Inside the Market’s roundup of some of today’s key analyst actions
In response to the late Wednesday announcement of the suspension of its mining operations and all development work in Russia’s far east, Credit Suisse analyst Fahad Tariq downgraded Kinross Gold Corp. (KGC-N, K-T) to “neutral” from “outperform.”
His 12-month target for Kinross’ U.S.-listed shares slid to US$5.25 from $7, below the US$8.03 average on the Street, according to Refinitiv data.
Elsewhere, calling the decision “prudent,” BMO Nesbitt Burns’ Jackie Przybylowski trimmed her target to US$11 from US$12 with an “outperform” rating.
“We had previously identified that we could see increased risks to sale of gold in Russia if international sanctions limit the ability of Russian domestic banks to purchase Kinross’ gold,” she said. “In our view, as sanctions are tightening, the challenges to sell gold are heightened and temporary suspension is prudent. We are assuming a seven-month impact. As a mining equity analyst team, we do not pretend to forecast the outcome of this global conflict; the duration of Kinross’ outage and delay are uncertain. We are assuming that operations are shut from early March to early September 2022, which cuts our Kupol NAV (5%) by 27 per cent to US$423-million, and at Udinsk by 50 per cent to US$300-million.”
Other analysts making target changes include:
* Barclays’ Matthew Murphy to US$6 from US$7 with an “overweight” rating.
“We update our KGC model by shutting down Russia operations, but maintaining some in-situ asset value on the assumption of an eventual value realization. We have redirected some of the Russia capex to other assets as we expect a shift in capital allocation,” he said.
* TD’s Greg Barnes to US$7 from US$8.50 with a “buy” rating.
Following a fourth quarter in which it missed expectations on “nearly every metric,” Raymond James analyst Rahul Sarugaser cut his recommendation for Valens Company Inc. (VLNS-T) to “underperform” from “market perform.”
“While we had seen some signs of cautious optimism 2Q-3Q21, with modestly increases in revenue and slightly improved margins, 4Q21 proved to be an inordinately disappointing quarter from VLNS,” he said. “Management pointed to challenges in the Canadian market (B.C. floods, underperforming customers, etc; factors which we point out had limited/no negative impact on well-performing peers: Village Farms [VFF-Q, “strong buy”], Organigram [OGI-Q, “outperform”], Auxly [XLY-T, “outperform”], etc) we view the massive (45-per-cent) sequential decline in Green Roads’ U.S. CBD revenue, combined with a 60-per-cent escalation in S&M + G&A, as harbingers of things to come: anemic revenues, limited ability to contain costs. As such, we are cutting our rating.”
Shares of the Kelowna, B.C.-based company fell 2.5 per cent on Wednesday, a day after reporting revenue of $18.4-million, down 12 per cent from the third quarter and below both Mr. Sarugaser’s $25.1-million and the consensus projection of $21-million. An adjusted EBITDA loss of $13.4-million also fell lower than estimates (losses of $8.9-million and $7.9-million, respectively).
“The company reduced its processing customer count, suggesting that it was reducing exposure to LPs with precarious finances in favour of LPs with larger balance sheets,” the analyst said. “(So far, VLNS’s ‘fewer, bigger, better’ B2B plan is at the ‘fewer’ stage.)
“4Q21 represented VLNS’s first full quarter of contribution from VLNS’ wholly-owned, U.S.-based CBD business, Green Roads. 3Q21 yielded $4.7-million in sales on a partial-quarter (44 per cent), which, combined with growth in the U.S. CBD sector, motivated us to estimate $10.4-million in 4Q21 sales. VLNS’s report indicated that Green Roads generated $5.7-million in revenue, a (45-per-cent) sequential decline; management cited disruptions from its own lengthy M&A process and VLNS’s efforts to aggressively realign Green Roads’s portfolio as reasons for the material miss here. Also, management indicates that Dec. is a historically weak month for health products (including CBD), so we shouldn’t expect much from 1Q21.”
Believing Valens is finding the integration of its new business, including Green Roads, Citizen Stash Cannabis Corp. and LYF Food Technologies Inc., to be “especially challenging,” Mr. Sarugaser cut his 2022 revenue and earnings expectations, prompting him to reduced his target for its shares in half to $2.50. The average on the Street is $9.58.
With Q4 Inc. (QFOR-T) “sticking to the growth plan,” Canaccord Genuity analyst Doug Taylor thinks the recent software “swoon” is leading to a “more compelling” risk/reward proposition for investors.
Accordingly, in the wake of the release of better-than-anticipated quarterly results, he raised his recommendation for the Toronto-based investor relations software company to “speculative buy” from “hold.”
“The company reiterated targets of 30-per-cent organic top-line growth with further margin increases anticipated in coming years and ultimately positive FCF in 2023,” said Mr. Taylor. “Our revised model features narrower EBITDA losses on modestly higher revenue. Assessing entry points for names still navigating their path to breakeven amid increased market preference for profits is challenging. With that said, we believe the recent share price weakness too heavily discounts the value in Q4′s platform. As such, we upgrade our rating ... as we believe that there is room for valuation expansion from current levels (1.7 times next-12-month sales) exiting 2022 if the company can deliver against growth acceleration and margin expansion, bringing profitability into better view.”
On Wednesday before the bell, Q4 reported quarterly revenue of $13.8-million, topping both Mr. Taylor’s $12.9-million estimate and the consensus projection of $13.1-million. An EBITDA loss of $3.4-million was also better than anticipated (losses of $7.3-million and $4.3-million, respectively).
“It is worth noting that Q4 still has just 6-per-cent market share of its targeted addressable market of issuers, suggesting room to grow in most market environments,” he said.
“Management reconfirmed that they expect to see dramatic margin improvements in 2022 driven by shifts to fixed cost infrastructure and less reliance on third-party vendors – both seem firmly in their control. This is seen driving FCF breakeven in 2023 and EBITDA positivity in 2024 as these benefit from a favourable upfront payment dynamic.”
Calling organic growth from M&A activity a potential “wildcard,” Mr. Taylor trimmed his target for Q4 shares by $1 to $9, pointing to its near-term focus on revenue growth. The average on the Street is $12.50.
Elsewhere, CIBC’s Stephanie Price cut her target to $11 from $14.50 with an “outperformer” rating.
Ahead of the March 25 release of its fourth-quarter 2022 financial results, National Bank Financial analyst Cameron Doerksen sees BRP Inc.’s (DOO-T) valuation as “very compelling,” believing its outlook remains “positive” and emphasizing its limited exposure to Russia.
“BRP will continue to face supply chain issues in the coming quarters, but we believe these challenges, as well as some concerns over potential end market softness (that has yet to materialize), are already reflected in the share price and we remain positive on BRP’s longer-term prospects,” he said. “Underlying powersports demand still looks solid. Although industry retail numbers are down year-over-year, this is due to very difficult comparisons and a lack of inventory available for sale at the dealer level. ... Based on commentary from other powersports competitors, the underlying demand for powersports appears to be healthy.”
“In Q3, BRP’s dealer inventory was down 44 per cent year-over-year and down 74 per cent versus two years ago and based on commentary from other powersports players, dealer inventories industry-wide remain at similarly low levels. This will drive significant dealer re-stocking demand through BRP’s fiscal 2023 and likely well into fiscal 2024. Over the past two years, BRP has attracted new consumers to powersports with 36 per cent of its retail in the last year from new entrants versus the historical average of closer to 20 per cent. As such, the overall powersports market size has also increased meaningfully over the past two years.”
For the quarter, Mr. Doerksen is forecasting earnings per share of $2.50, up 37.5 per cent year-over-year (from $1.82) and in line with the consensus on the Street of $2.42.
“Recall that previously management has indicated that it is comfortable that fiscal 2023 EPS growth could be in the 10-per-cent range. We note that our current forecast is more conservative (7 per cent) while the current consensus is for EPS growth of just over 10 per cent,” the analyst said.
Expecting an “aggressive” new product roll-out to drive further share gains and seeing its valuation as “historically inexpensive,” Mr. Doerksen trimmed his target for BRP shares to $124 from $128, reiterating an “outperform” recommendation. The current average is $137.
“BRP shares are down about 19 per cent so far in 2022 versus the TSX which is down 1 per cent,” he said. “BRP is also significantly underperforming its powersports peers so far in 2022 with Polaris shares up 6 per cent, Harley-Davidson shares up 6 per cent and marine market leader Brunswick shares down 7 per cent. We do not believe there is any fundamental justification for BRP’s underperformance.”
Calling it a “quality compounder,” Desjardins Securities’ David Newman initiated coverage of Dentalcorp Holdings Ltd. (DNTL-T) with a “buy” rating.
The analyst pointed to a quartet of factors in justifying his bullish view of the Toronto-based company, which operates a rapidly expanding national network of independent dental practices: “(1) proven M&A playbook in a fragmented market; (2) organic growth; (3) proprietary technology; and (4) compelling financial profile (resilient top-line growth, healthy margins and strong cash flows).”
“The leader in Canada’s $18-billion dental industry, DNTL has enjoyed double-digit growth in number of practices, pro forma revenue and EBITDA every year since its inception, leaning on its M&A playbook,” said Mr. Newman in a research note released late Wednesday. “Moreover, dentistry offers downside protection with its recurring, non-discretionary, cash-pay model, insulated from economic cycles and disintermediation by technology.”
“Despite its success, DNTL holds only a 3-per-cent share of the highly fragmented Canadian dental market (comprised of approximately 15,000 practices, 95 per cent of them independent). It targets the acquisition of $40‒50-million in post-IFRS practice-level EBITDA each year (at least 80 practices), which it achieved in 2021. It typically pays 7.5‒8.5 times pre-IFRS EBITDA (80-per-cent cash, 20-per-cent equity) for practices with more than $2-million in revenue, 20-per-cent margin and 2+ dentists. DNTL has been able to drive top-line growth of the acquired practices through its insourcing agenda and technology stack, while expanding practice-level EBITDA margins by 5‒10 per cent through its fully scaled infrastructure and labour and purchasing efficiencies. DNTL has become the acquirer of choice for dentists, evidenced by its greater than 90-per-cent retention rate and 96-per-cent contract renewal rate. DNTL has $520-million in dry powder to accelerate its M&A program.”
Mr. Newman projects organic growth should reach 3.5‒4.5 per cent annual per year based on “pricing, volume (centralized marketing and technology (hellodent, dc engage) driving patient acquisition, retention and frequency of visits) and mix (higher-margin hygiene, as well as orthodontics and implants (C$100m revenue opportunity each).”
He set a target of $22, exceeding the average on the Street of $20.36.
“We see significant growth ahead as DNTL executes its repeatable acquisition playbook, driving both top-line growth and bottom-line improvements for acquired practices, while pushing its organic growth agenda, including orthodontics insourcing, implants, network synergies through economies of scale and driving new patients and frequency of visits with its technology toolbox,” said Mr. Newman. “We view DNTL as a quality compounder in the Canadian consumer healthcare sector, in the realm of other high-growth healthcare companies as well as high-growth consolidators in other industries that are characterized by a fragmented market, resilient demand with underlying secular tailwinds and an emphasis on growth through scale.”
Scotia Capital analyst Meny Grauman acknowledged Laurentian Bank of Canada (LB-T) enjoyed a “good start” to the year with its first-quarter results.
However, he emphasized there are better opportunities for investors elsewhere in the sector.
“First off we note that the beat this quarter was driven by seasonality in the Inventory Finance business that led to outsized margin expansion that is expected to partially reverse in both Q2 and Q3,” he said. “Secondly, while we acknowledge that the bank is executing on its commercial banking growth strategy, the outlook for personal banking remains very challenging. Not only did residential mortgage balances continue to decline year-over-year, but sequential growth also turned negative again after an encouraging year-end result, and all this is happening in the context of double-digit year-over-year mortgage growth across the peer group. Strong expense management is helping boost PTPP earnings growth, but this comes after significant restructuring/strategic review charges, and the bank’s investment needs are still significant. Laurentian Bank is clearly on track to meets its F2022 financial targets, but execution risk remains elevated and those targets mean that performance here will still lag the bank’s larger peers.”
Keeping a “sector perform” rating for Laurentian shares, Mr. Grauman trimmed his target by $1 to $50. The average is $46.90.
“We continue to value the shares at 8.0 times our 2023 EPS, but our valuation is impacted by a lower expected excess capital position which takes our price target down .. We reiterate our Sector Perform rating, despite the fact that the stock continues to trade at a discount to book, given the still immense challenges of turning this business around,” he said.
Others making changes include:
* Barclays’ John Aiken to $46 from $45 with an “equalweight” recommendation.
“Although LB’s valuation will likely continue to be dictated by risk appetite and market volatility driven by global geopolitical concerns, with the Q1 beat driven by solid loan growth and improved margins (and the spectre of even stronger margins from Bank of Canada rate hikes), we believe LB could begin to recoup some of its recent lost valuation,” said Mr. Aiken.
* Stifel’s Mike Rizvanovic to $47 from $46 with a “hold” rating.
“While we’ve moved our EPS forecasts up slightly through F2023, along with our target price, our HOLD rating is unchanged given our lingering concerns about LB’s ability to compete in a more digitized banking sector as we have yet to see signs of improvement in core branchraised personal deposits or those originated through the digital channel. We do not yet see a compelling case to be made for a meaningful revaluation for LB vs. the Bix Six Canadian banks and expect the shares to continue to trade at roughly their historical relative discount,” he said.
* CIBC’s Paul Holden to $48 from $46 with a “neutral” rating and
Equity analysts at CIBC World Markets made a series of adjustments to TSX-listed energy stocks in their coverage universe on Thursday.
“One can argue we certainly did not need to go here, but we are here nevertheless,” they said in a research report. “Russia is an energy superpower, and while its invasion of Ukraine complicates the energy supply picture and skews prices higher, we are hopeful that there is a near-term resolution to this conflict to limit the human impact. We have revised our near-term commodity price assumptions upwards to align with the forward curve, but include some conservatism for a scenario wherein the U.S. and Iran agree to a JCPOA-style nuclear deal. In 2023 and beyond, we carry a positive bias to the backwardation seen in the strip, with an estimated oil price of US$77.50 WTI in 2023 and US$70.00 WTI in 2024.
“We see upside risk to our near-term estimates if an Iranian nuclear deal is delayed and/or sanctions begin affecting the delivery/transport of crude globally. Given these revisions and the increased level of volatility in commodity prices, we remain focused on companies that provide asymmetric risk-return profiles and we highlight CVE, NVA, TVE and TOU as top idea.”
Their changes included:
- Advantage Energy Ltd. (AAV-T, “neutral”) to $10 from $9. Average: $9.77.
- ARC Resources Ltd. (ARX-T, “outperformer”) to $20 from $18. Average: $19.73.
- Baytex Energy Corp. (BTE-T, “neutral”) to $7 from $5. Average: $5.86.
- Birchcliff Energy Ltd. (BIR-T, “neutral”) to $9 from $8. Average: $9.77.
- Canadian Natural Resources Ltd. (CNQ-T, “outperformer”) to $80 from $67. Average: $70.43.
- Cenovus Energy Inc. (CVE-T, “outperformer”) to $28 from $25. Average: $22.74.
- Crescent Point Energy Corp. (CPG-T, “outperformer”) to $13 from $10. Average: $10.64.
- Enerflex Ltd. (EFX-T, “neutral”) to $10 from $9.50. Average: $11.47.
- Enerplus Corp. (ERF-T, “outperformer”) to $20 from $19. Average: $17.81.
- Ensign Energy Services Inc. (ESI-T, “neutral”) to $3.25 from $2.75. Average: $2.74.
- Imperial Oil Ltd. (IMO-T, “neutral”) to $58 from $50. Average: $56.26.
- Kelt Exploration Ltd. (KEL-T, “outperformer”) to $7.50 from $7. Average: $7.45.
- MEG Energy Corp. (MEG-T, “neutral”) to $20 from $17. Average: $18.50.
- NuVista Energy Ltd. (NVA-T, “outperformer”) to $12 from $10. Average: $11.15.
- Peyto Exploration & Development Corp. (PEY-T, “neutral”) to $14.50 from $13.50. Average: $14.15.
- PrairieSky Royalty Ltd. (PSK-T, “neutral”) to $24 from $22. Average: $20.02.
- Precision Drilling Corp. (PD-T, “neutral”) to $82.50 from $70. Average: $79.73.
- Tamarack Valley Energy Ltd. (TVE-T, “outperformer”) to $7 from $6. Average: $6.50.
- Topaz Energy Corp. (TPZ-T, “outperformer”) to $23 from $22. Average: $24.25.
- Tourmaline Oil Corp. (TOU-T, “outperformer”) to $65 from $60. Average: $65.58.
- Vermilion Energy Inc. (VET-T, “neutral”) to $25 from $19. Average: $22.67.
- Whitecap Resources Inc. (WCP-T, “outperformer”) to $13 from $11. Average: $12.27
In other analyst actions:
* In response to a “disappointing” quarter, Canaccord Genuity’s Yuri Lynk cut his target for Aecon Group Inc. (ARE-T) to $20, above the $19.92 average, from $25 with a “buy” rating. Other changes include: BMO’d Devind Dodge to $18 from $19 with a “market perform” rating; Raymond James’ Frederic Bastien to $23 from $24 with an “outperform” rating; CIBC’s Jacob Bout to $20 from $22 with an “outperformer” rating and Stifel’s Ian Gillies to $17.25 from $24.50 with a “buy” rating.
“We are sticking with our BUY rating on Aecon despite taking our estimates down,” Mr. Lynk said. “Most importantly, we are of the view the margin weakness in Q4/2021 was transitory, primarily driven by Omicron. We allow for some of this weakness to creep into this quarter but not beyond. All told, we take our consolidated EBITDA estimates to $244 million from $269 million in 2022 and to $265 million from $285 million in 2023. Our model reflects modest revenue growth, reflecting backlog, but could be considered conservative given bookings strength and recurring revenue growth. We continue to forecast the Construction segment generating EBITDA margins in the 5.5-per-cent range, in line with recent history. If management is able to take this higher, which is the plan, it would represent upside to our estimates.”
* National Bank Financial analyst Mike Parkin raised his Alamos Gold Inc. (AGI-T) target to $11, matching the average, from $10.50 with a “sector perform” rating.
* RBC Dominion Securities analyst Luke Davis raised his Athabasca Oil Corp. (ATH-T) target to $2.50 from $1.75, keeping a “sector perform” rating, while BMO’s Mike Murphy bumped his target to $2.25 from $1.50 with a “market perform” recommendation. The average is $2.25.
“Athabasca closed out 2021 with strong operating results and a solid reserve update. In our view, the company’s focus on debt repayment and disciplined capital spend should continue to resonate with investors, particularly given strength in oil pricing,” said Mr. Davis.
* Mr. Davis also increased his Freehold Royalties Ltd. (FRU-T) target to $18 from $17 with an “outperform” rating, while CIBC’s Jamie Kubik bumped his target to $19 from $17, keeping an “outperformer” rating and Raymond James’ Jeremy McCrea raised his target to $19 from $17 with an “outperform” rating. The average is $16.82.
“We expect Freehold’s continued commitment to improving shareholder returns will be rewarded with pricing strength improving capacity to increase the payout and push forward with M&A. Payor activity continues to trend favourably with the organic growth profile taking shape,” said Mr. Davis.
* RBC’s Paul Quinn cut his Canfor Corp. (CFP-T) target to $45, matching the consensus, from $48 with an “outperform” rating, while TD Securities’ Sean Steuart reduced his target to $37 from $41 with a “buy” recommendation.
“Canfor Corporation reported Q421 results that were below RBC/consensus expectations due to lower-than-expected results across the board in North America. Only the European business, which has demonstrated strong pricing power and cost control, outperformed our expectations. Despite continued operational challenges at the Pulp business, we like the company’s exposure to still favourable North American and European lumber markets,” said Mr. Quinn.
* Barclays analyst Raimo Lenschow cut his Descartes Systems Group Inc. (DSGX-Q, DSG-T) to US$78 from US$80 with an “equalweight” rating, while BMO’s Thanos Moschopoulos reduced his target to US$81 from US$88 with a “market perform” rating. The average is US$88.83.
“Descartes reported a strong quarter as the company continues to execute well on its growth and profitability outlooks,” said Mr. Lenschow. “We were particularly pleased with the Adj. EBITDA margin outperformance in the quarter (44.6 per cent vs. consensus of 43.3 per cent), which reflects the scale of the company’s global logistics network and the relevance of DSGX solutions given increased supply chain complexity and labor shortages. Management also spoke in depth to the Russia/Ukraine crisis, and noted the likelihood of mixed effects on the business: tailwinds as it relates to helping companies navigate new sanctions but headwinds if the crisis leads to lower trade volumes and broader financial contagion. We think this uncertainty is partly why the 10-15-per-cent year-over-year adj. EBITDA growth and 38-43-per-cent Adj. EBITDA margin guides were not raised despite outperformance in the quarter. Given the uncertainty of growth and margins and elevated valuation (30 times calendar 2023 estimated FCF), we see little upside and cut our PT slightly on a lower multiple.”
* CIBC’s Nik Priebe raised his ECN Capital Corp. (ECN-T) target to $7.50, above the $7.31 average, from $7 with an “outperformer” rating.
* Mr. Priebe trimmed his First National Financial Corp. (FN-T) target to $45 from $46 with a “neutral” rating, while RBC’s Geoffrey Kwan cut his target by $1 to $45 with a “sector perform” rating and Scotia’s Phil Hardie reduced his target to $44 from $47.50 with a “sector perform” rating.
“Q4/21 results were mixed as EPS was below our forecast although originations were ahead of forecast (residential originations in line, commercial originations ahead) ... We think FN appeals to small cap investors as it gives investors an attractive blend of exposure to continued strong housing/mortgage market activity, defensive attributes, and an excellent track record of dividend growth with the shares having a 5.5-per-cent dividend yield underpinned by strong FCF,”s aid Mr. Kwan.
* RBC’s Pammi Bir raised his Extendicare Inc. (EXE-T) target to $8.50 from $8 with a “sector perform” rating. The average is $8.35.
“Our outlook on EXE has improved, notwithstanding continued volatility in quarterly results. We expect fundamentals in LTC will continue to rebound, even if a bit delayed, as pandemic pressures recede. Similarly, we expect further progress in ParaMed as volumes and margins make their way through the rehabilitation process. As well, the sale of its retirement portfolio enables EXE to exit a business where it struggled to build scale and redeploy capital more efficiently into its core LTC and home healthcare segments,” said Mr. Bir.
“Our stable view on Slate Grocery is intact, despite the shortfall in Q4 results,” he said. “Operationally, we’re encouraged by the improving pace of organic growth on stronger leasing, with momentum positioned to carry over into 2022. As well, acquisition activity could be set to rise amid a “deep” pipeline of opportunities under review, providing a means through which SGR can continue to increase its scale and quality.”
* CIBC’s Mark Petrie increased his George Weston Ltd. (WN-T) target to $177 from $171 with an “outperformer” rating. Others making adjustments include: Scotia’s Patricia Baker to $174 from $167 and Desjardins’ Chris Li to $167 from $158 with a “buy” rating. The average is $165.71.
“We believe an accelerated share buyback could be a catalyst for the holdco discount to narrow from the current 15 per cent to our 10 per cent,” said Mr. Li. “We believe 15 per cent is high considering GWL’s simplified corporate structure with two high-quality assets: L (52.6 per cent) and CHP (61.7 per cent). The main risk is if GWL acquires another business.”
* CIBC’s John Zamparo raised his target for GDI Integrated Facility Services Inc. (GDI-T) to $65, below the $68.21 average, from $64 with an “outperformer” rating, while Scotia’s Michael Doumet cut his target to $59 from $61 with a “sector perform” rating.
“4Q21 EBITDA came in 3 per cent below consensus,” said Mr. Doumet. “The miss was largely due to a loss in its Complementary Solutions (i.e. inventory write-down). Otherwise, trends/profits were largely as expected. Janitorial continues to perform well above pre-pandemic levels. Higher occupancy rates anticipated through 2022 should support incremental revenue opportunities. However, we continue to believe the margin pressure from a lower demand of (higher-margin) enhanced services and a normalizing labour arbitrage will more than offset the organic revenue opportunity through our forecast horizon. We expect consolidated EBITDA margins to normalize to 7.1 per cent in 2023E (versus 8.3 per cent in 2021), which is at the upper-end of its targeted (albeit conservative) margin range of 6 per cent to 7 per cent.
“GDI has operated extremely well in the last two years through the pandemic. EBITDA and FCF margins expanded to record levels, helping fund its growth via-acquisition strategy. Despite potential margin headwinds, we believe GDI will continue to power growth via-M&A towards its $3 billion revenue target in 2025.”
* BMO’s Jonathan Lamers cut his High Liner Foods Inc. (HLF-T) target to $16, below the $17.50 average, from $18 with an “outperform” rating.
“The geopolitical situation adds uncertainty to existing supply chain challenges,” he said. “For certain important types of fish, the global supply of raw material is predominantly caught in Russian waters. If this supply to third-party international processors were disrupted, risks to earnings could include cost inflation on substitute fish or inability to fully service demand. Our estimates are unchanged, target price trimmed to $16. Near term, multiple expansion seems unlikely while overall global supply chain challenges continue. For longer-term investors, the stock remains inexpensive, and it is encouraging sales trends have improved.”
* Canaccord Genuity’s Robert Young cut his Kinaxis Inc. (KXS-T) target to $200 from $225 with a “buy” rating. Others making changes include: RBC’s Paul Treiber to $200 from $225 with an “outperform” rating; Stifel’s Suthan Sukumar to $215 from $235 with a “buy” rating and CIBC’s Stephanie Price to $180 from $215 with an “outperformer” rating. The average is $217.55.
“Kinaxis provided a strong 2022 outlook alongside a strong Q4 with bookings, backlog and ARR driven by a strong environment for supply chain software,” said Mr. Young. “Kinaxis expects to grow 34-38 per cent in 2022, driven by a peak in the 3-year sub-term license cycle, ProServices demand at the front end of deployments and continued 23-25-per-cent SaaS growth. Management commentary on the call was bullish and highlighted a healthy, growing pipeline paired with conversion and win rates which have ticked up. In the short run, ‘22 EBITDA margins of 15-18 per cent, despite being a year-over-year improvement, will lag the company’s mid-term targets due to acceleration in spend across S&M, R&D, support and data center. We believe Kinaxis provides a unique combination of growth, profitability, favorable industry tailwinds and a pristine balance sheet.”
* Following its acquisition of Minnesota-based Wellbeats Inc., Scotia analyst Adam Buckham raised his LifeSpeak Inc. (LSPK-T) target to $13 from $12 with a “sector outperform” rating. The average is $12.29.
“We view the addition as transformative, with WellBeats providing a complementary/strategic physical wellness platform, along with a robust financial profile,” he said.
“Magna’s stock, with the rest of the auto sector, saw a sharp decline March 1,” said Mr. Sklar. “While Magna’s direct exposure to the conflict in Ukraine/Russia is not meaningful, we believe the issue is that about 40% of Magna’s auto parts sales are to European OEMs. Over recent days, Europeans OEMs announced production stoppages due to a shortage of parts supplied from Ukraine/Russia. Reports have also cited concerns regarding a shortage of neon gas, which is crucial for manufacturing semiconductor chips, as Ukraine is the world’s largest supplier.”
* RBC’s Michael Harvey raised his Paramount Resources Ltd. (POU-T) target to $33 from $30 with a “sector perform” rating. Others making changes include: Raymond James’ Jeremy McCrea to $33 from $30 with an “outperform” rating; BMO’s Ray Kwan to $35 from $33 with an “outperform” rating and Stifel’s Cody Kwong to $37.50 from $31 with a “buy” rating. The average is $33.15.
“Paramount sits in a strong financial position with operational momentum early in 2022, notwithstanding Q4/21 AFFO which slightly trailed the street (largely on higher costs than we forecasted),” said Mr. Harvey. “With no net debt (inclusive of $388-million NVA stake) and meaningful FCF, numerous levers exist for deployment, which could include further return of capital or strategic initiatives.”
* TD Securities’ Derek Lessard raised his target for shares of Pizza Pizza Royalty Corp. (PZA-T) to $14 from $12, keeping a “hold” rating.
“Overall, we still believe that PZA is well-positioned to play the long game and investors who hold the stock will be paid an attractive 6-per-cent dividend to wait. However, in an irrational competitive environment, there are rarely any winners, and as a result, we are comfortable with our HOLD recommendation for now,” he said.
* Stifel’s Robert Fitzmartyn hiked his Tourmaline Oil Corp. (TOU-T) target to $80 from $69 with a “buy” rating. Others making changes include: Raymond James’ Jeremy McCrea to $70 from $65 with a “strong buy” rating; CIBC’s Jamie Kubik to $65 from $60 with an “outperformer” rating; BMO’s Randy Ollenberger to $60 from $55 with an “outperform” rating; TD’s Aaron Bilkoski to $63 from $64 with a “buy” rating and Cormark’s Garett Ursu to $65 from $62.50 with a “buy” rating. The average is $66.08.
“Tourmaline’s fourth quarter results were in line with our expectations though CFPS trailed the market. It exited the year replete with a robust year-end reserve book once again long in breadth and scope, though completely financed by near/medium term cash generation, culminating in a compelling NAV growth premise. There are no material changes to our forecast. We increase our target price on the basis of strong commodity price appreciation since its special dividend declaration earlier this year,” said Mr. Fitzmartyn.
* BMO’s Stephen MacLeod increased his Winpak Ltd. (WPK-T) target to $46 from $45 from with a “market perform” rating. The average is $46.75.
“We maintain our Market Perform rating following Winpak’s Q4/21 earnings beat, which was driven primarily by very robust revenue growth (strong volumes, complemented by pricing passthroughs),” he said. “Encouragingly, volume momentum has continued into 2022 (easier H1 comps, tougher H2 comps); we forecast HSD [high single-digit] full-year volume growth. Inflationary pressures weighed on Q4 gross margin (down 320 basis points year-over-year); price increases (69-per-cent revenues indexed, 90- to 120-day lag) are expected to aid sequential margin recovery in Q1 and into 2022, but we expect gross margin to remain below historical levels.”