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

A day after U.S. President Joe Biden revoked the permit for the Keystone XL pipeline, a pair of equity analysts on the Street raised their ratings for TC Energy Corp. (TRP-T).

Credit Suisse analyst Andrew Kuske moved the stock to “outperform” from “neutral.”

“With a long saga surrounding KXL coming to an end (at least this part of it), a less “noisy” TRP combined changes to our financial model equates to a more attractive risk-reward relationship,” he said.

“On a longer-term basis, we believe some of the key questions become the ability to backfill meaningful capex from the current asset base (along with natural extensions) along with acquisition aspirations starting to creep into the narrative.”

Mr. Kuske raised his target to $70 from $65. The average on the Street is $68.77, according to Refinitiv data.

“TRP looks very well positioned for ongoing growth across the asset base with key competitive advantages in both the WCSB and Marcellus production basins,” he added.

Elsewhere, BMO Nesbitt Burns analyst Ben Pham raised TC Energy to “outperform” from “market perform” with a $65 target, down from $68.

“U.S. President Biden’s expected revocation of a crucial permit for KXL shifts TRP’s projected growth rates from the higher end of the 5-7-per-cent guidance to the lower end,” he said.

“However, the benefit is a ‘cleaner’ story without large-scale project risk, an improved balance sheet that can self-fund the current secured backlog, and a better-positioned ESG narrative (i.e., less oil pipes).”

Several analysts also cut their targets for its shares, including:

* CIBC World Markets’ Robert Catellier to $69 from $71 with an “outperformer” rating.

“While the cancellation of the Keystone XL (KXL) project is disappointing for the company and the industry at large, the company’s growth prospects remain robust and dividend growth outlook intact,” said Mr. Catellier.

* Scotia Capital’s Robert Hope to $69 from $72 with a “sector outperform” rating.

“With Keystone XL permits being pulled some investors had pointed to two negative potential scenarios: 1) management trying to push the project through and put incremental shareholder capital at risk, and 2) the company could become more acquisitive, which could be an overhang on the shares,” said Mr. Hope. “We push back against these scenarios given our view that the company is very disciplined when it comes to capital. While the company often speaks about the potential for M&A, this has been the case for years, and we do not believe anything is in the hopper. The loss of KXL does weighs on TC Energy’s growth profile in 2023+, though we believe the company will look to its extensive gas position and potential to build renewables to back-fill growth. The loss of KXL also removes a large equity funding requirement and should help the company delever ... TC Energy’s shares have under-performed its peers since the fall, which we attribute to the loss of KXL, but also a flow of funds from TC Energy, which we view as the lowest risk name in the energy GICS, into companies with more torque to higher oil prices. We view TC Energy as a high quality name at an attractive valuation at a 2021 PE of 13.5 times and free cash flow yield of 10.2 per cent. With KXL behind them we believe the narrative on the shares could improve.”


While its year-end results fell in-line with his expectations, RBC Dominion Securities analyst Josh Wolfson saw B2Gold Corp.’s (BTG-N, BTO-T) 2021 and five-year average guidance as “a little bit softer” than the Street’s expectations due to sequencing at its Fekola mine.

“In recent years, B2Gold has generated attractive free cash flow, supported by the company’s cornerstone Fekola mine in Mali,” he said. “Going forward, Fekola economics are expected to soften, driven by mine sequencing and changes in ownership economics following the repayment of initial shareholder construction loans.

“Despite these changes at Fekola, B2Gold is still expected to generate favourable free cash flow from the Fekola mine, positioning the company to fund its ongoing high dividend and development of internal opportunities, including Otjikoto UG, Fekola regional upside, and Gramalote.”

Keeping an “outperform” rating and seeing it “well-positioned financially to fund its existing high dividend and Gramalote development, “Mr. Wolfson trimmed his target for B2Gold shares to US$6.50 from US$6.75 with an “outperform” rating. The average is US$7.90.

“In the short term, various upcoming milestones are expected in 1H (Fekola resource updates, Gramalote FS), also balanced by materially weaker 1H operating results,” he said. “B2 guidance reinforces an interim transition in place whereby year-over-year comparables are likely to soften at the cornerstone Fekola mine, and prior high corporate FCF will be reallocated towards project development.”


Canaccord Genuity analyst Scott Chan now favours Canadian lifecos over banks, switching a stance he took at the end of last March.

“Since that time period, the Big-6 banks (average) returned 42 per cent that slightly underperformed the Lifeco’s (avg.) stock performance of 44 per cent,” he said in a research note released Thursday. “During COVID-19, we note that Lifeco shares have demonstrated much better EPS resiliency than expected.

“With vaccines being rolled out, we believe Lifeco investor sentiment continues to improve supporting our new stance: (1) Long-term interest rates have also moved higher which we believe will disproportionately benefit Lifecos (e.g. strain, NBV, earnings on surplus) over Banks; (2) Lifecos historically have exhibited higher beta (1.3 times) that should support price appreciation on improving markets over our forecasted period (albeit with volatility); (3) Canadian Banks (avg.) significantly outpaced Lifecos in 2020 (up 13 per cent) and during 4 of the last 5 years, while Lifecos have relatively outperformed the Big-6 banks year-to-date (up 4 per cent); (4) Lifecos exhibited much stronger than expected EPS resiliency in 2020 (Canaccord estinate: down 1 per cent year-over-year vs. Big-6 at down 16 er cent ) with upcoming Q4 results expected to benefit from higher exposure to market sensitive businesses; (5) Lifecos’ larger exposure to Asset Management/Wealth Management should provide a tailwind short-term (particularly with SLF); (6) Lifecos have earned larger annual EPS revisions from the Street which is a strong leading indicator for near-term share relative gains; and (7) Big-6 banks P/E (next 12-month) trade at a 5-per-cent premium to its historical average vs. Lifecos (avg.) at down 19 per cent. Further, our best fit P/B to ROE line (2021E) favors Lifecos over Banks.”

Mr. Chan upgraded Sun Life Financial Inc. (SLF-T ) to “buy” from a “hold” recommendation based on a higher price-to-earnings target multiple stemming from larger earnings potential and his expectation for a rise in return on equity.

Also seeing an “ improved valuation due to recent relative share underperformance,” he raised his target to $66 from $61, exceeding the $65.75 average.

Mr. Chan reiterated Manulife Financial Corp. (MFC-T, “buy”) as his top pick pick in the sub-sector, raising his target to $28 from $25. The average is $26.15.

He also increased his target for IA Financial Corp. Inc. (IAG-T, “buy”) to $65 from $59, falling 33 cents short of the consensus.

Mr. Chan maintained his target and ratings for Canadian banks. They are:

  • Bank of Montreal (BMO-T) with a “buy” rating and $103.50 target
  • Bank of Nova Scotia (BNS-T) with a “hold” rating and $66.50 target
  • Canadian Imperial Bank of Commerce (CM-T) with a “buy” rating and $122 target
  • National Bank of Canada (NA-T) with a “hold” rating and $74.50 target
  • Royal Bank of Canada (RY-T) with a “hold” rating and $113.50 target
  • Toronto-Dominion Bank (TD-T) with a “hold” rating and $76 target


Ahead of the release of its fourth-quarter financial results on Feb. 10, Industrial Alliance Securities analyst Elias Foscolos reiterated Mullen Group Ltd. (MTL-T) as one of his top picks for 2021, expecting the earnings release to be “solid” with a “strong” forecast for the remainder of the year.

“We are constructive on the Company’s near-term outlook, forecasting OIBDA [operation income before interest, depreciation and amortization] toward the top end of guidance, which we estimate will support FCF [free cash flow] of over $90-million (8-per-cent yield on current share price),” he said. “We believe MTL is in a position to accelerate M&A activity in the coming year and beyond, and in general, we believe that its diversified operations and strong cost management enable the Company to generate stable FCF through the cycle, which can be re-invested to support annual OIBDA growth of 4 per cent. Further enhancing upside, in our view, is that MTL’s balance sheet appears underleveraged.”

For the quarter, Mr. Foscolos is projecting OIBDA of $59-million, exceeding the consensus on the Street of $55-million. He also expects to see its consumer-driven Less-Than-Truckload (LTL) business rebounding to pre-pandemic levels.

The analysts also sees the Okotoks, Alta.-based company as “poised for acquisitions” and expects continued buybacks, calling its balance sheet flexibility “tremendous.”

“Recall that when MTL implemented its NCIB in March 2020, the Company had the goal of buying back $100-million in shares over three years,” the analyst said. “MTL has since maxed out that NCIB, repurchasing 8 million shares for $50-million. The Company has recently reiterated its $100-million over-three-year target and we believe it will continue to repurchase shares when it renews its NCIB, although at a more moderate pace as a) MTL’s increased dividend will equate to $45-million of payments to shareholders in 2021, and 2) MTL’s stock is trading higher than it was during the first round of buybacks. If we assume the Company achieves its three-year buyback target, we can expect another $25-million of buybacks over each of the next two years. That would not leave as much FCF for acquisitions, however, we believe that MTL will take on additional leverage if the M&A environment supports acquisitions that offer strategic fit at a reasonable value.”

Keeping a “buy” recommendation for Mullen shares, Mr. Foscolos raised his target to $14.50 from $14. The average on the Street is $12.25.


Scotia Capital analyst Justin Strong sees a “compelling” growth outlook for TSX-listed renewable energy stocks.

“Ahead of earnings releases in early February we revisit our near-term estimates, extend our forecast period out to 2025, and roll our valuation reference year to 2023,” he said. “We continue to be of the view that the equities are currently pricing in a portion of near-term growth. To us, this explains (and justifies, to some extent) current valuations.”

Mr. Strong raised his target prices for the four stocks in his coverage universe, including:

* Northland Power Inc. (NPI-T) to $52 from $45 with a “sector outperform” rating. The average is $49.25.

“Northland is best poised for valuation expansion as contributions from the company’s offshore wind growth initiatives come into view,” he said. “We reverse-engineered the valuation of an offshore-wind weighted competitor to isolate the implied multiple for its offshore-wind segment and compare to that of NPI. The conclusion: NPI’s offshore wind segment is currently trading at 5-10 multiple turns lower than this peer. See within for details and methodology.

* Boralex Inc. (BLX-T) to $59 from $46.25 with a “sector outperform” rating. The average is $50.58.

“Boralex growth comes into view, further announcements expected. We’re confident that Boralex will organically achieve its 2023 guidance of 2800MW of installed capacity, $140-million-$150-million of discretionary free cash flow and a payout ratio in the range of 40-60 per cent,” he said. “With 450MW of capacity left to be secured, we expect further announcements in the coming year, with the majority coming from greenfield developments.”

* Innergex Renewable Energy Inc. (INE-T) to $32 from $25.25 with a “sector perform” recommendation. The average is $29.18.

“Several projects [are] on the horizon for Innergex,” he said. “We forecast a host of projects being developed between now and 2023 including Griffin Trail, as well as four solar plus storage projects located in Hawaii: Hale Kuawehi, Paeahu, Barber’s Point, and Kahana. While there still exists some risk that not all these projects will move forward we are confident in management’s ability to maintain growth similar to that forecasted through either greenfield opportunities or via acquisitions.”

* Brookfield Renewable Partners LP (BEP-N, BEP.UN-T) to US$44 from US$36 with a “sector perform” rating. The average is US$40.35.

“Brookfield Renewable continues to have one of the better growth profiles backed by its development pipeline, improved returns from existing assets and M&A,” he said. “It continues to trade at a wide premium to it renewable peers which we believe limits the potential for further relative valuation expansion.”


Scotia Capital’s Mark Neville raised his 2021 and 2022 earnings expectations for Canadian auto parts manufacturers, seeing a recovery taking hold.

“With auto sales trending above prior expectations, we have raised our forecasts for our auto parts suppliers under coverage,” he said. “Strong industry sales coupled with still low North American inventory levels and structural cost savings realized during the pandemic, in our opinion, should support a robust earnings recovery for the parts suppliers through our forecast period.”

Mr. Neville hiked his 2021 and 2022 earnings per share estimates by approximately 20 per cent and 10 per cent, respectively, for Magna International Inc. (MGA-N, MG-T). His projections for Martinrea International Inc. (MRE-T) rose by 10 per cent and 7 per cent, while his expectations for Linamar Corp. (LNR-T) increased by 5 per cent each year.

“Our revised forecasts primarily reflect higher industry production assumptions, which also drives corresponding increases in our margin forecasts,” he said. “Auto sales have trended above our prior expectations, namely in North America and China. In North America, Q4 industry sales were only down approximately 2 per cent year-over-year, with the SAAR exceeding 16 million units in three of the last four months. Industry inventory levels also remain well below prior year levels, supporting production numbers into 2021, in our view. In China, sales were up y/y in every month since May, including an increase of 11 per cent in Q4 (through November). European sales have shown improving trends, but the recovery still lags other regions.”

With his changing projections, Mr. Neville also increased his targets for the companies’ shares. His changes were:

  • Magna to US$100 from US$80 with a “sector outperform” rating. The current average is $76.97.
  • Martinrea to $19.50 from $19 with a “sector perform” rating. The average is $19.63.
  • Linamar to $90 from $80, maintaining a “sector outperform” rating. The average is $70.83.


A group of equity analysts on the Street raised their targets for shares of Birchcliff Energy Ltd. (BIR-T) following Wednesday’s release of its 2021 capital program and updated five-year plan.

“Birchcliff took a gamble in 2020, outspending cash flow and opportunistically advancing its infrastructure, but that gamble is now paying off with an 65-per-cent reduction in infrastructure spending and is supporting the Company’s accelerated FCF [free cash flow] growth with $130-150-million FCF generation at current strip pricing that will go to paying down debt and strengthening the balance sheet,” said Industrial Alliance Securities’ Michael Charlton.

“We believe Birchcliff can continue to deliver on continued debt reductions as well as sustainable production and cash flow growth rolling forward under the Company’s updated five-year plan, which looks to generate $1-billion in accumulated free cash flow. Looking out to 2022 and sustainability, a 25-well, $200-million capital program is all that’s needed to hold production relatively flat at 80,000 boe/d [barrels of oil equivalent per day] and generate $175M in FCF that will support the drive to a D/CF [debt to cash flow] ratio of less than 1.0 times by 2023 and debt free in 2025.”

Keeping a “buy” rating, Mr. Charlton increased his target to $3.50 from $3. The average is $3.21.

Others making changes included:

* BMO Nesbitt Burns’ Randy Ollenberger to $2.85 from $2.75 with a “market perform” rating

“Production is expected to grow modestly over the next several years as the company prioritizes debt reduction. We believe that Birchcliff’s decision to focus on reducing debt is prudent and should drive longer-term appreciation in the company’s share price,” said Mr. Ollenberger.

* National Bank’s Dan Payne to $3.50 from $3 with an “outperform”

* Canaccord Genuity’s Anthony Petrucci to $3 from $2.75 with a “buy”

* TD Securities’ Aaron Bilkoski to $3 from $2.50 with a “buy”


Industrial Alliance Securities analyst George Topping sees the synergies and scale of Treasury Metals Inc.’s (TML-T) Goliath Gold Project and Goldlund Project in Northwestern Ontario as “compelling,” leading him to initiated coverage with a “buy” recommendation on Thursday.

“Treasury’s Goliath Project on its own was too small to support development,” he said. “However, the recent purchase of the Goldlund Project, just 25 kilometres away, resolved that.”

“Treasury now has a management team in place that can expedite the development of the project to production if need be. The combined resources of Goliath and Goldlund will increase with the ongoing drilling program. As steady progress is made on building the resource, plant, and gathering permits, we expect the Company to be in a position to start the mine by the end of 2024/2025. A combined PEA for Goliath and Goldlund is expected in Q1/21. The Company is also looking to transition into the PFS/FS stage by the end of 2021.”

Mr. Topping set a target of $2.50 per share. The average on the Street is $2.38.


It’s “lining up to be a breakout year” for Blackline Safety Corp. (BLN-X), according to Canaccord Genuity analyst Doug Taylor.

“While Blackline shares have appreciated in recent months, we believe the stock still has upside potential as the company executes against expectations for a significant reacceleration in growth after a COVID-19-impacted F2020,” he said. “This acceleration is supported in part by the broader availability of its new G7 EXO product – available now in North America as of yesterday – and its positive potential implications on Blackline’s addressable market, ASPs and margins. Our F2021 estimates are largely unchanged, calling for 70-per-cent overall revenue growth, and we are introducing F2022 estimates that reflect a further 43-per-cent top-line expansion and the return of more ‘normal’ sales environments.”

Keeping a “buy” rating for shares of the Calgary-based company, Mr. Taylor hiked his target to $10, matching the consensus, from $7.50 ahead of the release of its fourth-quarter results next week.


In other analyst actions:

* BMO Nesbitt Burns analyst Mark Wilde initiated coverage of Cascades Inc. (CAS-T) with an “outperform” rating and $18 target. The average is $18.42.

“Cascades has made a series of impressive changes over the last decade,” he said. “The company has dramatically narrowed a far-flung portfolio that lacked scale and focus. Internal capital projects, acquisitions, and facility closures are all improving the relative cost position.

“The company has also made real headway in deleveraging/derisking the balance sheet. The work isn’t complete. Continued execution should narrow the valuation ‘gap’ to industry peers.”

* Desjardins Securities analyst John Chu lowered his target for shares of Valens Company Inc. (VLNS-T) to $3.75 from $4 with a “buy” rating, while ATB Capital Markets’ David Kideckel trimmed his target to $3.65 from $4 with an “outperform” recommendation. The average on the Street is $4.14.

“Valens announced a reset as it enters 2021 with some inventory writedowns and lower-than-expected sales guidance,” said Mr. Chu. “We are therefore forecasting VLNS to dip into negative EBITDA territory for the first time since early FY19. We expect the company to quickly bounce back to positive EBITDA and continue to forecast a strong sales outlook, but we have taken a more conservative outlook for the remainder of FY21 and FY22. We maintain our Buy rating but expect some near-term volatility.”

* Scotia Capital analyst Michael Doumet raised his target for AutoCanada Inc. (ACQ-T) to $35 from $32.50 with a “sector outperform” rating, while Acumen Capital’s Trevor Reynolds raised his target to $35 from $32 with a “buy” recommendation. The average is $31.11.

“While 2020 was a challenging year for new vehicle sales in Canada (down 20 per cent year-over-year) ACQ proved resilient and handily outperformed the Canadian new vehicle market through the first three quarters while delivering on the revised go forward plan rolled out in 2018 which focused on increasing high margin business segments (F&I and PS&CR) and used vehicle sales,” said Mr. Reynolds. “With significant headway made on debt reduction ($220-million of liquidity) the company is positioned to ramp up M&A in what we expect will be a tough market for smaller dealers. In addition to organic initiatives and M&A, we look to increased throughput from the digital online sales platform over time.”

* Haywood Securities analyst Colin Healey raised his target for H2O Innovation Inc. (HEO-X) to $4 from $2.50 with a “buy” recommendation. The average is $3.

“We believe H2O is undervalued given the resiliency of its business lines, large backlog and synergies it is achieving through M&A,” said Mr. Healey. “We believe strong financial performance over the next few quarters and improving EBITDA margins will lead to share price appreciation. We see H2O as undervalued at these levels and as such are raising our target.”

* National Bank’s Vishal Shreehar cut his Metro Inc. (MRU-T) target to $64 from $65, keeping a “sector perform” rating. The average is $63.

* National Bank’s Rupert Merer increased his target for shares of Algonquin Power & Utilities Corp. (AQN-N, AQN-T) to US$19 from US$16.50, exceeding the US$16.61 average. He kept an “outperform” rating.

* CIBC World Markets analyst Scott Fromson raised his target for Park Lawn Corp. (PLC-T) to $37 from $35 with an “outperformer” rating. The average is $34.83.

“We had the pleasure of hosting PLC CEO Brad Green, COO Jay Dodds and CFO Daniel Millett for a virtual fireside chat at CIBC’s 24th Annual Western Institutional Investor Conference. The discussion focussed on the impact of COVID-19. Operations continue to perform well – highlighting the benefits of PLC’s increasing scale and the non-cyclicality of the death care business. PLC’s acquisition program continues apace and the pipeline remains strong. We are fine-tuning our estimates and rolling out 2022 estimates,” he said.

* Mr. Fromson increased his Diversified Royalty Corp. (DIV-T) target to $3, matching the consensus, from $2.75 with an “outperformer” rating.

“DIV has outperformed management’s expectations during the pandemic, which is impressive considering that its royalty investments are all consumer-facing. We expect additional investments will be delayed until COVID-19 calms down and physical due diligence can proceed,” said Mr. Fromson.

* CIBC’s Bryce Adams increased his target for Lundin Mining Corp. (LUN-T) to $12.50 from $11, keeping a “neutral” rating, while BMO Nesbitt Burns’ Jackie Przybylowski raised her target to $13.50 from $13. with an “outperform” recommendation. The average is $12.71.

“Q4 production results were better than expectations across all commodities and at most mines including Candelaria and Chapada, which faced challenges during the quarter,” said Ms. Przybylowski.

· The company reported progress across all its operations, and we expect continued improvement through 2021.

* Mr. Adams raised his Largo Resources Ltd. (LGO-T) target to $2.50 from $1.80 with an “outperformer” rating. The average is $1.70.

* CIBC’s Dean Wilkinson raised his target for Brookfield Asset Management Inc. (BAM-N, BAM.A-T) to US$49 from US$46, maintaining an “outperformer” rating. The average is US$49.35.

“Adapting to the times, we hosted BAM from the comfort of our home office for our 2021 Western Institutional Investor Conference. While there were no major surprises (other than our own ability to manage the technology of a virtual setting), the conversation did serve to re-affirm our view of BAM as a best-in-class alternative asset manager,” said Mr. Wilkinson.

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