Inside the Market’s roundup of some of today’s key analyst actions
Expecting the eventual close of Rogers Communications Inc.’s $20-billion acquisition of Shaw Communications Inc. to lead to even more intense competition among Canada’s telecommunications companies, National Bank Financial analyst Adam Shine sees little room for growth from BCE Inc. (BCE-T) in 2023.
Accordingly, after resetting his valuation ahead of the Feb. 2 release of its fourth-quarter results and 2023 guidance, he downgraded BCE to “sector perform” from “outperform” on Thursday.
“Inasmuch as Bell continues to execute well and has been enjoying wireless tailwinds and market share gains in residential wireline related to its fibre deployment which will be largely completed in 2025, we expect the eventual closing of the Shaw and Freedom deals, subject to the Competition Bureau’s appeal(s) and ISED approval, to add to competitive intensity in Ontario, Alberta, and British Columbia and look for the new CRTC chair to pursue a more pro-consumer tack than the pro-industry skew of her predecessor,” said Mr. Shine. “While the stock offers an attractive dividend yield of 6 per cent and is poised for ongoing 5-per-cent increases, we see 2023 guidance ranges similar to last year and our forecast calls for Revs/EBITDA gains slightly below 2022 levels.”
The analyst’s rating changes was largely based on valuation concerns after “reflecting on historical forward multiples.”
“We calculate average forward EV/EBITDA [enterprise value to earnings before interest, taxes, depreciation and amortization] multiples for the stock as 8.1 times since 2014 and 8.2 times since 2018,” he said. “At the start of 2020 (pre-pandemic), the LTM [last 12-month] multiple stood at 8.2 times and forward multiple at 7.9 times and these were 8.1 times and 7.7 times in early 2021 before popping to 9.2 times and 9.0 times at the start of 2022 (April would see a high of 9.7 times 2022). The shares now trade at 8.8 times LTM and 8.5 times 2023E. We think multiples are more likely to compress than expand.”
Mr. Shine trimmed his target for BCE shares to $63 from $66. The average target on the Street is $65.65, according to Refinitiv data.
“We pushed out our valuation six months which is now based on averages of 2023 estimated DCF [discounted cash flow] & 2024 estimated NAV [net asset value], with implied EV/EBITDA a decline of 30 basis points to 8.9 times 2022, 8.6 times 2023 & 8.3 times 2024 (ex future spectrum spending). In our DCF, we raised the equity risk premium 25 bps to 8.75 per cent which appears more prudent given economic considerations. In our NAV, we lowered our multiples 50 bps to 8.0 times for Wireline and 8.5 times for Wireless to reflect the pending next chapter of telecom competition in Canada, the presumed repositioning of a less benign CRTC, and the fact that we had each of these multiples 100 basis points above what we were using for Rogers amid the latter’s prior underperformance. We also reduced the multiple applied to Media 200 basis points to realign it with what we’re using for Rogers and to acknowledge pressure on industry multiples given recessionary concerns and evolving secular challenges.”
In separate research notes, ahead of a Jan. 24 hearing from the Federal Court of Appeal, Mr. Shine raised his targets for Quebecor Inc. (QBR.B-T, “outperform”) to $36 from $32 and Rogers Communications Inc. (RCI.B-T, “outperform”) to $78 from $75. The averages are $33.92 and $71.12 respectively.
“The Competition Bureau (CB) remains persistent in its quest to scuttle the Shaw & Freedom sales despite the Tribunal disagreeing with all its arguments,” he said. “The CB has until Jan. 13 to file its arguments for appeal based on its view that the Tribunal made errors of law by not first assessing the original Rogers-Shaw deal, not fully explaining how it would have come to the same conclusion if it had done so, and not considering the implications of price increases. The companies must file by Jan. 17. We’d be surprised if the FCA takes more than a week to render its decision. ISED is waiting for legal clarity before giving its decision; however, the CB could opt to appeal to the Supreme Court. An appeal would need to be done within 60 days of the FCA decision, with the companies having up to 30 days to respond, and then the CB would have 10 days to reply. That’s 100 days without any certainty that the appeal would be heard, unless this process was somehow expedited. The FCA judgment would be in effect despite an appeal unless a stay is granted by the FCA.”
He cut his Telus Corp. (T-T, “outperform”) target to $31 from $34, below the $32.56 average.
“Telus has enjoyed a premium valuation given its verticalization strategy in Wireline as a point of differentiation and given relatively less competition faced out West,” said Mr. Shine. “After the successful IPO of Telus International whose valuation has since materially reset, we await future monetization opportunities related to Health and Agriculture. Telus continues to execute well, has completed its fibre build with FCF to jump and coming benefits from copper decommissioning to be realized along with other savings and LifeWorks synergies, but a new state of competition is coming pending the closing of the Shaw & Freedom deals, and we look for the new CRTC chair to pursue a more pro-consumer tack than the pro-industry skew of her predecessor.”
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CIBC World Markets analyst Stephanie Price expects the telcom sector to “do well” in 2023, pointing to {interest rate expectations stabilizing and the market posture remaining defensive.
“Fundamentally, the sector remains solid and we are expecting average wireless service revenue growth of 7 per cent and a 3-per-cent increase in Internet subscribers,” she said.
In a research report released Thursday, Ms. Price upgraded Telus Corp. (T-T) to “outperformer” from “neutral,” seeing it as undervalued following the recent sell-off in Telus International Inc. (TIXT-N/TIXT-T).
“TELUS’ TI subsidiary has been impacted by slowdown-related concerns in its core tech and games vertical,” she said.” At current levels, TI is trading at a significant discount to peers despite above average growth and margins. We expect solid execution in TELUS’ core telecom vertical.”
She maintained a target price of $31 per share. The average on the Street is $32.56.
Ms. Price also made these target changes:
* BCE Inc. (BCE-T, “neutral”) to $64 from $62. Average: $65.65.
Ms. Price: “We view BCE as the most defensive name in our coverage universe. The company has been a solid and consistent grower, focused on making the necessary investments to sustain its dividend growth model. It is executing well in a solid wireless environment and gaining share in wireline as it accelerates its fibre investment. That being said, we expect 2023 to remain a heavy fibre investment year and foresee potential recessionary risks to BCE’s enterprise and media businesses.”
* Cogeco Inc. (CGO-T, “neutral”) to $71 from $64. Average: $89.50.
Ms. Price: “While the NAV discount fluctuated through Q1/F23, it has returned to negative 17 per cent, where it was during Q4/22 and in line with the longer-term historical average of negative 15 per cent. We remain on the sidelines of the story due to a less compelling NAV gap and continued weakness in the company’s media segment.”
* Cogeco Communications Inc. (CCA-T, “neutral”) to $84 from $76. Average: $90.70.
Ms. Price: “We remain on the sidelines of the Cogeco story given increasing competition in Canada and the U.S. Within the U.S., increased competition risks continue to pull down valuations in the sector and we expect the more competitive environment to potentially lead to new costs (including wireless bundling). Within Canada, Cogeco is encountering increasing competition from BCE in certain markets as it continues to roll out its fibre offerings, although we expect more discipline in the Canadian market than in the U.S. market. We believe a Canadian MVNO offering is several years away given the regulatory hurdles still to be overcome.”
* Quebecor Inc. (QBR.B-T, “outperformer”) to $35 from $29. Average: $33.92.
Ms. Price: “Quebecor has reached maturity in its Quebec market, acting as the largest cable operator in the province with a broadband network that covers 80 per cent of Quebec’s total addressable market. The company has also grown its mobile offering since its 2010 launch to comprise a 30-per-cent market share of mobile gross adds in the province. From here, we foresee upside from the acquisition of Freedom’s wireless business, which will allow Quebecor to move into Ontario, Alberta and BC. Quebecor noted during the Tribunal that it could launch 5G wireless services outside of Quebec within three months of acquiring Freedom. We believe that Quebecor could fund the transaction without raising equity, and calculate pro forma leverage of 3.5 times at the end of 2023.”
* Rogers Communications Inc. (RCI.B-T, “outperformer”) to $72 from $69. Average: $71.12.
Ms. Price: “The outcome of the Rogers/Shaw transaction should finally be decided this year. The Tribunal has ruled in favour of the merger, with the Bureau now appealing the decision to the Federal Court (and potentially the Supreme Court); an appeals court date of January 24 has been set. Our base case remains that the transaction closes. If an appeal is granted, we expect the process to extend into mid-2023. Regardless of the transaction’s outcome, we continue to take a positive view of Rogers’ wireless fundamentals, with the company benefiting from a solid market environment. We see a more competitive environment in wireline, with BCE becoming more promotional amidst its fibre rollout.”
* Telus International Inc. (TIXT-N/TIXT-T, “outperformer”) to US$27 from US$30. Average: US$27.36.
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Still struggling to rebound from the impact of the pandemic, office real estate investment trusts now face significant uncertainty from a potential recession, according to Desjardins Securities analyst Lorne Kalmar.
“The outlook for the office market has rarely been so uncertain as the pandemic caused an upheaval in how users think about their office space and needs,” he said. “While more employees have started returning to the workplace, the threat of a looming economic slowdown has further dampened sentiment toward the asset class. This has translated into office REITs trading at, or near, record-low valuations. However, we are in no way of the view that office is dead — in fact, far from it — but change is on the horizon.”
In a research report late Wednesday titled It’s always darkest before the dawn, Mr. Kalmar said he expects a “K-shaped recovery” in the office sector, expressing a preference for “new or heavily renovated properties with robust amenity offerings and a greater focus on ESG, while older commoditized assets will likely absorb the majority of the market vacancy.”
He initiated coverage of Allied Properties Real Estate Investment Trust (AP.UN-T) and Dream Office Real Estate Investment Trust (D.UN-T), seeing both possessing “portfolios of high-quality assets which should benefit from this flight-to-quality trend, positioning them well to outperform the broader office market.”
“A pause in the transaction markets has created near unprecedented uncertainty around asset values,” the analyst added. “While we would not be surprised to see a decline in office prices from pre-pandemic levels, we believe the current implied pricing for both AP and D will prove to be excessively discounted once transaction activity picks up.”
“Despite the choppy waters ahead, we see several potential positive catalysts for the sector, and for AP and D specifically. In the context of the current environment, we understand that investor appetite for office is somewhat muted. While AP and D are trading at heavily discounted valuations, we believe AP’s record-low valuation excessively discounts the headwinds facing the sector. We view this as a rare opportunity to invest in a high-quality REIT at a bargain price which we do not expect to last very long. We also believe D is a name to watch closely, as a recovery in downtown Toronto office fundamentals will likely drive a strong positive reaction in its unit price given its outsized exposure to the market.”
Mr. Kalmar set a “buy” rating and $35 target for units of Allied Properties. The average target is $36.14.
“AP owns a portfolio of high-quality, Class I office assets across Canada’s largest major markets, which we believe should outperform the broader market as the flight-to-quality trend accelerates,” he said. “It also owns a portfolio of downtown Toronto data centres, including North America’s third largest Internet exchange point (151 Front Street West), although management is currently reviewing strategic alternatives for these assets, including a potential sale. The REIT has a robust near-, medium- and long-term development pipeline which should contribute meaningfully to both earnings and NAV [net asset value] growth, as well as improve the overall quality of its portfolio. AP has a strong track record of FFO/unit and NAV growth, as well as one of the strongest balance sheets in the Canadian REIT sector. Given its record-low valuation, we believe the current risks are more than priced in and view this as a rare and compelling price point to gain access to a high-quality office and data centre portfolio with significant development upside.”
The analyst gave Dream Office a “hold” rating and $17 target, which falls below the $19.18 average on the Street.
“D offers investors access to a high-quality, internally managed office portfolio which is heavily concentrated in downtown Toronto,” he said. “Despite these uncertain times, we believe the REIT has a strong and visible NOI [net operating income] growth profile. Our forecast includes SPNOI [same-property NOI] growth of 5.5 per cent in 2023 and 2.0 per cent in 2024. In our view, the lease-up of its recently renovated Dream Collection assets in Toronto is a key catalyst for near-term earnings growth, while its longer-term development pipeline, which aggregates 4.3 million square feet and 3,500 residential suites, provides investors with future NAV and earnings growth potential. D also owns a 10-per-cent interest in Dream Industrial REIT (DIR.UN, TSX, rated Buy–Average Risk with a $15.50 target by Kyle Stanley). Management/insiders of D hold 39 per cent of total units outstanding, ensuring strong alignment with unitholders. However, the REIT does have a relatively high proportion of variable-rate debt, and its second largest unitholder is Artis REIT (AX.UN, TSX, not rated) and its joint actors, including Sandpiper (collectively own 14 per cent interest) — which leaves the door open for a possible activist campaign. While we see positive catalysts for the stock, we believe that in consideration of the current office environment, its size, relative valuation and balance sheet, D is fairly valued at the current price.”
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Credit Suisse analyst Joo Ho Kim initiated coverage of Canadian life insurance companies on Thursday with “a sense of optimism about the group’s outlook in what could be a more challenging growth environment on a global scale.”
“We believe the life insurance companies are in a strong capital position to face these challenges (and opportunistically deploy when possible) and continue to deliver solid growth from many parts of their businesses that are experiencing long-term secular tailwinds,” he said.
Mr. Kim expects a “solid” pace of growth in 2023 following a “challenging” year, forecasting mid-single-digit earnings growth for the group, which he said implies a 2-per-cent increase in return on equity.
“We could see modest upside to our estimates should the economic outlook improve and market conditions turn more favorable,” he said. “Meanwhile, our 2024 estimates imply further strong earnings growth potential from the group as well.”
“We see several catalysts that could drive shareholder value including: 1) efficient capital allocation and deployment of excess capital into accretive businesses and markets, 2) continued management and reduction of risks related to both markets and insurance-related risks, and 3) execution of strategy in the core areas of growth.”
The analyst’s ratings and targets are:
* Great-West Lifeco Inc. (GWO-T) with a “neutral” rating and $33 target. The average on the Street is $32.89.
* Manulife Financial Corp. (MFC-T) with a “neutral” rating and $25 target. Average: $25.75.
* Sun Life Financial Inc. (SLF-T) with an “outperform” rating and $70 target. Average: $67.04.
“SLF is our top pick and the sole Outperform-rated name in the group,” he said. “We like the company’s defensive positioning given the strong capital position and lower sensitivities to changes in the markets and other assumptions-related variables, in addition to the upside potential on growth from both Asia and U.S. Group Benefits. While we expect MFC to deliver the best growth out of the group in our forecast period, we believe the discount valuation could remain until we see the needle move on the company’s legacy business. Finally, we believe GWO has a lot to gain when it comes to expanding its Empower business; however, given our view of less relative upside from Europe, the continued weaker performance from Putnam, and with the shares trading at a modest premium, we also see less relative upside for the shares.”
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National Bank Financial analyst Jaeme Gloyn expects the operating performance and valuation upside for Canadian diversified financial companies in his coverage universe to “remain constrained” in 2023, seeing “downside macroeconomic risks persist (i.e., increasing probability of recession).”
“Our preference to start the year focuses on companies with both robust, yet de-risked growth profiles and ongoing multiple re-rate potential. ‘De-risked’ is the key theme,” he said.
He recommends Element Fleet Management Corp. (EFN-T) mid-to-large cap investors and Trisura Group Ltd. (TSU-T) for small-to-mid cap investors, believing they “provide the best combination of de-risked growth and compelling valuation upside.”
“While consensus expects more rapid growth for some other companies in our coverage, executing against that forecast could prove challenging should the macro backdrop deteriorate and equity markets falter,” he said. “The big risk to our call? Higher-risk growth/consumer credit driven companies (e.g., ECN, EQB, GSY) will outperform as risks to consumer spending/health subside (the timing of which remains uncertain).”
For Element Fleet, he reiterated an “outperform” rating and $24 target, exceeding the $22.08.
“Element Fleet (EFN) is a ‘core holding’ we believe every PM needs to own in all environments,” he said. “EFN is a low-risk, double-digit FCF and dividend grower, with blue-sky share price potential easily into the $30s over the next two years regardless of the market backdrop. We view growth as de-risked given 1) continued solid execution on an organic growth pipeline of $500 million of revenues (40 per cent above 2022 levels) to be earned in the next few years, 2) a massive order backlog with high-margin revenues to support that growth in H2 2023 through 2024, and 3) mega-fleet wins not baked into guidance or consensus estimates (see Rentokil). In addition, EFN still trades at an FCF Yield of 9 per cent on 2024 estimates, roughly 40 per cent above the yield of Canadian Financials with similar fundamentals (e.g., defensiveness, strong organic revenue growth, expanding profitability, solid FCF generation, low credit risk, and barriers to entry). As EFN executes in 2023, we expect significant yield compression.”
For Trisura, Mr. Gloyn has an “outperform” rating and $68 target. The average on the Street is $57.71.
“Trisura (TSU) is a rapid revenue/EPS growth and significant ROE expansion story with valuation upside,” he said. “We view growth as de-risked given 1) persistent sector tailwinds (e.g., hard markets, high interest rate environment discussed in our 2022 preview), 2) fee-based income drives 40 per cent of earnings, growing above 50 per cent near term, 3) low-risk organic growth strategies (e.g., entry into U.S. surety lines and admitted lines markets) benefiting from secular trends in U.S. MGA markets and growing Canadian distribution relationships, and 4) balance sheet capacity to execute organic growth. Moreover, trading at a P/E multiple discount of 30 per cent to its U.S. specialty insurance peers and 30 per cent below its peak multiple, we see a significant re-rate opportunity as TSU executes against expectations in 2023.”
If investors already hold either company, he said his secondary ideas “offer the most compelling value.” They are:
* Fairfax Financial Holdings Ltd. (FFH-T) with an “outperform” rating and $1,100 target. Average: $951.79.
“Fairfax (FFH) will deliver long-run ROE of more than 10 per cent and the market is still only pricing in 5-per-cent ROE. Fairfax will generate run-rate $1.2-$1.5 billion in interest and dividend income in 2023, which translates to 6.5-8.0-per-cent ROE on its own. Meaning, you are buying FFH’s interest income stream and getting the rest of the business for FREE,” he said.
* Brookfield Business Partners LP (BBU-N/BBU.UN-T) with an “outperform” rating and US$38 target. Average: US$31.43.
“BBU is currently trading at a 52-per-cent discount to management’s NAV estimate of $39/unit, or 4 times the pre-COVID wide discount,” he said. “Striping out the recent sale of Westinghouse’s $8 per unit of value means BBU is trading at more than 65-per-cent discount to NAV.”
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Stifel analyst Suthan Sukumar sees Lightspeed Commerce Inc. (LSPD-N, LSPD-T) as “a leader in cloud Point-of-Sale (POS) systems, disrupting a largely legacy sector with a next-gen commerce tech-stack to address the complex needs of merchants in the retail and restaurant industries.”
“We believe recent M&A and a track record of innovation have enabled a strong competitive moat, positioning the company for further share gains and greater ARPU [average revenue per user] expansion with multiple growth drivers, which should drive adj. EBITDA to breakeven or better by F24,” he added.
However, Mr. Sukumar sees the risk-reward proposition “relatively balanced given near-term uncertainty,” leading him to initiate coverage of Montreal-based software company with a “hold” rating on Thursday.
“While valuation has de-rated on a more cautious outlook, we see the current discount to peers as justified given our view for potential further downside near-term with macro uncertainty and execution risk given the recent pivot in the company’s GTM [go-to-market] strategy, while risk to the upside remains limited near-term given a potential recession,” he said.
“To grow more constructive, we would look for (1) better than expected momentum with payments penetration; (2) discretionary consumer spending and GTV growth resilience; and (3) increased confidence in the company’s go-to-market pivot with better than expected larger customer growth and ARPU expansion trends. We capture this view in our bull case analysis, which yields a valuation of $20 per share (approximately 32-per-cent upside) based on assumptions for a 23-per-cent revenue CAGR by F32, with 25-per-cent adj. EBITDA margins, driving more than $800-million in FCF.”
He set a target of US$18 per share. The current average is US$30.42.
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O3 Mining Inc. (OIII-X) provides investors “an attractive opportunity into a strategically significant gold project, located in a Tier-1 jurisdiction, trading at a deep discount with limited downside risk,” according to iA Capital Markets analyst Sehaj Anand.
He initiated coverage of the company, which was created as a spin-out of Osisko Mining Inc.’s (OSK-T) non-core assets, with a “buy” rating and $4.20 target, touting the potential of its flagship Marban Project in the Val-d’Or Gold Camp. The average target is $3.40.
“Notably, Marban is located just 12km from Canadian Malartic, which is close enough to viably truck and process the project’sore at the Canadian Malartic’s mill,” said Mr. Anand. “Although Marban has excellent economics on a standalone basis, its proximity to Agnico Eagle/Yamana’s Canadian Malartic provides opportunities for synergies to be unlocked that could be beneficial for both parties. Canadian Malartic is expected to transition to underground-dominant ore from 2026-2028 before going fully underground in 2029 resulting in an excess mill capacity of +40ktpd by 2029. Agnico is actively looking for additional ore sources in the region to fill the mill, however, there aren’t many options available in the near term. Recall that Agnico Eagle recently announced the acquisition of Yamana’s Canadian assets, including 50 per cent of Canadian Malartic and Wasamac (as part of Agnico and Pan American’s (PAAS-Q, Not Rated) joint bid to acquire Yamana Gold). We believe things will move forward on this front once the Agnico-Pan American-Yamana transaction is completed.”
“O3 trades at US$7 per ounce (based on a total resource of 3.6Moz, incl. O3′s investments), below its developer peers at US$37 per ounce Notably, O3′s investment portfolio worth $47-million(as of January 11, 2023) is 43 per cent of the Company’s current market cap of $109-million, providing solid downside protection.”
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In other analyst actions:
* Seeing “multimillion ounce potential in an underexplored camp,” Stifel’s Stephen Soock initiated coverage of Reunion Gold Corp. (RGD-X) with a “buy” rating and 60-cent target. The average is 78 cents.
“The Kairuni deposit on the company’s Oko West property in Guyana is a major new gold discovery in an underexplored camp,” he said. “We see runway to an open pit reserve of 3.1Moz at 2.03 g/t plus 440koz of high grade underground resources still open at depth. The combination of broad widths of high grade coming right to surface is an excellent set up for a future high margin mining operation. We see production of 185koz/yr over 13 years at a LOM site-level AISC of $969/oz, optimized to 284koz at $586/oz over the first three years from the low strip, high grade, easy milling mineralized saprolite. Guyana is a country on a growth trajectory, investing in major infrastructure that benefits a major gold mining operation.”
* Barclays’ Matt Murphy downgraded First Quantum Minerals Ltd. (FM-T) to “underweight” from “equal-weight” with a $23 target, rising from $21 but below the $31.73 average.
* Mr. Murphy increased his targets for Ero Copper Corp. (ERO-T, “equal-weight”) to $20 from $19, Hudbay Minerals Inc. (HBM-T, “equal-weight”) to $7 from $6 and Teck Resources Ltd. (TECK.B-T, “equal-weight”) to $47 from $45. The averages are $21.21, $9.61 and $56.68, respectively.
“Our copper demand analysis suggests downside versus street estimates. Fortunately supply has also disappointed, and our projected market balance has tightened considerably. But we still see a surplus ahead and think there are downside risks to the copper price,” he said.
* CIBC’s Jacob Bout increased his targets for Ag Growth International Inc. (AFN-T, “outperformer”) to $62 from $53, Chemtrade Logistics Income Fund (CHE.UN-T, “outperformer”) to $12 and $11 and Methanex Corp. (MEOH-Q/MX-T, “neutral”) to US$42 from US$39. The averages are $56.09, $11.43 and US$44.36, respectively.
* Following the late Wednesday release of “solid” third-quarter results, Canaccord Genuity’s Derek Dley trimmed his Aritzia Inc. (ATZ-T) target to $65 from $67, maintaining a “buy” rating. The average is $61.57.
“While we think the shares may open weaker, we believe increased inventory costs are manageable short term and would takeadvantage of any share price weakness,” said Mr. Dley.
* Barclays’ Brandon Oglenski raised his targets for Canadian National Railway Co. (CNR-T) to $170 from $160 with an “equal-weight” rating and Canadian Pacific Railway Ltd. (CP-T) to $115 from $110 with an “overweight” rating. The averages are $161.15 and $114.80, respectively.
“4Q transport results likely soft given deteriorating fundamentals at the end of 2022, but potential destocking and bottoming in truck pricing later in 2023 could provide ample green shoots for value investors,” said Mr. Oglenski.
* KBW’s Rob Lee raised his CI Financial Corp. (CIX-T) target to $19.50 from $18, maintaining an “outperform” rating. The average is $18.69.
* Raymond James’ Andrew Bradford cut his STEP Energy Services Ltd. (STEP-T) target by $1 to $10 with a “strong buy” rating. The average is $10.54.
* Stifel’s Alex Terentiew bumped his target for Teck Resources Ltd. (TECK.B-T) to $64 from $61, keeping a “buy” recommendation. The average is $56.68.
“Owing to extreme cold weather in British Columbia in December disrupting transportation logistics, met coal sales were below guidance and our expectations,” he said. “However, realized coal pricing came in higher than our forecast (actual $278 per ton vs estimated $260/t) and we remain bullish on near-term coal pricing, raising our 2023 forecast to $281/t (from $250/t) owing to recent price strength (up year-to-date 16 per cent) as markets are speculating on easing of the import ban of Australian coking coal by the Chinese authorities. For 2023, we eagerly look forward to QB2 start-up in Q1 as the most significant near-term catalyst. We note that we have assumed a slower pace of ramp-up (QB2 2023 Cu production of 150 kt lower than the +170kt guidance) with commercial production in H2, 23. With met coal continuing to generate strong cash flow and copper production set to grow significantly, we raised our target.”
David Leeder