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

After a “strong” fourth-quarter earnings beat, Ag Growth International Inc. (AFN-T) is likely to garner increased investor support, according to Desjardins Securities analyst David Newman, who sees it “transformed into a fundamentally stronger, less cyclical and more predictable business as it expands across products and market.”

On Wednesday, the Winnipeg-based company reported earnings before interest, taxes, depreciation and amortization for the quarter of $28-million, up 20 per cent year-over-year and easily exceeding both Mr. Newman’s $22-million forecast and the consensus projection on the Street of $23.5-million. Rge analyst attributed the difference to “a favourable mix of Farm versus Commercial sales and operational gains on the back of strategic investments in prior years, eg Brazil, EMEA, India, Food and SureTrack (IoT sensors, subscription sales).”

The analyst now sees Ag Growth “riding the tailwinds of an ag ‘super cycle’” with backlogs currently up 40 per cent year-over-year.

“Management is optimistic that the momentum should accelerate throughout 2021 with an expected robust performance across its key regions, offset to a degree by higher steel prices and a weaker U.S. dollar,” said Mr. Newman. “The spike in steel prices should be contained to 2Q, with a muted impact in 1Q and improvements in 2H21.”

“In 2021, debt reduction remains a key priority as investments and capex normalize from elevated levels in the past several years. Management will also focus on leveraging these investments to drive growth, improve margins and accelerate value creation, eg SureTrack platform. Excluding unique near-term risks (steel, FX and a higher Commercial mix as it rebounds from COVID-19), EBITDA margins should track toward historical levels of 16 per cent-plus within the next two years. We forecast 2021 EBITDA margin of 15.1 per cent.”

Bullish on the growth potential and seeing “a high margin profile” for its Technology segment, Mr. Newman raised his target for Ag Growth shares to $57 from $50, keeping a “buy” recommendation. The average target on the Street is $48, according to Refinitiv data.

“Retail-equivalent sales grew 33 per cent in 2020 despite COVID-19 challenges in direct-to-farm,” he said. “We believe the value should be reflected in AGI’s share price over time as SureTrack grows, backstopped by a large TAM, rapid ag technology adoption, unique competitive advantages and a scalable omnichannel sales approach.”

Elsewhere, Raymond James analyst Steve Hansen raised his rating to “strong buy” from “market perform” with a $62 target, up from $50.

“We are ... upgrading our rating back to SB1 based upon: 1) improved clarity on the firm’s silo collapse liability (est. unchanged); 2) the firm’s rapidly accelerating backlog in a robust fundamental Ag backdrop; and3) new segmented disclosure that illuminates the hidden value embedded in AGI SureTrack—the company’s rapidly growing technology platform,” he said.

CIBC World Markets’ Jacob Bout hiked his target to $50 from $42 with an “outperformer” rating, while Scotia Capital’s Michael Doumet raised his target to $50 from $40 with a “sector perform” recommendation.

“Ag Growth looks to be in harvest mode, focused on leveraging its increased capacity in Brazil, EMEA, India, and SureTrack. As organic sales growth ramps, margins should improve (through 2022). While remediation costs (estimate was unchanged) are expected to postpone FCF normalization until 2022, the company maintains sufficient B/S flexibility. We increased our valuation multiple to 10 times EV/EBITDA, above its historical average to reflect the growth opportunities, supported by a favorable macro and maturing growth investments. We believe deleveraging would act as a positive catalyst,” said Mr. Doumet.


In response to recent share price appreciation and seeing a “lack of visible catalysts, Scotia Capital analyst Konark Gupta downgraded Westshore Terminals Investment Corp. (WTE-T) to “sector perform” from “sector outperform” on Thursday.

“We believe the stock has outperformed year-to-date (up 28 per cent vs. TSX up 9 per cent) due mainly to two factors: (1) material volume guidance increase in early February 2021, and (2) increase in regular dividend this week along with a large special dividend,” he said. “The coal market fundamentals have not changed materially with the exception of some tailwinds this year, partly reflecting the China-Australia conflict. While there could be some companyspecific catalysts in the long term, we would expect the stock to be capped until such catalysts come to fruition as we think FCF has peaked in 2020 and will decline over the next three years.”

Though Westshore’s FCF has “consistently increased over the past five years as volume and pricing improved while capex normalized,” Mr. Gupta now expects a “material” decline this year with a more gradual drop through 2023 as volume, pricing and margins dip.

He maintained a $21 target for Westshore shares, which falls 60 cents below the consensus.

“We continue to believe that WTE could potentially be a take-out candidate (e.g., Pattison owns 38 per cent of the stock) and/or could potentially diversify into a more sustainable commodity (e.g., potash, grain or another bulk commodity),” Mr. Gupta said. “However, we don’t have much visibility on timing of such potential catalysts, while we currently expect organic growth to be negative in each of the next three years. Moreover, the stock is not inexpensive, trading at 10 times our 2023 EBITDA, near the top end of its 5-year range.”

Meanwhile, CIBC World Markets’ Jacob Bout raised his target to $20 from $17 with a “neutral” recommendation (unchanged).


Seeing it as one of the top players in the cannabis sector on execution, revenues and profitability, Canaccord Genuity analyst Matt Bottomley thinks Green Thumb Industries Inc. (GTII-CN) continues to warrant a premium valuation after another quarterly beat.

The Chicago-based company reported revenue for the fourth quarter of 2020 of US$177.2-million, up 12.8 per cent from the third quarter and exceeding Mr. Bottomley’s US$173.5-million projection. Adjusted EBITDA of US$65.4-million also topped his forecast (US$61.6-million), due largely to higher sales and margins.

“Once again, the company’s leading positions in both Illinois (a market that has already grown to run-rate sales of US$1.4-billion) and Pennsylvania were the primary growth drivers for the period,” the analyst said. “Although quarter-over-quarter same-store growth came down to 6 per cent (from 18 per cent in Q3), this was largely to be expected given the seasonally slower Q4 months, substantial rebounds in NV and MA in Q3, and steadily increasing COVID-19 cases during the period. However, the company saw its branded wholesales increase by 31 per cent quarter-over-quarter (in line with 33 per cent in Q3), which once again helped drive its overall top line to an all-time high. Green Thumb ended the quarter with 51 retail locations in operation (with three store openings so far in Q1/21) and is generating revenues from all 12 of its existing markets.”

Mr. Bottomley emphasized that Green Thumb’s exposure in Illinois is “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$1.4-billion,” he added. “Of particular note, during the earnings call, management noted that state tax collections for cannabis for the month of February surpassed that of alcohol for the first time as legal adult-use marijuana continues to meaningfully transition out of illicit channels and into Illinois’ regulated framework.”

Maintaining a “speculative buy” rating for its shares, Mr. Bottomley hiked his target to $52 from $47 after increasing his 2021 and 2022 earnings and revenue expectations. The average target on the Street is $51.64.


Structural changes to Intertape Polymer Group Inc. (ITP-T) are bringing “significant” growth, according to PI Financial analyst Ben Jekic, who initiated coverage with a “buy” recommendation on Thursday.

“The Analyst first covered the Company in 2014, has not encountered such a comprehensive structural change in the operation after capital deployment and M&A moves made since 2017,” he said. “ITP made several acquisitions in protective packaging and automation, with a large capital deployment program in areas with the highest rates of growth. Ecommerce sales have grown rapidly for several years, but the Covid onset in 2020, pushed their contribution to just under 30 per cent of overall sales. Moreover, they are believed to be growing at 30 per cent year-over-year and are margin accretive as they are sold to the end customer. Consequently, ITP’s net margin drove ROE [return on equity] rebound to historical 25-per-cent levels, significantly improving year-over-year with the Company looking to further expand capacity in 2021.”

Expecting its margin improvement trajectory to continue, Mr. Jekic thinks the “positive remake” of the Quebec-based company will continue through the year.

“ITP’s demand should continue post pandemic with company planning an installation of a new water-activated tape line, operational in 2022E as well as woven products, protective packaging and films,” he said. “We are conservatively modeling lower FCF in 2021E than managements expected range of $80-million-$100-million especially with the growth capex expected at $70-million. While FCF seasonally materializes in 2H, showing encouraging trend in 1Q21Ewould imply incremental improvements in recent investments leading to rerating of the multiple and additional stock upside.”

Touting its “attractive” valuation, he set a target of $36 per share, exceeding the $35.06 average on the Street.

“As ITP continues demonstrating strong growth and margin improvement, market should continue to modestly re-rate its multiple and close the valuation gap with the group,” he said. “Clients should accumulate positions as ITP has strong prospects for expanding even as its beta likely sees some pullback (from 1.99 over the last 5 years). ITP is a strong play on economic reopening, and should benefit from stronger volume/mix, operating gains and bolt-on deals. We see adjusted EBITDA and EPS CAGR during 2019-2022 at 13 per cent and 35.9 per cent respectively.”


Desjardins Securities analyst Benoit Poirier called Calian Group Ltd.’s (CGY-T) recent $80-million equity issuance “an opportunistic financing to strengthen the war chest and continue deploying capital toward M&A.”

Upon resuming coverage of the Ottawa-based firm, Mr. Poirier said he expects it “to remain on the lookout for larger transactions now that the M&A playbook is well-established” and possessing over $200-million in “dry power” to utilize for growth opportunities.

“When CGY completed its $69-million equity offering in February 2020, management targeted to deploy the capital toward M&A over 18+ months,” he said. “Since then, management has deployed $77-million of cash to complete six acquisitions in three different segments (Advanced Technologies, Learning and Information Technology), beating its target by six months. More importantly, management remained true to its disciplined capital allocation strategy by realizing these transactions at an aggregate EV/TTM EBITDA [enterprise value to trailing 12-month earnings before interest, taxes, depreciation and amortization] multiple of 5.5 times (CGY currently trades at 16.8 times). The strong M&A execution and robust organic growth generation in the midst of the pandemic have helped to solidify CGY’s valuation multiple since its previous equity financing. This gives us confidence that management can successfully deploy the newly raised capital to unlock shareholder value.”

In the near term, Mr. Poirier expects Calian’s focus to be on M&A efforts to diversify its Health and Advanced Technologies segments “into new markets and verticals.”

“During its recent investor day, management emphasized that the company’s success is directly related to its four-piston engine, which provides strong diversification across segments as well as geographies,” he said. “Moving forward, CGY is targeting a 50/50 split in revenue from government customers and corporations (currently 55/45), with a larger presence in Europe (10 per cent of total revenue in 1Q) and eventually in the U.S. (actively looking to expand there). We believe management’s M&A strategy will play an important role in accelerating the company’s diversification. Now that the M&A playbook is well-established, we expect management to remain on the lookout for larger transactions. While these will likely command higher valuations than the company’s historical M&A transactions, we expect management to remain disciplined and target transactions that will be immediately accretive from a multiple standpoint.”

Keeping a “buy” recommendation for Calian, he trimmed his target by a loonie to $74. The average on the Street is $77.71

“Bottom line, we are reiterating our bullish stance on the name in light of the potential value creation arising from management’s disciplined M&A strategy as well as the attractive organic growth opportunities,” said Mr. Poirier.


Continuing to display reserve growth across its categories, InPlay Oil Corp. (IPO-T) has “more room to run,” according to Canaccord Genuity analyst Anthony Petrucci.

“Despite a challenging macro backdrop in 2020, we believe the company has positioned itself for success in 2021,” he said. “This includes improved financial liquidity, a return to an active drilling program, and forecasted production growth within cash flow. With the release of the company’s yearend reserves, our conviction continues to grow. The company grew reserves per share across all categories in 2020 at favourable FD&A costs, aided in part by a small but impactful acquisition in the Pembina area.

“IPO’s capex and production guidance remains unchanged for the year, with forecast spending of $23-million and targeted production of 5,100-5,400 barrels of oil equivalent per day. With the improvement in commodity prices, the company is now forecasting free funds flow this year of $16.5-million, which represents a FCF yield of 42 per cent on the current market cap.”

Seeing its upside potential highlighted in its 1P reserve value, Mr. Petrucci doubled his target for the Calgary-based company’s shares to $1, keeping a “speculative buy” rating. The average on the Street is 73 cents.

Elsewhere, Acumen Capital analyst Trevor Reynolds increased his target to $1 from 80 cents with a “speculative buy” rating.

Mr. Reynolds said: “Results for the quarter generally in-line with our estimates. Reserves are up year-over-year across all categories on the back of M&A along with proactive management through the downturn. Overall outlook has improved significantly in the current pricing environment.”


Viewing the first steps of Intel Corp.’s (INTC-Q) new Chief Executive Officer Pat Gelsinger as “promising,” Citi analyst Christopher Danely opened a positive catalyst watch for its stock on Thursday.

“We believe the new Intel CEO is taking away both the doomsday scenario of Intel losing share in CPUs for many years and the AMD ‘Blue Sky’ upside scenario of AMD gaining CPU share for many years,” he said. “We believe investors (and us) are becoming more confident in Mr. Gelsinger’s ability to fix Intel’s manufacturing either internally or via outsourcing to TSMC which should at least stabilize Intel’s market share in CPUs if not reverse the share loss. We expect Intel to continue to trade well and AMD to trade poorly in the near term as Mr. Gelsinger begins to meet with investors..”

Though he still expects a price war when the “PC space cools,” which he sees as a negative given the resulting margin and earnings declines, Mr. Danely raised his target for Intel shares to US$65 from US$55, maintaining a “neutral” rating.

“We are Neutral rated on Intel given our view of a fall off in data center in 2H20 due to a global recession,” the analyst said. “In addition, we believe Intel’s gross margin will be under pressure in the mid-term given the manufacturing challenges at 10nm and 7nm and a price war with AMD to combat further share losses.”


In other analyst actions:

* BMO Nesbitt Burns analyst Peter Sklar increased his target for shares of Restaurant Brands International Inc. (QSR-N, QSR-T) to US$71 from US$66 with an “outperform” rating. The average target on the Street is US$66.92.

* * Scotia Capital’s Mario Saric raised his American Hotel Income Properties REIT (HOT.UN-T) to $4.50 from $3.50 with a “sector perform” rating. The average is $2.98.

* CIBC’s Stephanie Price raised her target for shares of Regina-based Information Services Corp. (ISV-T) to $25 from $20.50, exceeding the $24.50 consensus, and maintained a “neutral” rating. Raymond James’ Stephen Boland increased his target to $27 from $22 with an “outperform” rating.

“Despite a strong 4Q, indicating the resiliency of the business model, management remains cautious of volumes due to COVID and won’t be providing guidance for the year as yet. We believe that growth in 2021 and 2022 will improve, which should continue to generate higher free cash flow and support the dividend,” said Mr. Boland.

* RBC Dominion Securities analyst Geoffrey Kwan raised his target for Power Corporation of Canada (POW-T) by a loonie to $35 with a “sector perform” rating, while TD Securities’ Graham Ryding raised his target to $38 from $36 with a “buy” recommendation. The average is $35.29.

* National Bank Financial analyst Matt Kornack raised his BTB REIT (BTB.UN-T) target to $4.25 per unit from $3.75, maintaining a “sector perform” recommendation. The average is $4.50.

* National Bank’s Endri Leno cut his IMV Inc. (IMV-T) target to $5.25 from $7, keeping a “sector perform” rating, while iA Capital Markets’ Chelsea Stellick cut her target to $7 from $10 with a “speculative buy” recommendation. The average is $8.74.

“[Wednesday] morning, IMV reported Q4/20 earnings and announced readouts from the basket trial of Maveropepimut-S and pembrolizumab in select advanced or recurrent solid tumours. NSCLC and ovarian cancer failed to meet the success thresholds and HCC results are not yet available due to insufficient enrollment so far,” said Ms. Stellick. “However, MSI-H and bladder cancer both achieved the prespecified success threshold, making them promising targets for therapy with Maveropepimut-S and pembrolizumab. Although itis difficult to judge the overall success of Maveropepimut-S in the basket trial without response rates or duration, it can be considered a success to the extent that it provides IMV with two new indications worth evaluating with Maveropepimut-S and pembrolizumab. We look forward to the trial design and initiation of the Phase 2bDLBCL trial, and expect this lead indication to drive the stock much higher in the backhalf of 2021.”

* Canaccord Genuity analyst Tania Gonsalves cut her target for MindBeacon Holdings Inc. (MBCN-T) to $14 from $17 with a “buy” recommendation. The average is $15.

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