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

Aya Gold & Siver Inc. (AYA-T) is “ready to expand and explore” after the close of a $70-million bought deal, said Desjardins Securities analyst John Sclodnick upon resuming coverage.

He now sees the Montreal-based company’s current valuation “as an attractive entry point given the slew of significant catalysts on the horizon, which has the potential to drive NAV growth.”

Under the deal, Aya sold 6.83 million common shares at a price of $10.25 each with Desjardins acting as sole bookrunner.

“The company has no shortage of uses for the proceeds as the bulk of the raise will be allocated to the Zgounder expansion and the installation of a 2,000tpd mill,” said Mr. Sclodnick. “With the strong drill results at Zgounder showing no signs of diminishing, we expect to see a continued aggressive drill program next year, while the grab samples from Imiter bis, bordering and along strike from Africa’s largest silver mine, have certainly justified an ambitious drill program there.”

“After AYA is added to the GDX and GDXJ this Friday (Sept. 17), representing demand of 9.62 million shares, the catalysts will continue into year-end. We expect the strong drill results from Zgounder and Imiter bis to continue, while we see potential for the year-end resource update to blow through the target of 100moz Ag. This will include a maiden reserve and form the basis for the Zgounder expansion study to 2,700tpd, also scheduled for release by year-end.”

Maintaining a “buy” rating for Aya shares, the analyst raised his target to $12.50 from $12.20. The average on the Street is currently $12.94.

Elsewhere, National Bank’s Don DeMarco resumed coverage of with an “outperform” rating and $13.25 target.


Scotia Capital analyst Phil Hardie expects to see a fourth consecutive quarter of positive mutual funds flows from AGF Management Ltd. (AGF.B-T) when it reports its earnings on Sept. 29.

For its third quarter, he’s projecting operating earnings per share of 17 cents, matching the consensus estimate on the Street), with adjusted earnings before interest, taxes, deprecation and amortization (EBITDA), excluding commission expense, of 46 cents per share, which would be an increase of 19 per cent quarter-over-quarter and 21 per cent year-over-year.

“We forecast a sequential increase in adjusted EBITDA per share (before ommissions) mainly driven by an increase in management fees given higher average AUM [assets under management] and an increase in carried interest income from the monetization of one of the LP investments managed by SAF,” he said. “We believe investors should focus on Adj. EBITDA (which excludes the impact of commission expenses) as the primary earnings metric rather than EPS. Adj. EBITDA removes the relative ambiguity of EPS given that it can be negatively impacted by increased sales momentum, which is a positive indicator for the business and future earnings.

“Key areas of focus for the quarter are likely to be: 1) AUM and sales outlook given continued very strong industry-wide sales, 2) additional colour on new relationships with First Ascent Ventures and evolution of strategic partnership with SAF, 3) SG&A expense guidance, and 4) update on capital deployment plans. Heading into the quarter, we have made some upward revisions to our earnings forecasts. Our Q3/F21 Adj. EBITDA (before commissions) forecast increased slightly from 44 cents to 46 cents, while our EPS estimates remain unchanged at 17 cents driven by upward revisions to our sales commission expense forecast.”

Maintaining a “sector perform” rating for AGF shares, he bumped up his target by $1 to $9. The average is currently $8.96.

“With solid operating momentum and a strong balance sheet, we believe AGF is well-positioned to drive meaningful earnings growth,” said Mr. Hardie. “We recently hosted the company as part of the Scotiabank GBM 22nd Annual Financials Summit ... with key themes of our discussion revolving around 1) AGF’s positioning for earnings growth in the mid-to-long-term following the company’s repositioning towards a more focused and targeted business model, and 2) the alternative platform being a key driver for future growth.”


After hosting a series of virtual investor meetings with its management team, iA Capital Markets analyst Elias Foscolos is maintaining a “constructive thesis” on Computer Modelling Group Ltd. (CMG-T), expecting improved financial performance in fiscal 2023 with “the potential to eventually deliver low double-digit revenue growth through multiple levers.”

“Given the pressure on the stock year-to-date, we believe that CMG’s leading, defensible competitive position, global diversification, and strong earnings and cash flow profile are being offered at a discounted price,” he said.

Mr. Foscolos thinks the Calgary-based company’s complex software, geographic reach and “sticky” customer relations give it “an enviable competitive position” moving forward.

“CMG has developed its suite of software through a long history of R&D and real-world problem solving with customers, and as a result has established itself as one of the dominant players in oil reservoir simulation worldwide, specializing in modelling for complex assets that use advanced recovery techniques,” he said. “CMG has a wide geographic reach with sales into 60 countries. Finally, CMG has a base of loyal customers with strong penetration among major energy producers, resulting in a revenue base that is largely sticky and recurring.

“CMG’s sales remain below pre-pandemic levels, but we expect an improvement as CMG is tied to late-cycle E&P CAPEX. This is evidenced by CMG’s resilience through C2020 (essentially F2021) compared to traditional Energy Services peers. While customers have remained cautious as demand for oil has improved, industry activity has been trending positively and we would expect revenue recovery in F2023 and beyond as the majority of E&P capital budgets are finalized in December/January.”

Emphasizing CMG’s “multiple pillars for growth,” Mr. Foscolos introduced his fiscal 2023 financial estimates, but he maintained a “speculative buy” rating and $6 target for its shares. The average on the Street is $5.42.

“While management’s growth projections may not fully materialize in F2023, we concur that low double-digit revenue growth is achievable by (a) gaining market share with a focus on markets in the Eastern Hemisphere, (b) increasing sales of higher-value CoFlow, (c) serving energy transition, (d) expanding unconventional simulation offerings, and (e) implementing software price increases.”

“CMG’s current dividend provides flexibility, which could support several value-added initiatives. Our impression from commentary was that its preference would be for smaller, bolt-on parallel product acquisitions while maintaining the current dividend and adequate cash reserves.”


With the revival of its brands “now in full swing,” Canaccord Genuity analyst Aravinda Galappatthige sees WildBrain Ltd.’s (WILD-T) “steady” progress continuing following the release of its fourth-quarter 2021 financial results.

Late Tuesday, the Halifax-based media company, which focuses on entertainment for children and families, reported revenue of $112.6-million, up 21 per cent year-over-year and ahead of both Mr. Galappatthige’s $102.4-million estimate and the consensus on the Street of $101.7-million as its consumer products segment saw 33-per-cent growth. Adjusted earnings before interest, taxes, depreciation and amortization of $19.2-million, up 3 per cent, was lower than the analyst’s $22.4-million projection, due largely to higher investment spending.

“We continue to be encouraged by the stream of new deals and revitalizations around WildBrain’s top legacy brands,” said Mr. Galappatthige. “Most recently, the company announced the commissioning of 20 new episodes of Yo Gabba Gabba! which now moves to Apple TV+ (following the larger Peanuts deal with the same platform). Apple also took on the sizable library of Yo Gabba Gabba! including the classics and specials. Just prior to that, the company announced the refreshing of the evergreen brand Strawberry Shortcake with a new digital first series on WildBrain Spark as well as the launch of a new Roblox game next month. Both these brands were major hits historically, and the strategy of the company is to use its full expertise and levers to revive the IP. This of course follows the number of content deals announced pre-Q3 including Peanuts with Apple+, Sonic the Hedgehog (Netflix and SEGA), emoji company, etc. Hence there is a clear and emerging sense that WILD’s outlook is improving notably, although much of the higher-margin CP streams would likely accrue post F2022. The notable element here is that we are seeing all of WILD’s key assets working in unison, giving rise to a virtuous operational cycle.”

“In addition to the above, WildBrain’s library contains a broad stable of under-monetized but well known legacy brands (e.g., Johnny Test, Calliou, Inspector Gadget, Teletubbies) as well as new titles gaining momentum (e.g., Chip and Potato). The company is well into the process of refreshing many of the legacy brands while focusing on a handful of prospective new titles. Thus, given its expanding relationships with key platforms such as Netflix and Apple TV+, there is room for longer-term growth, particularly if one or several of these brands start to see strong uptake on the merchandise front. The opportunity to leverage Spark, as needed, is also a significant advantage.”

Emphasizing the importance of WildBrain Spark as a “key growth engine for the company” moving forward, Mr. Galappatthige raised his target for WildBrain shares to $3.10 from $2.90 with a “hold” rating. The average is $3.42.

“In our view, WILD has already benefitted from a notable re-rating this year, as reflected by its over 70-per-cent year-over-year stock appreciation,” he said. “It currently trades at 9.8 times EV/EBITDA 2022 estimates, well above Thunderbird Entertainment’s (TBRD-T, “buy,” $5 target) 8.5 times and Boat Rocker Media’s (BRMI-T, not rated), 8.1 times. Notably, both these peers have positive net cash balances while WILD is at near 5x balance sheet leverage (net debt/LTM EBITDA). Against this backdrop, we maintain our HOLD rating.”

Others making target increases include:

* Scotia Capital’s Jeff Fan to $3.60 from $3.40 with a “sector perform” rating.

“Overall, management continues to make progress on stabilizing and growing revenue while investing future opportunities,” said Mr. Fan. “F22 guidance reflects the strong production pipeline which will set up the business for continued consumer products growth. WildBrain follows a 360 approach to growing and monetizing brands through production, AVOD and Consumer Products. Over the past two since years CEO Eric Ellenbogen joined the company, WildBrain has remained on strategy of focusing on fewer, select brands with multiple revenue streams, including AVOD, SVOD licensing and consumer products. WildBrain is hosting an investor day on October 5. We look forward to further detail on Mr. Ellenbogen’s multi year strategy.”

* BMO Nesbitt Burns’ Tim Casey to $3.50 from $3 with a “market perform” rating.

* National Bank Financial’s Adam Shine to $4 from $3.75 with an “outperform” rating.


Scotia Capital’s Orest Wowkodaw views the announcement of Labrador Iron Ore Royalty Corp.’s (LIF-T) third-quarter dividend as a “negative,” given it fell short of his expectations.

After the bell on Wednesday, the Toronto-based corporation declared a $2.10 per share dividend, up 20 per cent quarter-over-quarter (from $1.75) but missing the analyst’s forecast of $2.45 by 14 per cent.

“We believe the weaker dividend largely reflects prudence by management to maintain a higher cash balance given the recent free fall in spot Fe prices (62 per cent Fe prices of US$113 per ton have declined by an astonishing 53 per cent from May peak levels),” said Mr. Wowkodaw.

Though he thinks Labrador Iron Ore’s dividend outlook “remains attractive despite lower Fe prices,” Mr. Wowkodaw cut his target to $50 from $55, keeping a “sector outperform” rating. The average is $48.

“Although our 2022-2023 dividend estimates are unchanged, we have lowered our target multiples given the larger-than-anticipated recent decline in Fe prices. We will formally review our Fe price assumptions in mid-October. We anticipate LIF shares to rebound once the Fe price stabilizes,” he said.


Canaccord Genuity analyst Katie Lachapelle raised her target prices for a series of companies tied to lithium in response to increases to the firm’s price deck.

On Tuesday, Canaccord raised its lithium priced forecast by 22 per cent with its 2022 and 2023 estimates rising by 48 per cent and 10 per cent, respectively.

“While we had expected prices to move higher, current prices are now 30 per cent above our Dec. 2021 forecasts, with hydroxide pricing having exceeded our previous peak pricing assumption,” said Mr. Lachapelle.

Her target prices changes were:

* Neo Lithium Corp. (NLC-X, “speculative buy”) to $6.50 from $6.25. The average on the Street is $6.10.

“Neo Lithium continues to provide investors with strong leverage to rising prices at an attractive valuation (0.79 times NAV), with numerous upcoming catalysts including the receipt of final construction permits, a Feasibility Study, and a potential offtake/partnership agreement on deck,” she said.

* Sigma Lithium Corp. (SGML-X, “speculative buy”) to $14 from $12. Average: $8.83.

“We believe Sigma is well positioned to capitalize on growing demand for lithium with 1) a strong backing by Mitsui 2) a high-quality near-term project that is fully funded and targeting first production in late 2022 and 2) and strategic focus on ESG,” she said.

* Lithium Americas Corp. (LAC-T, “speculative buy”) to $35 from $32. Average: $27.67.

* Standard Lithium Ltd. (SLI-X, “hold”) to $9.25 from $9. Average: $6.14.


In other analyst actions:

* Scotia Capital analyst Himanshu Gupta upgraded BSR Real Estate Investment Trust (HOM.U-T) to “sector outperform” from “sector perform” with a US$18 target, up from US$17. The average is US$17.16.

* After it entered into three additional spot purchase contracts totaling 300,000 pounds of triuranium octoxide (U3O8) at an average cost of US$38.17 per pound, Canaccord Genuity analyst Katie Lachapelle increased her Uranium Royalty Corp. (URC-X) target to $7 from $4.25, exceeding the $5.15 average, with a “speculative buy” rating.

“We view this transaction as positive for URC as it provides the company with increased leverage to uranium in a rising price environment,” she said. “At the time of this announcement, the agreed upon purchased price already represents an 18-per-cent discount to the current spot price of US$45.25 per pound U3O8. We note that the spot price has risen 49 per cent in the last month alone; an upward trend which we expect to continue in the near term as the Sprott Physical Uranium Trust (U.UN-T, “buy” rating, $15 target) remains active in the physical market. To date, URC’s cumulative holdings have appreciated US$7.7-million.”

* Reiterating his bullish call, Scotia Capital analyst Cameron Bean raised his target for Peyto Exploration & Development Corp. (PEY-T) to $13 from $12, exceeding the $9.88 average, with a “sector outperform” rating.

“With the energy equities as a whole and natural gas prices more specifically rallying, we are revisiting and reiterating our recent upgrade call on PEY,” he said. “While the stock has done well over the last three months, besting the XEG by more than 30 per cent, it has still lagged the gains made by its closest Canadian peers and the Henry Hub strip.. With the outlook for 2022 (and beyond) natural gas prices even stronger since we upgraded the stock, we believe PEY is a great way for investors to add natural gas exposure. We maintain our Sector Outperform rating and are increasing our Target Price to $13/share on our updated cash flow forecasts

* National Bank Financial analyst Cameron Doerksen raised his target for shares of Canadian National Railway Co. (CNR-T) to $144 from $139, keeping a “sector perform” rating. The average is $152.80.

* Mr. Doerksen cut his Canadian Pacific Railway Ltd. (CP-T) target to $97 from $98 with a “sector perform” rating. The average is $103.74.

* National Bank’s Rupert Merer increased his Innergex Renewable Energy Inc. (INE-T) target to $28 from $27, reaffirming an “outperform” rating. The average is $24.93.

* National Bank initiated coverage of Torex Gold Resources Inc. (TXG-T) with a “sector perform” rating and $24 target. The average is $26.56.

* RBC Dominion Securities analyst Walter Spracklin raised his target for Bombardier Inc. (BBD.B-T) to $2.50 from $2 with an “outperform” rating. The average is currently $1.79.

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