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

In response to recent share price appreciation, iA Capital Markets analyst Naji Baydoun is take “a more neutral stance” on TransAlta Renewables Inc. (RNW-T), lowering his recommendation to “hold” from “buy” on Thursday.

“RNW’s shares have appreciated by 13 per cent since we upgraded the stock to a Buy (from Hold) in January 2022,” he said in a research note. “At the time, this was a call on absolute share price and valuation levels, as we noted that the shares had suffered from a short-term negative market overreaction to the operational issues at Kent Hills. This drop in the share price had opened up a buying opportunity for investors; since then, the shares have now recovered almost all of their declines since the initial update on Kent Hills in Q4/21. Furthermore, the shares are currently trading at approximately 11.0 times forward EV/EBITDA, up from 10.0 times in early 2022 and slightly above their historical average of 10.5 times. We expect the stock to continue trading at a discount to peers, reflecting differences in growth profiles and portfolio composition.”

Mr. Baydoun said the rating change does not impact his view of the company’s fundamental outlook, which he called “largely intact.” He added: “The company continues to generate stable revenues and cashflows from its contracted renewables and thermal assets. At this time, we continue to estimate relatively stable EBITDA and CAFD/share through our forecast horizon.

However, he did express concern about TransAlta Renewables’ overall growth outlook, seeing “limited near-term growth potential (due to the limited portfolio of drop-down opportunities from TA [excluding new project developments and/or M&A]), and (2) visibility on external growth initiatives at this time (i.e., acquisition opportunities). Although RNW’s shares continue to lag overall sector returns, we would prefer to wait for (1) a better entry point, and/or (2) further strategic developments before accumulating the shares.”

Mr. Baydoun maintained a $19 target for the company’s shares. The current average on the Street is $17.42, according to Refintiv data.

“RNW offers investors(1) a more than 2.5GW portfolio of gas & renewable infrastructure assets, (2) an attractive dividend (5-per-cent yield, 80-85-per-cent CAFD payout), and (3) potential longer-term growth via M&A,” he said. “We are downgrading RNW to Hold (from Buy) based on the relative attractiveness of the shares compared to peers. Overall, we believe that the current growth outlook is largely priced into the shares, and thus would wait for a better entry point or further strategic developments.”


TC Energy Corp. (TRP-T) is “comfortable in its own utility-like skin,” said Robert Kwan following recent meetings with CEO Francois Poirier, which reaffirmed his confidence in the company’s investment proposition

“With the stock up over 20 per cent year-to-date (among the best in the Canadian midstream group and modestly higher than the Alerian U.S. midstream index), we have received many questions about TC Energy’s strong share price performance, particularly given the lack of catalysts, low commodity exposure, relatively high leverage (compared to North American midstreamers) and no share buybacks, which are generally key themes that have been topical for North American midstream investors,” he said. “While we believe the stock may be out of favour for North American midstream specialists, we believe it has become the go-to stock for investors seeking a utility-like investment given its high degree of regulated and contracted EBITDA, its conservative dividend coverage (i.e., payout ratio of less than 100 per cent of earnings) and its selffunded model for equity. Year-to-date, TC Energy’s share price performance (up over 20 per cent) has significantly outpaced the Canadian regulated utility peers (down roughly 2 per cent on average).

“In our view, the key driver of the stock has been a flow of funds into TC Energy’s shares by multi-sector investors seeking an alternative to regulated utility stocks given concerns about rising 10-year interest rates and the negative historical impact on utility valuations ... TC Energy’s shares are trading at a roughly 16.5 times forward P/E, which has improved off the 15-year lows of 12 times, but still remain at a roughly 20-per-cent discount to the average Canadian regulated utility P/E. Further, the current P/E is only modestly higher than the 10- year trough P/E between 2005-2015. While we do not expect the stock to garner much interest from midstream-focused investors, we believe investors looking for increased defensiveness (particularly with an “energy” tilt) will continue to be attracted to TC Energy’s shares.”

Mr. Kwan thinks a greater “appreciation” for its upside as an energy transition investment could “put it in the conversation with regulated utilities,” and he sees growth potential “in both the near-term (e.g., emissions reduction investments in the gas pipeline system), and optionality for growth over the longer-term (e.g., hydrogen hubs near sources of demand.”

“Other topics that came up that have generated broad investor interest include: (1) inflation exposure, which is modest with a 1-per-cent change in CPI impacting EBITDA by roughly $7-million; (2) Keystone XL where a revival does not seem realistic; and (3) Coastal GasLink (CGL) where the company does not foresee a scenario where it is not constructed, and we sensed confidence in a commercial resolution, possibly by this summer,” he said. “Also, the company formalized the previously communicated plan to provide Indigenous communities the option to take a 10-per-cent equity stake in CGL.”

Despite recent appreciation, Mr. Kwan views TC Energy’s shares as “not that expensive,” raising his target to $79 from $72 with an “outperform” recommendation. The average is $68.50.

“We believe investors seeking a utility-like investment with greater exposure to energy (versus regulated utility stocks) have helped drive TC Energy’s shares higher,” he said. ”While an argument could be made for TC Energy’s stock to trade at parity, our revised valuation still incorporates a discount (now 10 per cent versus 20 per cent previously) compared to what we used for the premium-valued Canadian regulated utilities, resulting in an 18 times forward P/E (up from 16.5 times that we previously used).”


In a research note titled Beat. Rinse. Repeat., Echelon Partners analyst David Chrystal said BSR Real Estate Investment Trust (HOM.U-T, HOM.UN-T) continues to exceed his “high expectations” after “delivering another quarter of exceptional financial and operational results.”

“Top line growth continues to accelerate, with same-property revenue coming in at [an increase of] 10.6 per cent year-over-year,” he said. “Leasing momentum remained strong in the fourth quarter, with new leases signed at lifts in excess of 20 per cent and renewal lifts accelerating. Management’s 2022 guidance supports our view that BSR will continue to deliver sector-leading organic growth in the year ahead, driven by continued strength in market rents.

On Wednesday, shares of Little Rock, Ark.-based REIT, which owns and operates multifamily communities in the Sunbelt region of the United States, rose 4.7 per cent in Toronto a day after releasing its quarterly report.

Revenue rose 19 per cent year-over-year to US$34.1-million, narrowly below Mr. Chrystal’s US$35-million estimate, while earnings before interest, taxes, depreciation and amortization (EBITDA) were up 15.7 per cent to US$16.3-million, topping his US$15.7-million projection. Adjusted funds from operations per unit came in at 17.9 US cents, jumping 34 per cent and also beating the analyst’s forecast (16.4 US cents).

“Uncharacteristically strong rent growth in the REIT’s core markets appears to be continuing into early 2022,” said Mr. Chrystal. “While still early days, on a weighted average basis, market rents have increased by 1.3 per cent across BSR’s core geographies year-to-date. This stacks up to the 1.0-per-cent increase over the same time frame in 2021, and flat rents in each of the three prior years. Though we do not expect 2022 rent growth to match 2021 (up 17.4 per cent year-over-year), we expect further market rent growth as the seasonally stronger spring and summer leasing seasons get under way. Further market rent growth and a current mark-to-market opportunity of 10-15 per cent, are supportive of management’s same-property revenue guidance of 8-10 per cent in our view.”

The analyst sees BSR “well-positioned” to continue to log margin expansion, noting: “(1) significant upside in in-place rents with 90 per cent of current leases below market rates, (2) ongoing market rent increases expected through 2022, (3) strict cost controls through leveraging economies of scale across the portfolio, and (4) lack of any rent control regulations which would limit the REIT’s ability to quickly increase rents to market on lease expiry.”

After raising his financial estimates to account for stronger-than-anticipated net operating interest margins and the expectation for further expansion, Mr. Chrystal increased his target for BSR units to US$23.50 from US$21, reiterating a “buy” recommendation and keeping it in the firm’s “Top Pick Portfolio.” The average target on the Street is US$22.40.

“We continue to like BSR for its exceptional organic growth profile, supported by unprecedented rent growth across its core markets,” he said.

Others making changes include:

* Canaccord Genuity’s Christopher Koutsikaloudis to US$23 from $20.50 with a “buy” rating.

“Given the favourable outlook for apartment fundamentals in the REIT’s markets and strong investor demand to acquire properties in the U.S. Sunbelt, we view BSR’s current valuation as compelling,” he said.

* National Bank’s Matt Kornack to US$24.50 from US$21.50 with an “outperform” rating.

“This quarter’s results expanded upon an impressive Q3 print with SPNOI up 19.3 per cent year-over-year (was 12.6 per cent in Q3/21),” he said. “Admittedly, the same property portfolio is a small portion of the overall asset base given capital recycling; however, broader rent spreads (on both renewals and new leasing) are indicative of consistent growth levels portfolio wide. A further positive is that 90 per cent of in-place rents have not been marked to market at this point providing a runway and support for management’s guidance at 12-per-cent organic growth and FFO/unit well above our pre-quarter estimate. BSR’s markets are inherently landlord-friendly with turnover levels of 50 per cent annually, which allows it to quickly capture changes in rental rates. We have increased our target price meaningfully on the better than expected NOI growth prospects combined with compressed cap rate assumptions. On the latter, our 4-per-cent assumed figure still has room to move lower, particularly if positive expectations on rental growth, beyond the current step, change materialize.”

* Desjardins Securities’ Kyle Stanley to US$24.50 from US$23 with a “buy” rating.

“Fundamentals in BSR’s core Texas markets remain highly supportive of continued elevated rent growth (10–15-per-cent loss to lease portfolio-wide),” he said. “In our view, BSR trades at an unwarranted relative discount (18-per-cent NAV discount, 4.5-per-cent implied cap rate) vs Sun Belt comps (1-per-cent discount, 3.9-per-cent implied cap rate) considering a forecast two-year 26-per-cent FFOPU CAGR [funds from operations per unit compound annual growth rate].”

* Raymond James’ Brad Sturges to US$25 from US$23 with a “strong buy” rating.


In a separate note, Mr. Chrystal initiated coverage of Kentucky-based Flagship Communities REIT (MHC.U-T) with a “buy” recommendation, touting its “compelling blend of growth, value and defence.”

“The REIT provides investors with access to a highly stable and defensive asset class with a history of consistent growth throughout all economic conditions,” he said. “We believe the REIT is well-positioned to deliver solid internal growth through improving occupancy and higher lot rents, as well as external growth given management’s exceptional transactional track record”

The analyst sees Flagship, which owns a portfolio of manufactured housing communities across seven central/Midwest states, possessing a “strong” organic growth outlook and “significant” external growth opportunity.

“Flagship’s same-community portfolio has delivered midsingle-digit compounded annual growth in average lot rent over the past several years,” said Mr. Chrystal. “This has been augmented by consistent increases in same-community occupancy as management works to bring portfolio occupancy (currently 82 per cent) to a ‘stabilize’ level (90 per cent plus). We expect that an increasingly tight market for alternative accommodation options (rental apartments, single-family homeownership) will continue to drive strong organic growth within Flagship’s existing portfolio.”

“Flagship’s management team grew the REIT’s predecessor entity at a compound annual rate of 18 per cent (lot count) over 25 years. This growth has continued with $180-million of acquisitions completed since its October 2020 IPO. We believe there is a significant opportunity for further external growth as Flagship’s market penetration in its existing seven states is estimated to be less than 1 per cent. Ownership of MHCs is highly fragmented, with less than 20 per cent of all communities owned by the largest 50 operators. Moreover, we believe that Flagship will continue to achieve outsized external growth owing to (1) deep industry relationships, and (2) somewhat less competition in the REIT’s markets from the largest institutional platforms which skew more towards coastal markets.”

The analyst set a US$23 target, which is 7 US cents below the consensus.


After a better-than-expected sales result in the final quarter of 2021, iA Capital Markets analyst Matthew Weekes continues to see “positive momentum” for Ag Growth International Inc. (AFN-T), setting up “strong” growth potential in this fiscal year.

Shares of the Winnipeg-based company soared 8.5 per cent on Wednesday following the premarket release of its quarterly results, which Mr. Weekes summarized as “a bit mixed and included some noisy items.”

The highlight was better-than-anticipated sales results. For the quarter, it saw a rise of 44 per cent year-over-year to $327-million, topping both Mr. Weekes’s $286-million estimate and the consensus of $290-million. Adjusted earnings before interest, taxes, depreciation and amortization of $45-million, including a positive adjustment of $11-million related to management changes, also topped estimates ($38-million and $40-million, respectively).

“AFN continued to perform strongly in its U.S. and international geographies, which offset weakness in Canada,” the analyst said. “Sales in Brazil grew almost 270 per cent year-over-year, with strength in both Farm and Commercial products, reinforcing the view that AFN has reached an inflection point in its Brazilian business. The beat in sales relative to our forecast was driven by the Commercial platform.”

“Backlog continued to grow, reaching another record level at quarter-end, which lends a degree of visibility to the outlook. AFN expects another year of strong growth in2022, which should be driven by continued strength in US Farm and International markets, strong demand in Food with the addition of Eastern Fabricators to the platform, and growth in the Digital segment which should benefit from initiatives designed to increase penetration and the return of the trade show sales channel with COVID restrictions easing. Tight supply chains will likely impact gross margins, but we believe that AFN’s responsive pricing strategy will help mitigate these effect.”

Noting Ag Growth’s exposure to Russia is “minimal,” Mr. Weekes said the company’s 2022 guidance largely fell in line with his expectations, including adjusted EBITDA of at least $200-million, which would be a rise of 15 per cent year-over-year.

”We are adjusting our estimates to build in higher revenue growth in 2022, but offsetting this with lower assumed margins,” he said. “For 2023, we are increasing our estimates modestly, assuming high-singledigit growth.”

That led him to raise his target for Ag Growth shares to $49 from $48 with a “speculative buy” recommendation (unchanged). The average target is $49.78.

“We remain constructive on the growth potential and market fundamentals for AFN’s global business, including growth in high-quality food processing markets and the evolving market for Farm Technology,” said Mr. Weekes. “We look forward to AFN continuing its deleveraging focus, as well as refinancing the remaining convertible debentures due in 2022, which we expect to provide balance sheet de-risking and help mitigate risks associated with litigation.”

Others making changes include:

* Scotia’s Michael Doumet to $50 from $45 with a “sector outperform” rating.

“The fundamentals are better than they have ever been for AFN. The company guided for 2022 EBITDA of at least $200 million; we forecast $208 million, which reflects 18-per-cent growth,” he said. “While the one-time charges recorded in 4Q21 make a dent in what we view as a slew of positives (supportive backdrop, record backlog, margin recovery, profit growth, balance sheet delevering, etc.), to us, two significant positives stood out on the conference call: management stated that the incremental provisions related to the bin incident were final and that its net debt to EBITDA would decline to 4.0 times by the end of 2022 (from 5.0 times). In our view, this underscores what we expect will be a much cleaner story in 2022 – and what we hope will lead to an eventual positive re-rate.”

* Desjardins Securities’ David Newman to $53 from $49 with a “buy” rating.

“We have even higher conviction on AGI given strong fundamentals, resilience against steel and political headwinds, and a dissipating overhang from the bin incident,” said Mr. Newman.

* Raymond James’ Steve Hansen to $50 from $45 with an “outperform” rating.

“We are increasing our target price on Ag Growth International ... based upon our constructive view of the company’s solid 4Q21 print, record backlog, improved margin outlook, and attractive guide underpinned by robust macro fundamentals and accelerating commercial momentum in key markets,” said Mr. Hansen

* CIBC World Markets analyst Jacob Bout to $51 from $47 with an “outperformer” rating.

“Despite Canadian sales being down 21 per cent in Q4/21 (drought), overall consolidated sales were up 44 per cent driven by strong international sales (AFN’s investment in Brazil finally paying off with sales in Brazil higher than Canada). We believe that AFN’s globally diverse, complete catalogue offering not only sets the company ahead of its competitors, but will continue to drive growth longer term. While the bin collapse remediation work remains an overhang (reflected in AFN’s depressed multiple), we do expect a meaningful resolution in 2022 (and possibly offsetting positive news from insurance and the FDGE claim by the end of the year,” he said.


Though he sees its 2022 outlook as “solid,” National Bank Financial’s Vishal Shreedhar expects Pet Valu Holdings Ltd.’s (PET-T) growth to moderate, prompting him to “remain on the sidelines” with its shares.

He was one of several equity analysts on the Street to make adjustments to their target prices for the Markham, Ont.-based company following the premarket release of its fourth-quarter results before the bell on Wednesday, which sent it soaring 8.8 per cent during the trading day.

“We view results to be favourable given a strong beat across key metrics and above-forecast 2022 guidance,” said Mr. Shreedhar.

The specialty retailer reported revenue of $223.1-million, up from $203.4-million during the same period a year ago and above the analyst’s $217.7-million estimate with same-store sales growth of 16.7 per cent (versus a 7.1-per-cent forecast). Adjusted EBITDA grew to $53.3-million from $47.8-million, which also topped Mr. Shreedhar’s forecast of $49.8-million.

“Guidance was more favourable than modelled; however, it similarly confirmed our expectations of slowing trends,” he said. “Management initiated 2022 guidance as follows: 30 to 45 new store openings, revenue of $845-million to $870-million, sssg of 6 per cent to 9 per cent, adj. EBITDA of $187-million to $194-million (year-over-year growth of 2.6 per cent to 6.4 per cent), adj. EPS of $1.37 to $1.44 (NBF was $1.28 and is now $1.39) and net capex of $20-million to $25-million.”

Maintaining a “sector perform” recommendation, Mr. Shreedhar increased his target to $37 from $35 to reflect his higher financial estimates. The average is $40.71.

“We believe PET’s execution has been strong and anticipate continued solid sales trends in Q1 before moderating thereafter,” he added. “For the moment, we believe that industry conditions remain healthy, despite pervasive concerns regarding inflation. We remain on the sidelines, particularly since EBITDA growth will moderate through 2022. In addition, we see better value elsewhere in our discretionary coverage universe.”

Other analysts making target adjustments include:

* Laurentian Bank Securities’ Anthony Linton to $41 from $39 with a “buy” rating.

“We maintain our positive view on Pet Valu following a strong quarter and we expect the company to maintain momentum into 2022, with a solid FCF profile providing flexibility to execute on the company’s growth objectives,” he said.

* CIBC’s Mark Petrie to $42 from $43 with an “outperformer” recommendation.

“Pet Valu reported strong Q4 results and introduced a 2022 outlook both nicely ahead of our estimates and consensus expectations. Shares have pulled back in the market sell-off and shift away from higher-multiple stocks, but we believe PET offers attractive defensiveness with multiple levers to exceed already healthy industry growth. Our 2022 estimates sit within management’s guidance, and we believe upward revisions are more likely than not,” he said.

* RBC’s Irene Nattel to $42 from $40 with an “outperform” rating.


While forecasting increased utilization and margin reflation later this year, Raymond James analyst Andrew Bradford thinks “the near-term dynamic will be less encouraging” for investors in Essential Energy Services Ltd. (ESN-T), leading him to lower his rating to “market perform” from “outperform” on Thursday.

“In particular 1Q22 and 2Q22 will still show uninspiring margins,” he said. “Considering this in the context of Essential’s steady share price appreciation motivates our Market Perform rating.

“Cost inflation is on the minds of energy and oilfield services execs, much as it is in most sectors these days. In some service lines, we notice producers have higher willingness to accept increased labour costs, steel, maintenance, fuel, than for other service lines. Coiled tubing is clearly one of those service lines where producers are less inclined to entertain increased costs. As a result, Essential’s margins compressed in 4Q. Moreover, margins aren’t likely to improve materially in 1Q either; we’re consequently reducing our 1Q22 EBITDA estimate to $3.8-million from $7.0-million. We fully expect scheduled pricing reviews with core customers will accommodate increased input costs over the coming months, but price increases beyond this seem unlikely until producers hear the words they’ve grown unaccustomed to in the modern oilpatch: ‘I’m sorry, we don’t have equipment for you.’”

Mr. Bradford maintained a 60-cent target. The average is 55 cents.


Calling it a “senior-quality EPCM in a developer market cap,” National Bank Financial analyst Rabi Nizami thinks G Mining Ventures Corp. (GMIN-X) “allows investors an opportunity to back an expert mine-building team as they embark on building the next intermediate gold producer.”

“The journey begins with the de-risking and construction of Tocantinzinho (TZ), an intermediate-scale project that will rank as the third largest gold mine in Brazil,” he said. “We expect the stock to re-rate and move up the Lassonde curve through de-risking of financing and construction, and we also see value in reserve upside that was not included in the recent feasibility study.”

In a research report released Thursday, Mr. Nizami initiated coverage of the Brossard, Que.-based company with an “outperform” recommendation, believing its management team is “uniquely qualified to de-risk construction.

“G Mining Ventures (GMIN) is founded and led by the Gignac family, the principals of G Mining Services (GMS), a full-service mining consultancy powerhouse, whose expertise mining/engineering/construction/management can be verified by a successful history of managing the construction of large gold mines on behalf of senior companies globally,” he said. With GMIN, the team is aiming to continue these successes, this time as the owners, backed by GMS’s technical bench strength. The Gignac family, Management and Board of Directors own 12 per cent of shares, Eldorado Gold Corp. (ELD-T) holds 19.9 per cent and institutions hold 57 per cent.”

Calling Tocantinzinho “construction-ready” and expecting financing package in the coming months, he set a target of $1.65 per share. The average is $1.99.


In other analyst actions:

* Cormark Securities’ David McFadgen downgraded Pollard Banknote Ltd. (PBL-T) to “market perform” from “buy” with a $35 target, down from $46.50 and below the $48.13 average.

* While its fourth-quarter results missed his expectations and warnings the first quarter “did not get off to a great start,” National Bank Financial analyst Tal Woolley raised his American Hotel Income Properties REIT LP (HOT.UN-T) target to $5 from $4.50 with a “sector perform” rating. The average is $4.11.

“The math on the recovery in HOT’s cash flows looks attractive,” he said. “The ongoing recovery in RevPAR, combined with lower service standards should drive higher revenues and margins long term (HOT management hopes to get 100-200 basis points of margin performance over pre-COVID times). Combined with high operating and financial leverage and the ability to price rents daily (helpful in an inflationary period), the prospects for HOT’s growth looks appealing in an inflationary time. We think this view sloughs off a negative consumer reaction: how high can rates go on lower service, with leisure customers facing inflation in food, housing and gas? Pre-COVID, HOT’s traffic was split 65/35 corporate/leisure; it has now reversed. Maintaining/ growing corporate occupancy might take time to unfold (we anticipate a burst as corporate American returns to the office, but video conferencing’s persistence might eat into a full recovery.”

* While its fourth-quarter results fell in line with “muted estimates,” Echelon Partners analyst Andrew Semple expects wholesale market headwinds to limit Ascend Wellness Holdings Inc.’s (AAWH-CN) growth in the first half of the year, leading him to cut his target for its shares by $1 to $12 with a “buy” rating. The average is $11.56.

“Despite near-term stagnation in revenues and margins, Ascend is likely to experience step-function growth in H222 and beyond as its investments in vertical integration across its portfolio of high torque states bear fruit,” he said. “The most notable catalyst for Ascend is the launch of adult-use cannabis sales in New Jersey in the coming months, which is expected to be one of the most attractive U.S. cannabis markets. We note that management indicated the Company is one of five license holders currently undergoing a ‘substantive review’ process with the state’s regulator, a positive sign that it may be one of the first allowed to market if it clears this review.”

“We made meaningful reductions to our estimates in response to management’s H122 outlook. We continue to expect New Jersey adult-use sales to begin in Q222, but for modelling purposes have push back first meaningful contributions from that until Q322.”

* Stifel’s Robert Fitzmartyn trimmed his target for Bird Construction Inc. (BDT-T) to $13.75 from $14.25 with a “buy” rating. The average is $12.69.

“Bird’s strategy is clearly paying off as the last three years have been characterized by strategically shifting the business to lower risk contracts with more stable margin profiles,” he said. “When comparing 2021 to 2018, revenue is up 61 per cent, EBITDA has increased 898 per cent and EPS has grown to $0.95 from a loss of 2 cents.

“Looking ahead, the record backlog of $3.0-billion comprises lower risk contract structures that should continue to depict a less risky business. Moreover, the balance sheet is in strong shape in our view with 2022 net debt/EBITDA at 0.6 times providing capital allocation flexibility. The valuation remains very inexpensive.”

* JP Morgan’s Brian Ossenbeck resumed coverage of Canadian National Railway Co. (CNR-T) with a “neutral” rating and $171 target as well as Canadian Pacific Railway Ltd. (CP-T) with an “overweight” recommendation and $113 target. The averages on the Street are $163.42 and $106.07, respectively.

* National Bank’s Shane Nagle raised his Ero Copper Corp. (ERO-T) target by $1 to $20.50 with a “sector perform” rating. The average is $25.23.

“We reiterate our Sector Perform rating as our estimates take into account Ero’s self-funded growth profile, incremental exploration potential, near-term expansion opportunities and low operating costs,” he said. “The company’s shift in strategy towards developing Boa Esperança and mine expansion at MCSA deteriorates the near-term FCF outlook and brings development/inflation risks. Delivering additional updates on the Pilar Deepening project/Boa Esperança will be a key catalyst alongside exploration results throughout 2022.”

* CIBC’s Cosmos Chiu raised his target for Franco-Nevada Corp. (FNV-T) to $260 from $240, exceeding the $207.14 average, with an “outperformer” rating.

“Despite slightly lower production from precious metals, which is consistent with producer guidance, FNV is well positioned to continue to benefit from rising commodity prices, and with limited exposure to inflation we expect to see continued strong cash flow generation,” said Mr. Chiu.

* CIBC’s Dean Wilkinson cut his InterRent Real Estate Investment Trust (IIP.UN-T) target by $1 to $18.50 with a “neutral” rating. The average is $19.71.

* Mr. Wilkinson also cut his target for units of Minto Apartment Real Estate Investment Trust (MI.UN-T) to $26.50 from $27.50 with an “outperformer” rating, while Canaccord Genuity’s Christopher Koutsikaloudis raised his target to $28.50 from $26.50 with a “buy” rating and Scotia’s Mario Saric moved his target to $24.75 from $24.25 with a “sector perform” rating. The average is $27.36.

“We continue to view Minto as a core long-term holding for investors looking to gain exposure to the Canadian multi-family sector, given the REIT’s high-quality, well located apartment portfolio in Canada’s largest markets,” said Mr. Koutsikaloudis.

* CIBC’s Krista Friesen reduced her Linamar Corp. (LNR-T) target to $90, remaining above the $89.60 average, from $95. She kept an “outperformer” rating, while Scotia’s Mark Neville cut his target to $90 from $105 with a “sector outperform” rating.

“In a vacuum, LNR’s Q4 results were disappointing, notably in Industrial – which was telegraphed, at least directionally,” said Mr. Neville. “However, LNR shares are down almost 35 per cent since the company’s intra-Q update, including 22 per cent since February 23rd (i.e., the day before Russia invaded Ukraine). In that context, we are less negative on the Q4 print. Moreover, management indicated it would be active in the market buying its own stock when its blackout period ends (can start buying on Monday), something it has been unable to do year-to-date (given blackout restrictions).”

* Seeing “momentum into 2022,” National Bank’s Travis Wood bumped up his Peyto Exploration & Development Corp. (PEY-T) target to $15.50 from $15 with an “outperform” rating, while Stifel’s Robert Fitzmartyn raised his target to $17 from $16.50 with a “buy” rating. The average is $14.65.

“Peyto’s fourth quarter results were in line with the market though cash generation bested our estimates. Subsequent to year-end it announced a $22-million private company acquisition complementary to its existing position at Brazeau and into Chambers. We continue to observe an outlook with strong volume growth and sizable deleveraging solidifying a prospect for further dividend growth in 2023,” said Mr. Fitzmartyn.

* Despite a fourth-quarter beat and special dividend announcement, Acumen Capital’s Jim Byrne trimmed his Richards Packaging Income Fund (RPI.UN-T) target to $68 from $80 with a “buy” rating, citing “multiple contraction in the peer group.”

“The company continues to generate significant free cash while navigating today’s challenging business environment. We would view further M&A as a positive catalyst for the units,” said Mr. Byrne, who is the lone analyst covering the stock.”

* Desjardins Securities’ Benoit Poirier raised his Stella-Jones Inc. (SJ-T) target to $58 from $52 with a “buy” rating. The average is $52.44.

“We are very pleased with the 2022–24 strategic plan unveiled with 4Q results. We derive adjusted EPS CAGR of 13 per cent from 2019–24, thanks in part to the steady allocation of $130–140-million per year toward share buybacks. We estimate that SJ’s leverage ratio should remain at 2.0–2.2 times in 2022–24, which provides plenty of financial flexibility to continue its disciplined M&A strategy. We encourage investors to revisit the name given the very attractive potential return embedded in the plan of 70 per cent.”

“We estimate that SJ could be worth $65 per share by 2024 (70-per-cent upside over current levels, including dividends). We derive another $8 per share of value creation if management can execute on its M&A pipeline of US$200-million of revenue. In an environment of increased market volatility, we believe this returns profile is quite compelling for a company with fairly resilient attributes.”

* Citing a “weak” macro picture, Raymond James’ Rahul Sarugaser cut his Village Farms International Inc. (VFF-Q, VFF-T) target to US$16 from US$19 with a “strong buy” rating. The average is US$13.69.

“Given VFF’s relatively flat market share through 2021 (which we believe was by design), we remain conservative in our revenue estimate, which is why we trim our target price ... Maintaining our conviction that VFF is, bar none, the best operator in the Canadian cannabis sector we maintain our Strong Buy rating,” he said.

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