Inside the Market’s roundup of some of today’s key analyst actions
Desjardins Securities analyst Benoit Poirier is expecting a “strong finish” to 2023 for both Canadian National Railway Co. (CNR-T) and Canadian Pacific Kansas City Ltd. (CP-T), benefitting from a volume “surprise to the upside,” however he warned the Street’s expectations for 2024 remain “on the high side.”
“For 2024, we believe CN will guide to high-single-digit EPS growth and CPKC to double-digit EPS growth, and that both rails will likely refrain from giving official OR [operating ratio] guidance,” he said. “While our estimates are below the Street’s for both rails, we are much more comfortable with 2024 consensus for CN and see less downside risk from a valuation perspective. Longer-term, we remain neutral between CN and CPKC as we believe both offer shareholder value‒creation opportunities; we expect both to hit their investor day targets.”
In a research report released Thursday previewing fourth-quarter earnings season in the sector, Mr. Poirier updated his volume expectation for both companies with his revenue ton mile projection for CN rising to a 2-per-cent year-over-year increase from 1.5 per cent previously and CP to 3.5 per cent from 3 per cent.
“The notable driver of the volume beat was mild weather, which resulted in a very strong performance in the last two weeks of the year with RTMs up 35.7 per cent and 9.9 per cent at CN and up 26.3 per cent and 18.1 per cent at CPKC as both rails lapped easy comps — recall that there were severe winter storms across Canada last year, which caused extensive road closures that affected rail operations (impeded the ability to move crews) and required both rails to restrict train length,” he said. “Additionally, coal volumes were up 25.4 per cent at CPKC as its 4Q in the previous year was impacted by an Elkview Teck outage. From an operating perspective, both rail dwell and rail velocity improved in the quarter; however, CPKC posted a slight deterioration in both metrics for the year as it looked to recover operations in Mexico, while CN saw a considerable improvement (dwell down to 7.0 hours from 7.7 hours and velocity up to 19.8mph from 19.0mph), benefiting from the first full year of results from COO Ed Harris’ switch to a scheduled operation plan.”
For the current fiscal year, Mr. Poirier remains below the consensus expectations for both companies, but he does not expect demand “becoming considerably worse versus current levels.”
“Taking into consideration the potential Red Sea boost and the slightly improved Canadian grain outlook, combined with some relatively easy comps for both rails, we now see less downside risk for 2024,” he said. “Although CPKC has lower exposure to intermodal and should continue to benefit from merger synergies, which should help offset some of the muted freight backdrop in early 2024, we continue to view Street expectations for CPKC 2024 EPS as being too high (consensus EPS growth of 17.6 per cent vs our new 14.3-per-cent estimate). For CN, we forecast 9.0-per-cent EPS growth in 2024, which is below consensus of 10.8 per cent.”
After raising his earnings per share projections for both companies through fiscal 2028, Mr. Poirier increased his target for CN shares to $189 from $171 and CP to $118 from $108, reaffirming “buy” recommendations for both. The averages on the Street are $169 and $114.34, respectively.
“We remain neutral between CN and CPKC over the long term as we believe both offer shareholder value –creation opportunities with limited downside; we expect both to hit their investor day targets despite near-term weakness,” he said. “For CN, despite a weaker 2023 as well as weaker 2024 estimates, we still calculate that the company could deliver a three-year adjusted EPS CAGR [earnings per share compound annual growth rate] of 11.4 per cent between 2023 and 2026, achieving the target set out at its investor day of 10–15 per cemt. This demonstrates the resilience of the Canadian rails and their value-creation opportunities no matter the economic backdrop. For CPKC, we assume that EPS will almost double between 2023 and 2028, driven by a 7.3-per-cent revenue growth CAGR (management targets high single digits) over that period and a 56.3-per-cent OR in 2028. We continue to like the long-term potential for value creation from the KCS transaction. The integration plan and customer feedback presented by CPKC are exciting, which leads us to believe that the revenue synergies targeted by management are achievable despite the more challenging market environment.”
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Expressing a bullish view of the Canadian energy infrastructure sector in 2024, Stifel analyst Cole Pereira thinks TC Energy Corp. (TRP-T) is “oversold at its current multiple and believe it is overdue for a rebound.”
Emphasizing its “peer-leading earnings quality,” he initiated coverage with a “buy” recommendation on Thursday, pointing to four “key points” for investors:
* Its “attractive earnings quality, meaningful exposure to natural gas and potential to create value from its Liquids Pipelines spin-out.”
“We view TRP as having the strongest earnings quality of its peers, with 95 per cent of its Comparable EBITDA generated from regulated cost-of-service assets or under long-term contracts, of which 77 per cent comes from natural gas transportation, with 69 per cent under cost-of-service frameworks in Canada and the U.S. In July 2023 the company also announced plans to spin-out its Liquids Pipelines business into a new entity called South Bow Corporation, expected to be completed in 2H24, which despite some risks we believe has the potential to create shareholder value,” he said.
* Its outlook “should be considerably de-risked going forward.”
“TRP has had a challenging few years, largely due to the significant capex inflation experienced during the construction of the Coastal GasLink pipeline, as well as the cancellation of the Keystone XL pipeline in 2021,” he said. “However, going forward we expect growth to be more focused on in-basin expansions of its existing natural gas pipeline infrastructure with capex expected to be $6-7-billion per annum from 2025 forward vs. $12-billion in 2023.”
* “Line of sight for continued dividend growth, albeit at a slower rate than prior years and below its smaller peers.”
“In our view Energy Infrastructure companies that can demonstrate both superior returns and superior growth rates are likely to outperform given increased visibility on medium-term dividend growth,” he said “TRP’s marginal adjusted returns do screen as the lowest in the group since 2019 due to the well-known issues with Coastal GasLink, and while its per share growth rate CAGR [compound annual growth rate] is in line with ENB and slightly below PPL from 2022-2025E, it screens as stronger than both from 2023E-2025E. Regardless, we view TRP as having line of sight to continue growing its dividend within its guidance range over the medium-term.
* A valuation “well below its peers and historical averages on a P/E basis.”
“While we acknowledge some of its recent headwinds would merit a lower valuation multiple, this appears more than priced into the stock, trading at 2025E multiples of 10.0 times EV/EBITDA, 9.2 times P/DCFS and 12.1 times P/E vs. the peer averages of 9.9 times, 8.9 times and 14.9 times,” he said. “TRP trades line with its peers on EV/EBITDA and P/DCFPS, and its 2025E P/E multiple (our primary valuation metric) is a 19-per-cent discount to the peer average and a 29-per-cent discount to its 10-year forward consensus average.”
Mr. Pereira set a target of $61 for TC Energy shares, exceeding the $53.78 average on the Street.
On the sector, he said: “Despite concerns on slowing growth rates relative to pre-COVID levels due to the shift in E&P capex philosophies, return metrics have remained strong and growth rates are still sufficient to deliver attractive dividend upside over the medium-term, while capex profiles are being de-risked across the sector. Additionally, a potential dovish shift in interest rate policy could also be a valuation catalyst for the equities. While the average stock in our coverage universe declined 6 per cent in 2023 vs. the S&P 500 gaining 24 per cent and the TSX Composite gaining 8 per cent, we view the sector as positioned to outperform in 2024. Total shareholder returns for the group were stronger, though the group still largely lagged both indices.”
“We prefer Energy Infrastructure companies generating stronger relative marginal adjusted ROIC in combination with strong pershare growth rates,as this should indicate the sustainability of dividend growth over the medium-term. Our Buy-rated names in the sector are KEY, GEI, PPL and TRP. We believe KEY and GEI both best align with the criteria of stronger marginal returns and attractive growth rates, with most of KEY’s growth coming organically vs. M&A for GEI, though the latter’s valuation remains particularly discounted vs. the peer group. PPL is our best “lower risk growth” pick given the company screens well on both metrics, and despite having lower growth rates than GEI and KEY, it also does not have any material near-term contracting risk required to meet or maintain our forecasted growth rates. TRP is our best ‘value’ pick as while acknowledging its recent headwinds, the company boasts the strongest earnings quality of its peer group and its recent challenges stemming from significant construction cost inflation on Coastal GasLink appear more than priced in with the stock’s 2025E P/E valuation a 19-per-cent discount to the peer average and a 29-per-cent discount to its 10-year forward consensus average.
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Concurrently, Mr. Pereira initiated coverage of Enbridge Inc. (ENB-T) with a “hold” rating, calling it “a stable sector leader.”
“We highlight four key points for investors: (1) its leading oil transportation footprint, with a growing exposure to natural gas; (2) its attractive earnings quality with 98 per cent of EBITDA underpinned by contracts or cost-of-service frameworks; (3) line of sight for continued dividend growth, albeit at a slower rate than previous years and below its smaller peers; (4) its deserved premium valuation relative to peers,” the analyst said. “However, we see less room for its valuation to migrate higher in the near-term given its premium to peers and lower upside for ROIC and per-share growth.”
His target for Enbridge of $52 per share is below the average on the Street of $53.52.
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Following the late Wednesday’s release of its updated 2024 guidance, five-year outlook and a 50-per-cent reduction to its dividend, Canaccord Genuity’s Mike Mueller downgraded Birchcliff Energy Ltd. (BIR-T) to “hold” from “buy” previously.
“Following a year of dividends coinciding with deteriorating natural gas prices, BIR declared its Q1/24 quarterly dividend at 10 cents per share, or 40 cents per share annualized, reflecting a yield of 7.0 per cent,” said Mr. Mueller. “While a dividend cut is often accompanied by a truncated outlook, we view the decision as the right move given the incremental debt taken on in 2023 to support the dividend and a muted outlook for natural gas prices in H1/24. BIR has also elected to weight its 2024 capital program to the back half of the year to deliver increased volumes at a time when the outlook for natural gas prices is expected to improve from this winter. At the current strip and on our updated estimates, we forecast BIR generating FCF of $85-million this year. Including the cut, the company’s 2024 dividend payments are expected to total $107-million and reflect an all-in payout ratio of 106 per cent this year which could result in the company still requiring to tap its credit facilities to cover the dividend and capital program to some extent.
“With the H2/24 weighted program (thereby, lowered 2024 average production) and cautious views on near-term natural gas pricing, we have lowered our rating on BIR to HOLD from BUY.”
The analyst cut his target to $6 from $9. The average is $7.98.
“Despite these views in the near-term, we continue to believe BIR’s asset base will benefit shareholders in the long-term with 36 years of drilling inventory on a 2P basis (i.e., omitting any unbooked upside) which has been an area of focus for many operators over the past year,” he concluded.
Others making changes include:
* Stifel’s Michael Dunn to $5 from $6.50 with a “hold” rating.
“BIR announced a 50-per-cent dividend cut (now yielding 7.0 per cent), a 3-per-cent reduction to 2024 production guidance due to shifting drilling activity later in the year when gas prices may be stronger, 4Q23 production that was 4 per cent below our forecast due to timing of wells onstream and third-party facility issues, and initial rates from nine new wells relatively consistent with prior 2023 wells,” said Mr. Dunn. “While a 7-per-cent dividend yield is attractive, at strip prices we forecast net debt to grow another $70-million in 2024. We are reducing our target price to $5.00/sh., based on target multiples similar to what we carry for our Canadian oil and gas producer universe (11.2 times 2025 EV/FCFF, or alternatively 4.0 times EV/DACF, unhedged, at strip prices).”
* RBC’s Michael Harvey to $7 from $8 with an “outperform” rating.
“Reflective of low gas prices, BIR cut its dividend (by 50 per cent) and reshaped its 2024 volume outlook to target a more stable back-half and 2025 natural gas price outlook,” said Mr. Harvey. “We believe a cut was largely priced in by the market (yield is now 7 per cent), and represents the prudent choice in context of a well-supplied WCSB natural gas market. This move returns the company to an expected total payout of roughly 85 per cent in 2024 (at the RBC price deck).”
* BMO’s Randy Ollenberger to $5.75 from $7.50 with a “market perform” rating.
“Birchcliff has released its official 2024 guidance and updated five-year outlook. The company lowered its 2024 production expectations by 2,500 boe/d as it plans to shift capital into H2/24. More importantly, the company cut its high yielding base dividend by 50 per cent. We felt this was inevitable due to the ongoing weakness in natural gas prices, coupled with Birchcliff’s aversion to hedging. We believe the company’s premium valuation is less warranted now given the reduced dividend support and are lowering our target price,” he said.
* CIBC’s Christopher Thompson to $5 from $6.50 with a “neutral” rating.
“We were expecting a 40-50-per-cent dividend cut, but this announcement could put additional selling pressure on the stock in the near term. Birchcliff lowered its production guidance for the year after weighting its capital program towards H2/24 in response to weak natural gas pricing. The revised dividend and our capital spending estimates for 2024 compute to a total payout ratio of 121 per cent on strip, where we estimate year-end 2024 net debt to cash flow of 1.6 times versus peers at 0.7 times. The company’s torque to natural gas prices make it an intriguing trade into better gas fundamentals in 2025, although we expect a focus on debt repayment after a tumultuous year that puts a cap on additional shareholder returns. The stock is trading at 6.0 times 2024E EV/DACF versus peers at 4.8 times and a free cash flow yield of 3 per cent, in line with peers at 3 per cent on strip. We believe 2024 will be a challenging year for natural gas pricing, but a lower dividend level provides additional capital flexibility,” he said.
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While its governance dispute “casts a shadow” over Gildan Activewear Inc. (GIL-N, GIL-T) , National Bank Financial analyst Vishal Shreedhar thinks “better execution is the likely medium-term outcome.”
“Gildan continues to issue allegations against its former President and CEO, Mr. Glenn J. Chamandy,” he said. “This comes amid a call for a special meeting by Browning West, LP to reinstate Mr. Chamandy as the CEO and replace eight of the 11 current Board members. Specifically, it’s alleged that Mr. Chamandy has undisclosed investments with a shareholder who is now supporting his reappointment. Also, an executive of the shareholder purchased a multimillion-dollar property at a private golf resort owned by him. Furthermore, Gildan states that Mr. Chamandy has treated certain shareholders, who are now calling for his reinstatement, preferentially. These comments are in addition to allegations relating to poor work ethic, including limited email and meeting activity. Mr. Chamandy issued a reply stating that the Board’s actions are value-destructive.”
In a research note released Thursday, Mr. Shreedhar predicted the ongoing dispute could result in “near-term pain for long-term gain” for investors.
“Continual press releases on the subject serve to drive uncertainty which causes us to be cautious on near-term trading performance,” he said. “That said, looking forward one year, we believe increased pressure to deliver results will be beneficial. Specifically, if the current Board remains, we see immediate pressure on the newly appointed CEO (Mr. Vince Tyra) to accelerate performance and offer superior strategy and execution. Alternatively, if the Board is largely replaced, and Mr. Chamandy is reappointed, we believe he will be under pressure to demonstrate that the allegations against him levelled by the current Board, including poor work ethic and a strategic insufficiency are without merit.
“From a fundamental standpoint, we believe that Gildan is well positioned in our discretionary universe to grow EPS in 2024 given: (i) Revenue growth reflecting new capacity and the continuation of new programs won in 2023 ($60-million to annualized sales); (ii) Lower commodity prices ($0.25 to EPS) and efficiency initiatives; and (iii) Ongoing share repurchases.”
Maintaining an “outperform” recommendation for Gildan shares, he trimmed his target by $1 to $52 to reflect foreign exchange changes. The average on the Street is $50.54.
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Even though he was “disappointed” by a reduction to NFI Group Inc.’s (NFI-T) 2025 guidance, National Bank Financial analyst Cameron Doerksen emphasized the demand for its buses remains “exceptionally strong” and its backlog provides a strong investment base moving forward.
“For 2024, the company slightly lowered its adjusted EBITDA guidance range to $240-$280-million from $250-$300-million previously (in line with our prior forecast of $257-million),” he said. “The bigger disappointment however, is that NFI lowered its 2025 EBITDA target from $400-million to $350-million-plus with the company expecting to finish 2025 at a $400-million annualized run-rate. Current consensus is for $367-million, so the new guide is not significantly different from expectations, but we have nevertheless lowered our above-consensus numbers to reflect the new outlook.”
The reduction came with an update to the Winnipeg-based company’s fourth-quarter 2023 results, which saw the delivery of 1,227 units. That’s an increase of 19 per cent year-over-year and in line with Mr. Doerksen’s projection.
“Notably, order activity in the quarter was especially strong, coming in at 2,100 EUs which increased its backlog to over 10,500 EUs (firm plus options) worth almost $8.0 billion, up from 9,556 EUs worth $6.6 billion at the end of Q3/23,” he said.
The analyst also emphasized pending orders “provide long-term visibility” for both NFI and its investors.
“Tempering the reduction in the 2025 guidance is the fact that demand for new buses remains exceptionally strong,” he said. “In Q4/23, NFI received 2,100 orders bringing its backlog to over 10,500 EUs (firm plus options) worth $8.0-billion, up from 9,556 EUs in backlog worth $6.6-billion at the end of Q3/23. The backlog does not include 3,800 EUs for which NFI has been selected, but for which a firm contract has yet to be finalized. The largest component of these pending orders is the order from New York City Transit that we highlighted in our note yesterday, which is likely to be the largest order in NFI’s history. The pending orders would increase the firm backlog by 36 per cent.
“We view the backlog (and related pricing improvements that we also highlighted in our prior note) as the key investment positive for NFI as the company has excellent visibility on delivery growth and margin improvement through 2025 and beyond.”
Reiterating an “outperform” recommendation, he cut his Street-high target for NFI shares by $1 to $18. The average is $15.70.
“The company has growing visibility on deliveries and EBITDA growth beyond 2025 that we expect will drive a higher share price over time,” said Mr. Doerksen. “We previously valued the stock by applying a 6.5 times EV/EBITDA multiple to our 2025 forecast; however, given the significant backlog growth that provides even greater visibility on earnings and cash flow growth beyond 2025, we are comfortable increasing our multiple to 7.0 times. With the downward adjustments to our 2025 forecast, our new target is $18.”
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Ahead of fourth-quarter earnings season for Canadian small and mid-cap energy companies, ATB Capital Markets analyst Amir Arif trimmed his estimates across the sector to reflect a reduced outlook for oil prices.
That led him to lower his target prices for 10 of the 12 companies in his coverage universe and downgrade Yangarra Resources Ltd. (YGR-T) to “sector perform” from an “outperform” recommendation.
“[Yangarra] brought on stream nine wells towards the end of Q3/23 for which production should be reflected in Q4/23 results,” said Mr. Arif. “Based on public Oct/Nov production data, we have adjusted our Q4/23 production estimate lower. We have also reduced our 2024 estimates to reflect a balanced budget at current strip prices. The Company continues to focus on reaching its $80-million net debt target which is anticipated to occur in 2024.”
His target for Yangarra shares slid to $2 from $2.50. The average on the Street is $2.45.
The analyst’s other target adjustments are:
* Baytex Energy Corp. (BTE-T, “outperform”) to $6.50 from $7. Average: $7.61.
* Cardinal Energy Ltd. (CJ-T, “outperform”) to $8.50 from $9.50. Average: $8.83.
“For investors who are looking for higher beta oil names, CJ offers one of the better names with an attractive current yield of 11 per cent which we view as sustainable to US$60-65 WTI,” he said.
* Crescent Point Energy Corp. (CPG-T, “outperform”) to $12 from $13. Average: $13.65.
* Gear Energy Ltd. (GXE-T, “outperform”) to $1 from $1.25. Average: $1.17.
* Hemisphere Energy Corp. (HME-X, “outperform”) to $1.80 from $2. Average: $2.13.
* InPlay Oil Corp. (IPO-T, “outperform”) to $3.75 from $4.25. Average: $5.10.
* Kiwetinohk Energy Corp. (KEC-T, “outperform”) to $22 from $24. Average: $19.29.
“For growth investors, KEC’s 2024 strip EV/DACF [enterprise value to debt-adjusted cash flow] valuation of 2.6 times remains similar to last year despite production having increased 26 per cent in 2023, positioned to grow 12 per cent in 2024, and with positive catalysts on the power side expected in the coming six months,” he said.
* Surge Energy Inc. (SGY-T, “outperform”) to $10.50 from $13. Average: $13.11.
“For defensive investors, we believe that SGY’s current 8-per-cent dividend yield, valuation, and excess FCF even at strip provide a defensive avenue to obtain oil exposure, especially following its recent dip,” he said.
* Vermilion Energy Inc. (VET-T, “outperform”) to $23 from $27. Average: $24.35.
He reiterated these targets:
* Advantage Energy Ltd. (AAV-T, “outperform”) at $13. Average: $12.53.
“For gas investors, we remain positive on AAV for H2/24 and we would continue to accumulate on dips, including any weakness that might present itself from summer gas given current storage levels,” he said.
* International Petroleum Corp. (IPCO-T, “sector perform”) at $16.50. Average: $16.88.
Mr. Arif added: “With the valuation gap between large and small caps having widened in 2023, value names such as SGY, HME, and KEC provide additional value discounts within a value sector, with SGY providing exposure to openhole multilats and a potential dividend bump later this year, HME trading below PDP strip NAV and testing a new play this summer, and KEC continuing its meaningful growth with potential power financings to add an additional $1 per share of value in the coming six months. Industry points that we believe will be meaningful with quarterly results include remaining 2024 guidance releases in light of lower 2024 strip prices and wider diffs, widening Canadian light and heavy oil diffs throughout Q4/23, impact from freeze offs during last week’s weather event, and exposure to daily (5A) vs. monthly (7A) spot AECO prices.”
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In other analyst actions:
* BNP Paribas’ Stefan Slowinski downgraded Shopify Inc. (SHOP-N, SHOP-T) to “underperform” from “neutral,” while Barclays’ Trevor Young hiked his target to US$70 from US$53 with an “equal-weight” rating. The average is US$73.94.
* In a research report titled Turning Holes Into Moats, Raymond James’ Frederic Bastien initiated coverage of Badger Infrastructure Solutions Ltd. (BDGI-T) with an “outperform” recommendation and $52 target, matching the high on the Street. The average is $44.89.
“In recent years, a new leadership team has implemented simple, yet effective strategies to leverage the firm’s strong safety culture, scale advantages and unique manufacturing capabilities into enhanced returns,” he said. “These actions are yielding benefits as a perfect storm of secular trends is driving unprecedented growth in BDGI’s key markets—utilities and infrastructure construction. Although these combined forces are already driving a healthy rebound in both financial performance and share price post-COVID, we believe there is much for investors to look forward too.”
* CIBC’s Dean Wilkinson increased his target for Brookfield Corp. (BN-N, BN-T) to US$46 from US$42 with an “outperformer” recommendation. The average is $46.83.
“BN remains one of the top picks within our coverage universe, as a favorable growth outlook and a discounted valuation present an attractive investment opportunity,” he said.
* Stifel’s Cole Pereira raised his Enerflex Ltd. (EFX-T) target by $2 to $13 with a “buy” rating. The average is $10.47.
“EFX delivered a positive market update on Tuesday, highlighting that 4Q23 FCF generation and debt reduction tracked ahead of our estimates with capex lower than expected,” he said. “While its 2024 capex guidance was higher than our prior estimates, it should be lower year-over-year and still drive significant forward FCF. Our EBITDAS forecasts are unchanged and while our FCF forecasts do decline 12 per cent in 2024 and 2025, forward FCF generation remains significant ($215-million in 2024 and $237-million in 2025 vs. $8-milllion in 2023E). We have raised our target multiple to 5.1 times 2025 estimated EV/EBITDAS to reflect the stock being de-risked, which sees our TP increase to $13.00/sh. We believe recent updates from the company have mitigated prior investor concerns on FCF generation, debt reduction and CFO departures. We believe if management continues to execute on these priorities the stock should continue to rebound and is a double from here.”
* Mr. Pereira also bumped his Total Energy Services Inc. (TOT-T) target to $15 from $14 with a “buy” rating, while ATB Capital Markets’ Tim Monachello nudged his target to $15.75 from $15.50 with an “outperform” rating. The average is $15.38.
‘Total has entered into an agreement to acquire driller Saxon Energy Services Australia from its parent SLB for US$37-million/C$50-million, expected to close in 1Q24 and be funded entirely with cash on hand,” Mr. Pereira said. “TOT will acquire 11 Australian rigs to add to its current fleet of 5 (soon to be 6), which have deeper capacity than its existing assets. We have assumed a 2.0 times EV/EBITDAS transaction multiple or a $25-million annual EBITDAS contribution, which sees our EBITDAS forecasts increase 10 per cent in 2024 and 13 per cent in 2025E, while FCF moves a respective 13 per cent and 18 per cent higher. We view this transaction positively for TOT, as it is high-grading its fleet and doing so at attractive metrics. The company has a long history of conducting accretive M&A, and we expect this one to be no different.”
* BMO’s Kevin O’Halloran reinstated coverage of Equinox Gold Corp. (EQX-T) with an “outperform” rating and $8 target. The average is $8.55.
“We see value in the company’s 60-per-cent stake in the Greenstone project, a large new gold mine in Ontario advancing to first production in H1/24,” he said. “The company currently trades at a discounted 0.6 times NAV vs. peers at 0.9 times; we expect EQX shares to re-rate to higher multiples in the coming quarters as Greenstone advances. In addition to Greenstone, the company operates seven gold mines in the Americas, with multiple expansion opportunities offering further growth potential.”
* TD Securities’ Craig Hutchison cut his First Majestic Silver Corp. (FR-T) target to $7.50 from $8 with a “hold” rating. The average is $10.19.
* Canaccord Genuity’s Robert Young bumped his Haivision Systems Inc. (HAI-T) target to $6.75 from $6.50 with a “buy” rating. The average is $6.92.
“Haivision reported solid FQ4 results with the top line and bottom line beating our estimates, continuing the strength in Q3,” said Mr. Young. “Margins were materially better than expected due to the wind-down of the House of Worship (HoW) in April 2023, which was a 200bp GM benefit. Mix was also a margin support given government/military and mature contribution. Recent restructuring and the impact on OpEx helped drive EBITDA margins to 15.9 per cent vs our 14.9-per-cent estimate. Management provided revenue guidance for F2024 of $145-150-million (implying 3.5-7-per-cent growth), and mid-teen adj. EBITDA margin guide (we read as 15-17 per cent). Management also reiterated its long-term target of adj. EBITDA margins of 20 per cent with top-line growth the key driver given a conservative view of GM expansion. Following the quarter, we have revised our estimates and have rolled out our F2025 forecasts.”
* In response to its deal to acquire ContainerWorld Forwarding Services, Acumen Capital’s Trevor Reynolds raised his Mullen Group Ltd. (MTL-T) target to $19.50 from $19 with a “buy” rating. The average is $16.69.
“No metrics were provided but we view the transaction, which will add over one million square feet of warehousing capacity and strong synergies, as a positive given the company’s track record of accretive M&A,” he said.
* JP Morgan’s Jeremy Tonet raised his Pembina Pipeline Corp. (PPL-T) target to $51 from $50 with a “neutral” rating. The average is $51.93.
David Leeder