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

Raymond James’ David Quezada added Innergex Renewable Energy Inc. (INE-T) to the firm’s “Canadian Analyst Current Favourites” list on Thursday.

“The addition of Innergex … is a function of several factors including 1) The company's sizable (and we believe underappreciated) development portfolio; 2) an attractive long-life asset mix which is diversified both geographically and by technology; and 3) significant EBITDA and cash flow associated with recent M&A and near-term development,” said Mr. Quezada.

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“We highlight that INE is expected to either begin construction or complete the acquisition of over 1 GW of capacity in 2H18 which we expect will propel the company from 1,124 MW net MW of capacity at the end of 2017 to 2,500-2,700 MW by 2020. Near-term we estimate INE's EBITDA/share growing at a 15-per-cent CAGR [compound annual growth rate] between 2017 and 2019 and, given the aforementioned growth opportunities see this trajectory continuing through 2020. We further stress the benefits of INE's long life, diversified footprint both by technology (42-per-cent hydro/geothermal versus 54-per-cent wind) and geographically. Longer term the company also maintains potential upside from developments in the U.S. including the 320 Boswell Springs project (currently tied up with interconnection challenges) and 490 MW of other PTC qualified U.S. wind projects.”

Mr. Quezada currently has an “outperform” rating and $20 target for Innergex shares. The average target on the Street is $16.25, according to Bloomberg data.


Canaccord Genuity analyst Scott Chan said National Bank of Canada’s (NA-T) recent outperformance and current relative valuation leaves him “neutral” on the stock.

Accordingly, despite reporting “relatively clean” quarterly results, Mr. Chan downgraded his rating to “hold” from “buy.”

“NA stock has been the second-best Canadian bank performer over the past year, returning 22 per cent and significantly outperforming the TSX Composite at 12 per cent,” he said. “As a result, NA shares trade at a price-to-earnings (NTM) of 10.6 times, representing a 10-per-cent premium compared to its historical average.

“Further, NA’s discount relative to peers (Big-6) sits at 6 per cent versus a historical discount of 12 per cent. With fiscal 2019 estimated EPS growth expectations now of 7 per cent (in line with peers; versus 8 per cent prior), we would like to see the discount narrow to get more constructive on the stock.”

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Mr. Chan emphasized the bank’s Personal and Commercial (P&C) segment earnings now sit below peers and continue to decelerate, noting: “During Q3/18, adj. net income increased 6 per cent year-over-year. We envision a similar growth rate to close out the year, which would track lower than comps. Loan growth at both personal and commercial remain below peers due to higher competition in their home market Quebec. Management remains disciplined on growth and remains focused on pricing and generating strong risk-adjusted returns.”

Also expressing caution about the performance of its international segment, Mr. Chan lowered his fiscal 2019 earnings per share estimate by 7 cents to $6.29.

His target for the stock remains $69, which exceeds the consensus by 62 cents.

“Relative to consensus, we estimate NA would have reported a slight EPS miss as lower PCLs [provisions for credit losses] added 3 cents, driving the beat,” he said. “For fiscal 2019, we have revised down our EPS estimate modestly by 1 per cent, mainly driven by lower NII and higher PCL.“

Elsewhere, Desjardins Securities’ Doug Young increased his target to $66 from $64.

Mr. Young said: “We are encouraged by NA’s CET1 ratio build and progress on NIX. We maintain our Hold rating.”

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A day after its stock jumped 20.6 per cent in price following the release of its quarterly results, Roth Capital Partners analyst Charles Finnie downgraded Tilray Inc. (TLRY-Q) to “neutral” from “buy.”

Mr. Finnie said the Nanaimo, B.C.-based cannabis producer’s “current stock price reflects plenty of positives, including rampant M&A (or minority investment) speculation."

The analyst also suggested other big-name industry names, including Aphria Inc. (APH-T), Aurora Cannabis Inc. (ACB-T) and the ETFMG Alternative Harvest ETF, could also fall in the near term.

"Cannabis stocks are looking increasingly speculative at current levels, and in Tilray’s case, the limited float adds an extra element of volatility,” said Mr. Finnie.

He added that, since the Aug. 15 announcement of Constellation Brands Inc.’s US$4-billion investment in Canopy Growth Corp. (WEED-T), Tilray shares have “run up dramatically, without any change to the fundamental business.”

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Mr. Finnie did increase his target for the stock to US$54 from US$35 based on the company’s second-quarter revenue jump and “a slightly expanded multiple.” The average on the Street is US$52.

On Wednesday, Cowen analyst Vivien Azer raises her price target to a Street-high of US$62 from US$34, believing it is well positioned to capture early market share in Canada’s recreational market.

She maintained an “outperform” rating.


Following the release of weaker-than-anticipated second-quarter financial results, PI Financial analyst David Kwan said he remains bullish on VersaPay Corp. (VPY-X), believing recent share price weakness presents investors with a “nice” entry point.

On Tuesday, the Toronto-based payment processing and payment systems company reported an 80-per-cent jump in revenue year-over-year to $1.1-million. However, the result fell short of both Mr. Kwan’s projection of $1.2-million and the Street’s expectation of $1.3-million, due largely to lower-than-expected results from its PayPort electronic fund transfer business, which the analyst noted tends to be “lumpy.”

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VersaPay reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of a $2.9-million loss, which was also below the estimates of both Mr. Kwan (a loss of $2.5-million) and the Street (a $2.4-million loss). He attributed the miss to higher operating expenses from “aggressively hiring to drive future growth, particularly in the U.S.”

“VPY ended Q2 with $9.9-million in cash, down from $13.4-million last quarter,” said Mr Kwan. “We believe VPY may need to raise some capital given the increased burn rate. Our estimates now assume a $5-million equity raise in early FY19.”

After lowering his 2018 financial estimates, Mr. Kwan dropped his target for VersaPay shares to $3.25 from $3.50, keeping a “buy” rating. The average target is $3.02.

“Our target price is based on our DCF valuation, which has been lowered due to the impact of increased spending and the expectation of a small equity raise,” he said. “Revenue growth and other key top line metrics are starting to reaccelerate and we believe this trend can continue based on customers in the implementation pipeline (including some large ones), growth with existing customers, and the increasing contribution from its growing number of partnerships (e.g., RBC and First Data). VPY also has a robust pipeline of potential customers to drive future growth. However, investors should keep an eye on spending, as VPY has been aggressively hiring in recent quarters to drive future growth.”

On Wednesday, Haywood Securities analyst Pardeep Sangha downgraded VersaPay to “hold” from “buy” with a target of $2.30, falling from $2.50.

Raymond James’ Brenna Phelan kept an “outperform” rating and $3.50 target, noting: “We believe that VersaPay is uniquely positioned to capitalize on 100-per-cent-plus revenue growth over our forecast period as B2B businesses increasingly see value in the automation of the Accounts Receivable process that its flagship product, ARC, elegantly provides.”

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A pair of equity analysts upgraded their ratings for Journey Energy Inc. (JOY-T) following Wednesday’s announcement that the Calgary-based company has entered into a definitive joint venture agreement with privately held Kiwetinohk Resources Corp. to develop its East Duvernay shale oil resource.

Canaccord Genuity’s Sam Roach raised his rating for Journey Energy shares to “speculative buy” from “hold” with a $2.25 target, rising from $1.80.

Eight Capital’s Adam Gill moved the stock to “buy” from “neutral” with a target of $3.15, up from $2.25.

The average target on the Street is currently $2.50.

Meanwhile, Acumen Capital’s Trevor Reynolds maintained his “speculative buy” rating and $2.65 target, noting: “Overall we view the definitive agreement as a material positive for JOY. While it doesn’t change our estimates in the near term, the potential upside created by the JV is significant and should help to attract more attention to JOY.”


Invesque Inc. (IVQ.U-T) currently provides investors with an “interesting” entry point, said Industrial Alliance Securities analyst Brad Sturges, pointing to its discount valuation and “attractive” 9.2-per-cent yield.

“We believe that the recent sell-off in Invesque’s shares may be related to a churn in the company’s investor base, including from former unitholders of Mohawk Medical Properties REIT (Mohawk) that were not subject to a lock-up period, which could create further pressure for Invesque’s shares in the near-term,” he said.

Maintaining a “buy” rating for Invesque shares, Mr. Sturges lowered his target to US$9 from US$9.75. The average is US$9.21.

“Our Buy rating is based on Invesque’s attractive yield, its relatively stable cash flow profile, external growth prospects driven by further execution of the company’s acquisition strategy, senior management’s historical track record of generating shareholder returns, and its fully internalized management structure that aligns senior management with shareholders,” the analyst said.


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