday, seeing the securing of a second contact with AppleTV+ for new original Peanuts content providing “production pipeline visibility” for fiscal 2021 and 2022.

“We believe the new AppleTV+ production improves the line of sight to EBITDA stability over the next 6-8 quarters allowing management to focus on strategic initiatives to return to growth and reduce financial leverage,” he said

Mr. Fan raised his target to $2 from $1.20. The average is $1.67.

“We continue to expect leverage to peak in Q2F21 (aligned with management’s guidance) and we expect both revenue and EBITDA to show growth for each of the remaining quarters in F21,” he said. “WILD is currently trading at 9.0 times NTM [next 12-month] EV/EBITDA, which we believe is justified given the improving EBITDA and financial leverage trajectory.”

Elsewhere, RBC’s Drew McReynolds increased his target to $2 from $1.50 with a “market perform” rating and CIBC’s Robert Bek moved his target to $1.75 from $1.25 with a “neutral” rating.

“While the risks pertaining to balance sheet, COVID disruption and YouTube changes remain, the visibility has improved, mostly on the back of demand for premium content, which has been augmented by the Apple/Peanuts deal,” said Mr. Bek.

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GDI Integrated Facility Services Inc. (GDI-T) “continues to play an essential role during COVID-19,” said Desjardins Securities analyst Frederic Tremblay following the release of the better-than-anticipated third-quarter results that featured record adjusted EBITDA, “strong” cash flow and reduced leverage.

On Tuesday after the bell, the Lasalle, Que.-based integrated commercial facility services provider reported revenue of $365.4-million, up 13.1 per cent year-over-year and exceeding the projections of both Mr. Tremblay ($341.2-million) and the Street ($357.8-million). Adjusted EBITDA increased 49.3 per cent to $30.2-million, also topping estimates ($22.3-million and $23.9-million).

“We attribute this excellent performance to continued strong execution and to increased demand for high-margin specialty janitorial services and supplies,” the analyst said.

“In the near term, we believe GDI’s janitorial operations should benefit from persistently strong demand for specialty services (eg high-frequency cleaning, disinfection), supplemented by a recovery in recurring janitorial services as more buildings reopen. We also view this as positive for the Complementary Services segment, which has been operating at excess capacity to supply gloves, masks, hand sanitizers and other key supplies. We continue to believe that GDI will remain a force post-pandemic.”

Also seeing a recovery for its Technical Services segment, he raised his financial projections for both 2020 and 2021, leading him to increase his target for GDI shares to $48 from $43.50 with a “buy” rating (unchanged). The average is $45.29.

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“We continue to view GDI as well-positioned during and post pandemic,” he said.

Elsewhere, CIBC’s Scott Fromson raised his target to $41 from $38 with a “neutral” rating, while TD Securities' Damir Gunja hiked his target to $47 from $45 with a “buy” recommendation.


Several equity analysts on the Street raised his targets for Boyd Group Services Inc. (BYD-T) following the release of better-than-anticipated third-quarter results.

On Wednesday, the Winnipeg-based company reported revenue, adjusted EBITDA and adjusted earnings per share of $508.3-million, $84.5-million and $1.02, respectively. The Street had anticipated $522.1-million, $64.7-million and 33 cents.

Among those making changes were:

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* CIBC World Markets analyst Matt Bank to $239 from $223 with an “outperformer” rating

“After holding in its business better than expected this year, Boyd’s impressive cost control, M&A opportunities, and new long-term targets suggest the company is positioned to get back to growth in 2021. While Q4 may be pressured on organic growth and a slower ramp-up in M&A to date, we believe Boyd will continue to take market share, and will pick up its acquisition pace shortly,” said Mr. Bank.

* RBC’s Steve Arthur to $230 from $222 with a “sector perform”

* Raymond James' Steve Hansen to $250 from $240 with a “strong buy”

* Jefferies' Bret Jordan raised his target to $258 from $250 with a “buy”

* Scotia Capital’s Michael Doumet to $250 from $240 with a “sector outperform”

“The highlight of the release was Boyd’s newly disclosed five-year growth plan to ‘double the size of the business’ from 2021 to 2025, based on 2019 revenues, implying a 15-per-cent revenue CAGR [compound annual growth rate,” said Mr. Doumet. “We won’t say it comes a surprise, but it does stand out as a bold move by management given the current operating environment. All this to say: we think the bull thesis remains firmly intact: with a 5-per-cent FCF yield ‘starting point’ and the company’s ability to self-fund a 20-per-cent FCFPS CAGR for the next several years, we see continued upside in the name.”

* BMO’s Jonathan Lamers to $249 from $247 with an “outperform”


A pair of equity analysts on the Street raised their ratings for Home Capital Group Inc. (HCG-T) a day after the release of third-quarter results that largely exceeded expectations.

National Bank Financial analyst Jaeme Gloyn upgraded the Toronto-based company to “outperform” from “sector perform” with a $34 target, up from $29.

TD Securities' Graham Ryding moved its shares to “buy” from “hold” with a $35 target, rising from $27. The average target is currently $31.33.

Others making changes included:

* Raymond James' Stephen Boland to $31 from $24 with a “market perform” rating.

“The higher than expected results were due to a provision release and a higher than expected NIM,” said Mr. Boland. “The provision release was due to overall improving economic conditions. Originations continue to trend in the right direction though we believe that management remains cautious on the housing market which has improved dramatically in a short period of time. Despite concerns about loan deferrals turning into impaired loans this has not occurred in a meaningful way and deferrals are close to ending. Results are improving, though we would like to see higher grow.”

* RBC’s Geoffrey Kwan to $30 from $26 with an “underperform” rating

* Scotia Capital’s Phil Hardie to $30 from $26 with a “hold” recommendation

“Following a solid rebound in the stock price, the upside surprise was met with a relatively muted investor reaction,” said Mr. Hardie. "Recent stock performance was likely driven by rising expectations and further narrowing of the stock’s discount on the back of a series of upside surprises across the mortgage services space, supported by an improved operating environment and resurgence of the “value trade.”

“Coming out of the quarter, we are raising our estimates largely on an upward revision to net interest margin expectations. Given repricing across the sector and an upward revision to our ROE outlook, we have increased our target price.”


In a research note titled An Appetizing Copper Menu for Any Investor, Scotia Capital analyst Orest Wowkodaw raised his target price for copper equities by an average of 11 per cent on Thursday, citing “higher multiples supported by improving fundamentals.”

“Cu prices have staged a remarkable recovery this year in the face of a severe pandemic induced global (ex-China) economic slowdown,” he said. “Looking ahead, we believe that recent positive vaccine hope, evolving U.S. election clarity, along with massive global stimulus and associated future infrastructure investment, combined with already low visible inventories and ongoing Latam supply risks, provide a positive backdrop for the Cu market.”

“For investors looking for Cu exposure, we believe there is a solid selection of good menu choices available among the equities for (1) growth, (2) value, (3) operational/financial leverage, and (4) capital return potential.”

His target changes included:

  • First Quantum Minerals Inc. (FM-T, “sector outperform” ) to $19.50 from $17.50. Average: $17.82.
  • Freeport-McMoRan Inc. (FCX-T, “sector outperform”) to US$22 from US$20. Average: US$20.47.
  • Southern Copper Corp. (SCCO-N, “sector underperform”) to US$32 from US$29. Average: US$43.42.
  • Ero Copper Corp. (ERO-T, “sector perform”) to $22 from $21. Average: $22.32.
  • Hudbay Minerals Inc. (HBM-T, “sector outperform” ) to $8.25 from $7.50. Average: $7.79.
  • Lundin Mining Corp. (LUN-T, “sector outperform”) to $10 from $9.25. Average: $10.31.
  • Capstone Mining Corp. (CS-T, “sector outperform” ) to $1.50 from $1.20. Average: $1.81.
  • Copper Mountain Mining Corp. (CMMC-T, “sector perform”) to $1.50 from $1.20. Average: $1.43.
  • Taseko Mines Ltd. (TKO-T, “sector underperform”) to $1.30 from $1. Average: $1.51.

“Overall, we recommend FCX, FM, LUN, and HBM for large/mid-cap Cu exposure,” said Mr. Wowkodaw. “Although valuation is mixed, FCX offers superior production growth, high leverage to Cu prices, a well positioned balance sheet, and the potential for large future capital returns driven by strong FCF generation. FM offers a similar growth profile with similar Cu price leverage (beyond 2021) at a more attractive valuation, although capital returns appear unlikely given de-leveraging priorities. Moreover, in our view, FCX and FM are also both legitimate takeover targets. Although several operational challenges overhang near-term performance, LUN offers relatively strong growth and Cu price leverage with a low risk balance sheet amenable for higher capital returns at a more attractive valuation. Finally, while Cu growth appears challenged, HBM offers high Cu price leverage at a very attractive valuation. While ERO has solid growth, very low costs, and a well positioned balance sheet, we remain concerned with valuation at current levels. Among the small caps, we prefer CS given its lower risk organic growth plans, lower financial leverage, attractive valuation, and strong FCF outlook. We prefer TRQ among the developers given the world class nature of Oyu Tolgoi combined with an extremely discounted valuation.”


Raymond James analyst Michael Glen sees a “favourable backdrop” for Martinrea International Inc. (MRE-T) heading into 2021.

In a research note released Thursday, Mr. Glen raised his financial expectations for the Vaughan, Ont.-based auto parts manufacturer after its third-quarter results featured a record free-cash generation. Martinrea also released fourth-quarter guidance of production sales of $900-million to $1-billion and adjusted earning per share in the range of 46 to 54 cents.

“We have increased our estimates to reflect the higher end of this EPS range (i.e. 53 cents),” he said. "We have also made adjustments to our forecast in 2021 and 2022, with 2021 EPS up 12 per cent and 2022 up 5 per cent. These positive revisions are driven by a much better performing North America segment, which saw an extremely strong 10.3-per-cent operating margin during 3Q (or 9.4 per cent excluding wage subsidy benefits). Offsetting the positive revisions in North America is downward adjustments to our Europe segment, which is reflective of a more muted trajectory for the Metalsa acquisition than previously forecast. We believe our Europe forecast is now sufficiently conservative to offer a base for positive revisions as Metalsa Germany transitions towards a break-even performance in 2021, and $30-million in EBITDA during 2022.

“All-in-all, we believe the 4Q guidance is illustrative of a quick recovery taking place in the operating profile of the business, and we continue to see further opportunities for potential upside in our forecast.”

Keeping a “strong buy” recommendation for Martinrea shares, Mr. Glen raised his target to $18 from $16. The average is $16.81.

“Martinrea remains a very inexpensive stock, in our view, and despite clear signals from management (and other auto parts peers) that business trends are working firmly towards a recovery, we continue to see a heavily discounted valuation in the name,” he said. “From that perspective, we continue to see: 1) U.S. SAAR sitting in the 16.2-16.3 million range (i.e., September/ October volumes per Wards); 2) low inventory levels (per Wards October 2020 U.S. inventory levels were at 2.8 million units, 22 per cent lower than October 2019 levels); and, 3) a continued positive mix skew towards truck/CUV/SUV (i.e., 76 per cent of October sales) versus passenger car.”

Other analyst raising their targets included:

* RBC’s Steve Arthur to $19 from $16 with a “outperform” rating

* CIBC’s Kevin Chiang to $16.50 from $14.50 with an “outperformer”

“MRE reported strong Q3 results and we continue to view its valuation as compelling, especially when compared to its Canadian peers. We see MRE closing this valuation gap given the improving fundamental outlook,” said Mr. Chiang

* Scotia Capital’s Mark Neville bumped his target to $17 from $15.50 with a “sector perform”


After another “significant” top-line earnings beat, Canaccord Genuity analyst Matt Bottomley said Green Thumb Industries Inc. (GTII-CN) “remains the steady hand” in the cannabis sector.

On Wednesday after the bell, the company reported revenues of US$157.1-million, up 31.3 per cent from the second quarter and easily exceeding Mr. Bottomley’s US$140.5-million estimate. Adjusted EBITDA jumped by 50 per cent to US$53.2-million, also passing the analyst’s forecast (US$41.4-million).

“The company noted that the higher sequential top line was both a result of organic growth/higher foot traffic driven from its key markets such as IL and PA (with companywide same store growth up 17.9 per cent quarter-over-quarter and retail/branded sales up 28 per cent and 33 per cent, respectively), in addition to a sizable rebound in both Nevada and Massachusetts due to state-mandated store closures in the prior period on the back of COVID-19 that have since been rectified,” the analyst said. “During the period, the company realized branded sales in 11 different states with a total of 48 retail locations in operation (no change over the prior period), with two additional store openings (in PA and FL) subsequent to period end.”

Seeing it benefitting from “one of the leading national footprints in the U.S.,” Mr. Bottomley hiked his target for its shares to $34 from $27, maintaining a “speculative buy” rating. The average is $29.21.

“As of Q3/20, GTI had US$78-million of cash on hand,” he said. "After another strong period that saw GTI achieve its third consecutive quarter of positive cash flow from operations, we believe the company is one of the better funded operators in the U.S. to continue executing on its initiatives.

“Of particular note, we believe GTI’s exposure in Illinois is one of the most material value drivers for the company at this time. We estimate that GTI is competing for the #1 spot in the market with a current share of more than 20 per cent and 100-per-cent wholesale penetration in a market that is already operating at an annualized revenue run-rate of US$1.5-billion. Further, as one of only 12 licensees in New Jersey, we believe the recent successful ballot initiative that will see adult-use sales kick-off in the state in 2021 will also likely be a significant growth driver for the company heading into 2021.”


In a research report reviewing third-quarter earnings results for large-cap energy companies, CIBC’s Dennis Fong raised his target prices for the stocks in his coverage universe on Thursday.

“Q3 earnings season for the large-cap energy equities started with a significant consolidation transaction in the merger of CVE/HSE and material macro-related events including the U.S. election and, more recently, positive news from early-stage testing of a COVID-19 vaccine,” he said. “We remain constructive on oil price, with a recovery towards US$50 WTI by 2022.”

“We estimate the large-cap energy group is discounting US$45 WTI despite the significant move earlier this week, not including any improvements to refining margin vs. Q3/20 levels. Despite the incremental risk a Biden administration could have on further pipeline egress out of Western Canada, we see value in the large-cap group, specifically from the downstream assets of SU and IMO, the potential opex improvements for the group and production resiliency which we believe continues to be misunderstood.”

His changes were:

  • Canadian Natural Resources Ltd. (CNQ-T, “outperformer”) to $31 from $30. The average is $31.63.
  • Imperial Oil Ltd. (IMO-T, “neutral”) to $25 from $22. Average: $20.88
  • MEG Energy Corp. (MEG-T, “neutral”) to $3.50 from $3.25. Average: $3.88.
  • Ovintiv Inc. (OVV-N/OVV-T, “underperformer”) to US$12 from US$11. Average: US$16.17.

Mr. Fong maintained a $28 target and “outperformer” rating for Suncor Energy Inc. (SU-T). The average is $26.28.

“As we enter year-end budget season, we expect updates from IMO, MEG, CNQ and SU before year-end, with OVV providing 2021 guidance early next year,” he said. “Net-net, we expect production growth in 2021 as assets ramp back towards full rates, while spending remains moderately above sustaining capex levels. Our pecking order remains unchanged as: SU, CNQ, IMO, MEG, OVV.”


In other analyst actions:

* TD Securities analyst Aaron Bilkoski downgraded Nuvista Energy Ltd. (NVA-T) to “hold” from “buy” with a $1 target, down from $1.25 and below the $1.23 consensus.

* RBC Dominion Securities’s Nelson Ng raised his target for Northland Power Inc. (NPI-T) to $45 from $37 with a “sector perform” rating, while CIBC’s Mark Jarvi increased his target to $45 from $44 with an “outperformer” rating. National Bank’s Rupert Merer moved his target to $45 from $43 with an “sector perform” rating. The average is $44.50.

* CIBC’s Dean Wilkinson hiked his target for BSR REIT (HOM.UN-T) to $12.75 from $12.25 with an “outperformer” rating. The average is $12.06.

* Scotia Capital’s Cameron Bean moved his target for Peyto Exploration & Development Corp. (PEY-T) to $4 from $3.50 with a “sector perform” rating., while Canaccord Genuity’s Anthony Petrucci raised his target to $4 from $3.50 with a “speculative buy” rating. The average is $3.67.

“With the tail wind of strengthening natural gas prices, we believe PEY is in a prime position for a rebound” said Mr. Petrucci. “Despite a challenging backdrop in 2020, the company is on pace to show healthy organic production growth this year (Q4 to Q4 growth of 10 per cent), while spending largely in line with cash flow. On our adjusted estimates, we forecast similar growth through 2021, with capex well within our cash flow expectations.”

* Cowen and Co.'s Georgios Mihalos raised his target for Nuvei Corp. (NVEI-T) to $64 from $59 with an “outperform” rating, while Scotia Capital’s Paul Steep moved his target to $71 from $68 with a “sector outperform” recommendation. The average is $51.60.

* CIBC’s Mark Jarvi trimmed his target for Innergex Renewable Energy Inc. (INE-T) to $26 from $26.50 with a “neutral” rating. The average is $25.75.

“While Q3 results were soft, we believe the market will look past unfavourable weather impacts and expect curtailment issues that hurt recent results to resolve. There were a few slight capex increases and revised projected EBITDA contributions, but the impacts are minor and INE has ample liquidity to fund organic growth and strategic M&A of operating assets that are intended to help moderate INE’s higher payout ratio,” said Mr. Jarvi.

* Industrial Alliance Securities analyst Michael Charlton bumped his target for Storm Resources Ltd. (SRX-T) to $2.75 from $2.50 with a “buy” rating. The average is $2.84.

“We believe Storm remains an attractive option for those looking to add a little more gas exposure heading into the winter heating season,” he said.

* Raymond James' Michael Glen hiked his target for Goodfood Market Corp. (FOOD-T) to $12.50 from $9.15 with an “outperform” rating. The average is $11.72.

“Exiting 4Q20 we are making positive revisions to our numbers and see a continuation of the positive EBITDA trend through 2021 and 2022," said Mr. Glen. "From that perspective, while FOOD has provided clear commentary that they will prioritize growth over profitability in the near-term (a strategy we absolutely agree with), we see momentum continuing to build as they launch new products/services while enhancing the customer experience. The most significant launch is with respect to Goodfood WOW (same day/next day grocery), which will expand out of the Montreal region in coming quarters to several other Canadian markets, namely Toronto, Calgary, and Vancouver. We see this offering as helping sustain average revenue per customer, encouraging repeat orders, and also driving new subscriber growth, all key metrics we use to make our forecast and value the stock. Additionally, as in terms of adjustments to our model, we continue to see a number of significant levers that could stand to offer upside. This is particularly true given how we saw the business perform during 2H20 and how we see the operating strategy evolving over 2021 and 2022.”

* Scotia Capital’s Mark Neville increased his target for NFI Group Inc. (NFI-T) to $23 from $22, keeping a “sector outperform” rating. The average is $21.29.

“While the Q3 release was a bit of a mixed bag (e.g., Q3 beat, but 2020 guidance was reiterated, implying Q4 below pre-reporting consensus), we took several positives from the results,” he said. “Specifically, (i.) Q3 results showed a material sequential improvement over Q2, with the company on track to meet its 2020 guidance, (ii.) the company made headway on ‘NFI Forward’, which is expected to eventually result in more than $65-million in annual structural cost savings, and (iii.) management indicated it was in advanced discussions with its lenders to provide extended covenant relief (sounds like through 2021), which, in our opinion, significantly reduces the equity risk. While the company has not yet provided 2021 guidance (expected in early January), it described 2021 as a ‘transition year’ – although it is expected to show significant improvement over 2020. We view NFI as somewhat of a ‘stimulus and vaccine story’ – as such, the slope of the recovery is somewhat challenging to forecast, but, in our view, the trajectory is less uncertain.”

* TD Securities analyst Tim James raised his target for shares of AirBoss of American Corp. (BOS-T) to $32 from $31, maintaining a “buy” rating. The average is $35.40

“The increased target price is due to the impact of carrying forward a portion of the better-than-expected revenue and margins in Q3,” said Mr. James. "Results were very encouraging and lend support to our view of the significant value potential in the shares. We believe that AirBoss' strong balance sheet is sufficient to weather the current period of uncertainty, while providing the flexibility to execute on growth opportunities.

"We view AirBoss as positioned to benefit from personal protective equipment (PPE) demand and the potential for a long-term trend of increased stockpiling by government entities. This, combined with the products added through the acquisition of CSI, supports our expectation of strong earnings growth over the near term due to traditional defense customers, and increased traction with healthcare providers.

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