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

In response to recent share price depreciation, Canaccord Genuity analyst John Bereznicki raised his recommendation for Superior Plus Corp. (SPB-T) to “buy” from “hold” on Tuesday, seeing a “more attractive” entry point for investors.

Even though its third-quarter results, released on Nov. 11, largely fell in line with his expectations, shares of the company remain down approximately 11 per cent since late August.

“Despite strengthening commodity prices and robust North American propane export demand, Superior believes it remains well positioned from a supply perspective for the coming winter heating season,” said Mr. Bereznicki. “The company sources its retail volumes from 50 counterparties in Canada and the U.S. and makes use of indexed supply commitments along with firm pricing contracts that offset its fixed pricing obligations. Superior also retains 117 million litres of leased storage capacity (across Ontario, Michigan and Alberta) and operates a leased fleet of 360 railcars to transport and store propane in strategic locations.

“Superior now expects to close its Kamps acquisition in Q1/22 as it continues to manage its U.S. FTC review. Management nonetheless retains limited visibility as to the exact timing of this process and we are assuming no contribution from this transaction in the first quarter. Superior does not expect heightened FTC scrutiny to limit the cadence of its transactions in 2022, particularly for smaller acquisitions under $100-million in size. Management is targeting $250- to $300- million in transactions next year in support of the five-year growth plan it unveiled in May. We nonetheless expect Superior’s acquisition cadence to slow somewhat heading into the winter heating season as potential vendors become less inclined to divest.”

After lowering his 2022 EBITDA outlook to reflect a delay in the closing of its Kamp’s acquisition, Mr. Bereznicki trimmed his target to $16.50 from $17. The average on the Street is $16.23, according to Refinitiv data.

His target now implies a total expected return of approximately 23 per cent (including dividend), leading to his upgraded rating.


Manulife Financial Corp.’s (MFC-T) deal with Pennsylvania-based Venerable Holdings Inc. to reinsure over 75 per cent of its legacy U.S. variable annuity block is a “step in the right direction,” according to Scotia Capital analyst Meny Grauman.

After the bell on Monday, it announced the move, projecting it to release approximately $2.0-billion of capital, including a one-time after-tax gain of approximately $750-million to net income and approximately $1.3-billion of net LICAT required capital.

“While this VA announcement should not come as a total surprise to investors given recent Management commentary, it is hard to not have a favourable view of a transaction that reduces tail risk, boosts management credibility, and delivers more favourable terms than what the market had been expecting,” said Mr. Grauman. “A key detail is the 1.5-per-cent boost to BVPS, which is modest but much better than the hit to BV most investors had been speculating about. The earnings impact is negative, but modestly so and will be offset by an increased buyback.

“And yet as much as we hate to inject any negativity into this announcement, the reality is that this deal does not mean that the market will stop worrying about MFC’s tail risk. This is a good deal, not one that will be able to do more than modestly narrow MFC’s valuation gap with peers.”

Maintaining a “sector perform” rating, Mr. Grauman increased his target for Manulife shares to $30 from $28. The average on the Street is $29.80.

Other analysts making target changes include:

* Credit Suisse analyst Mike Rizvanovic to $28 from $26 with a “neutral” rating.

* TD Securities’ Mario Mendonca to $37 from $36 with an “action list buy” rating.

* Evercore ISI’s David Motemaden to $29.50 from $28.50 with an “in line” rating.


Seeing “muted” revenue growth and a series of near-term challenges, Canaccord Genuity analyst Matt Bottomley downgraded Medipharm Labs Corp. (LABS-T) to “hold” from “speculative buy” following Monday’s announcement of weaker-than-anticipated third-quarter results.

Shares of the Barrie, Ont.-based company dropped almost 16 per cent in response to the premarket release.

“We continue to underscore management’s focus toward international markets,” he noted. “The quarter saw international contributions overtake domestic sales for the first period, with the category representing 53 per cent of the top-line for the period.”

Medipharm reported total net revenue of $5.4-million, up 6 per cent quarter-over-quarter but below Mr. Bottomely’s $5.8-million estimate.

“The company continues to see stalled penetration for its domestic segment, with Canadian recreational sales once again taking a step back (albeit far more muted than FQ2/21) to $2.5-million from $2.6-million in the prior quarter,” the analyst said. “We continue to see headwinds in the company’s Canadian market operations given its posturing away from many recreationally friendly formats. That said, LABS’s international markets saw a 16-per-cent increase in the quarter (to $2.9-million), led by sequential growth in Australia (which was up more than 90 per cent in the quarter), however partially offset by a 29-per-cent decline out of Germany (despite adding an additional partner in the period). Quarterly fluctuations are to be expected from international markets given stringent import/export protocol and the general timing for product calls from those markets.”

The results, which included an EBITDA loss of $5.6-million, prompted Mr. Bottomley to make “material” reductions to his long-term financial projections, citing ”a sustained decline in Canadian market performance through FY21 (down more than 50 per cent from FQ4/20) and limited visibility on the acceleration of contract volumes into Germany (following a quarter in which LABS reported declining contributions from the market).”

That led him to lower his target for Medipharm shares to 35 cents from 70 cents, falling below the 49-cent average.

“We do note that any de-risking in Germany (particularly as it relates to the Stada relationship), could present material upside to our target; however, we have elected to move to the side-line until we see further progress from this segment,” he said.


Desjardins Securities analyst John Chu reduced his target prices for a trio of Canadian cannabis companies on Tuesday.

After pushing back its timeline to become EBITDA positive to the first half of 2022 from the end of this year, he cut his financial expectations for Auxly Cannabis Group Inc. (XLY-T), despite displaying “solid” sales and “good” market share gains in the third quarter.

“XLY’s market share gains in key areas (flower, pre-rolls, vapes, concentrates) appear to be building momentum into 4Q, which increases our confidence in our sales outlook,” said the analyst.

Keeping a “buy” rating for Auxly shares, he lowered his target to 60 cents from 75 cents. The average on the Street is 57 cents.

Mr. Chu also maintained a “positive” outlook for Vancouver-based IM Cannabis Corp. (IMCC-CN, IMCC-Q) even though supply issues and acquisition integration weighed on its third-quarter sales and earnings results.

“We continue to see sales accelerating, albeit at a slower 2022 pace than we had previously forecast, but recovering from 2023 onward. Furthermore, IMCC remains well-positioned in Israel, especially as consumer preferences focus on premium imported products. Lastly, its Canadian flower has also ranked very well recently (#1 in ultra-premium, #6 in premium),” he said.

With a “buy” rating, Mr. Chu trimmed his target to $9.25 from $10.25, remaining above the consensus of $8.55.

Though he called the second-quarter 2022 results from Neptune Wellness Solutions Inc. (NEPT-T, NEPT-Q) “decent” with a “modest” EBITDA beat, he thinks the Laval, Que.-based company remains a “show-me story.”

“Sequential sales growth was strong in each of its key business segments, and the outlook for each continues to look encouraging, buoyed by new product launches and an increasing distribution network,” he said. “However, we need to see more evidence of the sustainability of the sales momentum and to have a better idea of the margin potential before we become more comfortable with its outlook. 2Q was encouraging.”

Maintaining a “hold” rating, Mr. Chu cut his target for Neptune shares to 75 cents from $1. The average is 97 cents.


Predicting “solid” upside potential over the next 12 months, Scotia Capital analyst Phil Hardie reaffirmed Guardian Capital Group Ltd. (GCG-T) as one of his top value plays after better-than-expected third-quarter results, seeing its valuation as “steeply discounted.”

“We believe the combination of Guardian’s significant capital position through its corporate portfolio and discounted valuation result in a high level of embedded optionality,” he said. “Various scenarios such as the sale of Guardian’s holdings in BMO and the redeployment of capital in the form of significant share buybacks, acquisition of other institutional platforms, streamlining operations to become a pure-play institutional asset manager, or financial restructuring, together with a steep NAV discount could significantly increase Guardian’s share price. Over time, generating more meaningful earnings from its underlying operations will likely serve as the catalyst to structurally reduce its NAV discount. Strategic focus on diversifying its AUM and capabilities outside of Canadian equities, with a priority on increasing presence in U.S. markets along with Global equities, are likely to accelerate earnings growth over the medium term. Opportunities related to the buildout of its Canadian Retail platform and continued expansion of its Wealth Management capabilities likely represent additional sources of longer-term growth and overlooked optionality in the stock.”

Mr. Hardie called Guardian’s operating earnings growth “solid,” driven by a “strong” performance from its UK-based subsidiary and its Managing General Agency platform. He called MGA a “hidden gem” and “an attractive asset that represents an attractive source of recurring nonmarket correlated earnings, and a potential source of embedded optionality.”

Seeing investors underestimating Guardian’s Investment & Wealth management platforms, Mr. Hardie raised his target by $1 to $48, topping the $47 average, with a “sector outperform” rating.

“We believe the combination of Guardian’s significant capital position through its corporate portfolio and discounted valuation result in a high level of embedded optionality,” he said.


Stifel analyst Stephen Soock expects capital constraints to continue to delay the growth initiatives of Americas Gold and Silver Corp. (USA-T).

However, he thinks the bottom for its shares has been reached with “an improved outlook,” prompting him to upgrade its shares to “hold” from “sell” following weaker-than-anticipated third-quarter results.

“We believe the impending restart of Cosalá could change the company’s trajectory,” he said.

Mr. Soock raised his target by 5 cents to $1.20, below the $1.98 average.


In other analyst actions:

* Touting its “cheap valuation given growth potential,” M Partners analyst Nicholas Cortellucci initiated coverage of Tucows Inc. (TC-T) with a “buy” recommendation and $160 target. The average is US$67.90.

“Tucows Inc. represents an opportunity for investors to play the secular shift in internet services from coax to fiber, backed by an elite management team,” he said. “As society demands faster and more reliable bandwidth, Tucows’ ownership of fiber assets will become increasingly valuable. TC’s predictable and high-margin domains business will continue to provide strong cash-flow which will be deployed in U.S. fiber builds.”

* RBC Dominion Securities analyst Matt Logan raised his target for Automotive Properties Real Estate Investment Trust (APR.UN-T) to $14.50 from $14 with a “sector perform” rating. The average is $14.07.

* Scotia Capital’s Mario Saric hiked his Boardwalk Real Estate Investment Trust (BEI.UN-T) target to $59.25 from $51.25 with a “sector perform” rating. The average is $60.32.

“BEI has fit our ‘Value over Growth’ theme quite well within the Apartment space, though our key point today is that the journey isn’t over and we see a high-$50 trading price, albeit signifying much less relative outperformance than what has been achieved in 2021 (40 per cent vs. peers),” said Mr. Saric. “Further Alberta cap rate outperformance is key to outsized returns, with Q3 illustrative of that. Incentives are coming down and tone is constructive (NCIB has been brought up again, but conviction in it is unclear to us), with less exposure to possible regulatory change in 2022 (i.e. Ontario/Quebec elections; Alberta votes in 2023). BEI is still cheap vs. peers on AFFO, but less so on NAV, albeit we see 14-per-cent NTM growth in NAV vs. 10-per-cent peer average.”

* Atlantic Equities initiated coverage of Canadian National Railway Co. (CNR-T) with a “neutral” rating and $177 target, exceeding the $158.25 average.

* The firm initiated coverage of Canadian Pacific Railway Ltd. (CP-T) with an “overweight” recommendation and $111 target, topping the average of $103.06.

* RBC’s Pammi Bir cut his Chartwell Retirement Residences (CSH.UN-T) target to $14 from $14.50, maintaining an “outperform” rating. The average is $14.14.

* Jefferies analyst Brian Tanquilut raised his Dentalcorp Holdings Ltd. (DNTL-T) target to $22 from $20 with a “buy” rating. Others making changes include: RBC’s Douglas Miehm to $20 from $19 with an “outperform” rating and Scotia’s Patricia Baker to $20 from $19.50 with a “sector outperform” rating. The average is $20.75.

“DNTL anticipates that the sequential monthly improving revenue trends, evident in Q3, will continue in Q4 and into F22. With 1.6 million active patients currently, DNTL is set to see continued outsized growth in the Canadian dental market through its M&A activity, and drive organic growth through operating efficiencies, as well as drive longer term growth with expansion of its proprietary model to other verticals,” said Ms. Baker.

* TD Securities analyst Tim James raised his Exchange Income Corp. (EIF-T) target to $55 from $53, exceeding the $52.82 average, with a “buy” rating, while Raymond James’ Steve Hansen raised his target to $55 from $52 with a “strong buy” recommendation.

“We are increasing our target ... based upon: 1) another strong beat highlighting the strength/resiliency of the company’s specialty Aerospace & Aviation (A&A) segment; and 2) our increasingly upbeat view of the firm’s embedded growth prospects and ability to capitalize on the forthcoming economic recovery,” said Mr. Hansen.

* CIBC World Markets analyst Anita Soni increased her target for Equinox Gold Corp. (EQX-T) to $11 from $10.50, maintaining a “neutral” rating. The average is $14.75.

* RBC’s Geoffrey Kwan increased his Home Capital Group Inc. (HCG-T) target to $57 from $53 with an “outperform” rating. The average is $54.29.

* Canaccord Genuity’s Carey MacRury raised his Iamgold Corp. (IMG-T) target to $4 from $3.75, keeping a “hold” rating. The average is $4.10.

“IAMGOLD reported sequential production improvement and maintained their revised 2021 guidance although missing our EBITDA and EPS estimates, largely on higher costs. Despite the quarterly improvement we would like to see current operations reach greater stability, particularly at Rosebel and Westwood and further progress on the Côté Gold development project (within budget) before becoming more constructive on the stock. We’ve nudged our target price upward as we’ve raised our target multiples in line with higher multiples observed in the gold sector,” said Mr. MacRury.

* CIBC’s Hamir Patel lowered his Intertape Polymer Group Inc. (ITP-T) target to $38 from $40 with an “outperformer” rating. The average is $38.94.

“We view the double-digit share price sell-off on Friday post Q3 results as overdone. We believe demand trends in e-commerce and building/construction end-markets (collectively 37 per cent of 2020 mix), and recent capital projects, should support ITP delivering organic growth above industry averages over the next two year,” he said.

* RBC’s Sam Crittenden increased his Ivanhoe Mines Ltd. (IVN-T) target to $12 from $10 with an “outperform” rating, while Canaccord’s Dalton Baretto raised his target to $13.50 from $11.50 with a “buy” rating. The average is $12.05.

“A solid quarter, but given monthly progress updates from the company, we were not surprised. Maiden quarterly average cash costs at KK came in at $1.37 per pound; these are expected to decline going forward as the operation ramps up. Optimization remains ongoing, and IVN has increased production guidance for the year yet again, to 92.5-100kt Cu. Management notes that KK is now producing 700 tonnes of Cu daily with some frequency; this production rate is 28 per cent above design capacity for Phase 1. Off-site, the logistics chain appears to be delivering, albeit with some hiccups due to typical port congestion being seen everywhere in the world right now,” said Mr. Baretto.

* Jefferies analyst Laurence Alexander raised his target for Lithium Americas Corp. (LAC-N, LAC-T) to US$39 from US$34 with a “buy” rating. The average is US$28.

* CIBC’s Hamir Patel raised his Loop Energy Inc. (LPEN-T) target by $1 to $7, below the $9.60 average, with a “neutral” rating.

* Acumen Capital analyst Nick Corcoran cut his Mdf Commerce Inc. (MDF-T) target to $10.50 from $15 with a “buy” rating. The average is $12.40.

“We remain optimistic that investment in the business will result in higher levels of organic growth. Contract wins by Periscope with new states are expected to be a major catalyst,” he said.

* Canaccord’s Tania Gonsalves cut her Mindbeacon Holdings Inc. (MBCN-T) target to $4.78 from $12.50, keeping a “buy” rating. The average is $9.50.

* CIBC’s Anita Soni increased her New Gold Inc. (NGD-N, NGD-T) target to US$2.50 from US$2 with a “neutral” rating. The average is US$1.81.

* Scotia Capital’s Mario Saric bumped up his NorthWest Healthcare Properties REIT (NWH.UN-T) target to $15.25 from $15 with a “sector outperform” rating. The average is $14.52.

“NWH remains a Top Income play in our universe but also provides solid Value (4-per-cent NAV discount) and Growth,” he said.

* Stifel analyst Maggie MacDougall increased her target for Park Lawn Corp. (PLC-T) to $48 from $46 with a “buy” rating. The average is $46.92.

“The stock is not pricing in the company’s potential,” she said. “A no-M&A, low-organic-growth scenario implies equity value per share of $42.25. This is above where the stock is presently trading. If Park Lawn makes no more acquisitions and does not invest in organic development opportunities we estimate the company will have net cash of $167 MM in four years. If all of this excess cash was to be paid out as dividends, the Gordon Growth Model says PLC would be worth $100 in 2025. That however, is not the objective. Park Lawn can earn much greater ROI then its cost of capital, and so, it will grow. We think the stock is clearly undervalued if even a 12-month view is taken, not to mention one for the long term.”

* Canaccord’s Matthew Lee raised his Playmaker Capital Inc. (PMKR-X) target to $1.10 from 90 cents.

* Canaccord’s John Bereznicki increased his target for Questor Technology Inc. (QST-X) to $2.10 from $1.90 with a “hold” rating, while Raymond James’ Michael Shaw bumped his target to $2 from $1.50 with a “market perform” recommendation. The average is $2.02.

“Our recommendation on Questor hasn’t changed: despite the global momentum to mitigate the harmful impacts of methane in the atmosphere, Questor is not aggressively pushing its advantage as one of the very first movers in methane mitigation technologies,” said Mr. Shaw. “Without a broader product offering, it seems as though Questor could be left behind in the growing GHG mitigation market. Questor’s balance sheet is a point of strength; it has $15-million of cash on its balance sheet and little in way of liabilities. QST’s low burn-rate gives it plenty of time, but the material question isn’t time; in our view, it has to be what corporate developments will drive share performance. In our view, Questor’s primary product line — innovative as it is — hasn’t driven materially positive economics. A broadened product line with the potential for more and larger economic touch points is ultimately required for meaningful share performance.”

* Guggenheim analyst Gregory Francfort cut his Restaurant Brands International Inc. (QSR-N, QSR-T) target to US$63 from US$70 with a “neutral” rating. The average on the Street is US$70.27.

* Canaccord’s Matthew Lee cut his Terago Inc. (TGO-T) target to $8.50 from $9, above the $7.65 average, with a “buy” rating.

“TGO reported its Q3/21 earnings on Thursday with revenue and EBITDA largely in line with our expectations. Importantly, TGO continues to see improvements in its operating metrics with ARPU bolstering the colocation business and improving retention on the connectivity side,” said Mr. Lee.

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