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

With its Kamoa-Kakula Copper Project exceeding his forecast and seeing a recently announced capacity upgrade as “extremely positive,” Citi analyst Alexander Hacking raised his recommendation for shares of Ivanhoe Mines Ltd. (IVN-T) to a “buy” from “neutral.”

“More broadly, IVN offers investors easily the best growth profile in our copper equity coverage (and with chances of exploration upside at Western Foreland),” he said.

Mr. Hacking expects Kamoa-Kakula, a joint venture between Ivanhoe (39.6 per cent), Zijin Mining Group (39.6 per cent), Crystal River Global Limited (0.8 per cent) and the Government of the Democratic Republic of Congo (20 per cent), to become the seventh or eighth most profitable copper mine in the world by 2024.

“The main risks remain geopolitical (highly concentrated exposure to the DRC) and delivering on future growth (KK stages 3 & 4, Platreef, Kipushi and maybe Western Foreland – which together are 35 per cent of our NAV),” he said.

The analyst also emphasized Citi’s bullish view on copper, “seeing a multi-year, electrification driven bull market with prices around $10,000 per ton.”

“Citi is calling for a copper ‘Supercycle’ based on our expectation of strong producer margins over the next 5 years, relative to historical standards,” he said. “The key driver is by copper-intensive decarbonization related investments, including the electrification of vehicles and the build-out of the renewable energy grid; not China-led global growth like during the 2000s.”

Mr. Hacking raised his target for Ivanhoe shares to $15 from $9. The average target on the Street is $14.41.


As it grows its healthcare business with the $845-million acquisition of Lifemark Health Group, National Bank Financial analyst Vishal Shreedhar is “increasing confidence” in Loblaw Companies Ltd.’s (L-T) “ability to execute.”

Before the bell on Monday, the grocer announced a deal for the national chain of more than 300 physiotherapy, massage, chiropractic and mental-health clinics.

“We estimate that the business delivers low-double digit EBITDA margins (about 11-14 per cent),” said Mr. Shreedhar. “We estimate that the valuation multiple is in the mid-teens (given a resilient business, with annual revenue growth in the mid-single digit range). Our preliminary analysis indicates that the deal will be modestly accretive to L’s annual EPS, around 2 per cent.”

Andrew Willis: Galen G. Weston sets out on a new vision for Loblaw, far from the bread wagon days of his family’s roots

“L continues to develop as a healthcare service provider (better connecting patients and providers), with a network of health and wellness solutions, accessible in-person and digitally. While L does not provide much information on its progress against its healthcare strategy, it is advancing in certain facets. Specifically, in 2021, L delivered more than 170-per-cent growth in pharmacy services revenue (aided in part by transient factors such as lockdowns and elevated vaccinations).”

Maintaining an “outperform” rating for Loblaw shares, Mr. Shreedhar raised his target to $119 from $111. The average target is $115.80.

“We continue to believe that L is well-positioned due to: (a) Anticipated benefits from management’s improvement initiatives (Retail excellence); (b) Expected momentum at SC, led by Beauty recovery; (c) Improving trends in the Discount segment; (d) Improved operating leverage as heightened operational and price investments are behind L for now (hurt past results); and (e) Rising food inflation trends (which typically benefit grocers, provided it doesn’t go too high),” said Mr. Shreedhar.

Elsewhere, others making adjustments include:

* Scotia’s Patricia Baker to $116 from $112 with a “sector perform” rating.

“We see no immediately obvious direct synergies with this transaction for [Shoppers Drug Mart]; rather this transaction represents an opportunity for SDM/L to participate in growth associated with rolling up a related healthcare market segment with a higher margin profile and to address a new market segment,” said Ms. Baker.

* TD Securities’ Michael Aelst to $125 from $115 with a “buy” rating.


While he sees improved sentiment in both Europe and North American for the second half of the year, National Bank Financial analyst Rupert Merer does not expect growth to pick up for Ballard Power Systems Inc. (BLDP-Q, BLDP-T) before 2023.

On Monday, shares of the Burnaby-based hydrogen fuel cell manufacturer dropped 7.4 per cent in Toronto following the premarket release of its fourth-quarter results and 2021 outlook.

Ballard reported revenue of US$37-million, up 28 per cent year-over-year and exceeding the US$30-million projection of both Mr. Merer and the Street, driven by sustained strength in its Heavy Duty Motive segment. However, an adjusted EBITDA loss of US$26-million was below Mr. Merer’s estimate of a loss of US$22-million due largely to higher-than-anticipated operating expenses.

“Revenue from Heavy-Duty sales in Q4 continued the trend towards diversification that BLDP has seen this year,” he said. “Its sales in China represented 37 per cent of total sales in 2021, down from 52 per cent in 2020. This can be partly attributed to delays in policy implementation in China, but also to increased year-over-year sales in Europe and North America. Moreover, with more sales to rail applications and its truck and marine segments expected to grow in the near term, BLDP is also increasing its diversification by market segment. BLDP reports that its backlog now represents 30 large customers, up from 20 last year.”

“For BLDP, China remains an important market, but the opportunity has been slow to materialize given delays to China’s subsidy program. However, in December 2021, the Chinese government approved Hubei and Henan as city clusters to trial the operation of hydrogen vehicles, joining Guangdong, Shanghai and Beijing. This could result in additional opportunities for BLDP given its presence in these regions. We are still waiting on final details of the level of funding and timing for the Chinese subsidy program, but we believe it could lead to roughly 5,000 vehicles deployments in the region of the Weichai-Ballard JV. In any case, an overreliance on a single market is not ideal, particularly when that market has some significant geopolitical risks. With that, we view the growth in Europe and North America as a positive outcome for BLDP.”

Mr. Merer said energy security concerns boost Ballard’s outlook as Europe seeks to accelerate a shift to hydrogen in order to reduce its dependence on Russian natural gas. However, he warned the benefits won’t be immediate.

“Energy security could overtake climate change as the main driver for hydrogen technologies,” he said. “With the potential for a hydrogen push in Europe, China and the U.S. starting this year, we believe the outlook is improving. However, for 2022, revenue could be flat again with a potential lull in sales to China over the next few quarters. BLDP’s order backlog and 12-month order book (at $93-million and $67-million respectively) are both down quarter-over-quarter (was $109-million and $79-million), in part because of the end its service contract with Audi. With that, revenue could become more lumpy.”

With a drop to his revenue forecast for this year and “a delayed ramp to its growth,” Mr. Merer lowered his target for Ballard shares to US$14 from US$22 with an “outperform” rating. The average on the Street is US$17.61.

“Although we believe BLDP could see momentum into 2023E as Europe, North America and China move forward with hydrogen and zero emissions vehicle plans, our forecasts are speculative,” he noted.

Other analysts making target adjustments include:

* Raymond James’ Michael Glen to US$14 from US$25 with an “outperform” rating.

“Looking forward, while Ballard is working with a number of different sales engagements, we continue to see the biggest potential order gains from: (1) a rebound in China which will ultimately be driven by the WeichaiBallard JV (and stem from clarity on the government’s hydrogen policy); and (2) higher activity in bus orders out of Europe where we continue to wait for a step higher in the volume on unit order,” said Mr. Glen. “Importantly, Ballard continues to emphasize their leadership position in the fuel cell market, an aspect that we view as critical when taking into consideration the evolving competitive environment. We would note that exiting 4Q, Ballard remains very well capitalized with $1.1-billion in cash and zero debt. From a capital allocation perspective, guidance indicates a near-term emphasis on organic growth and investment versus M&A, although management indicated that they continue to assess external ideas as presented.”

* TD Securities’ Aaron MacNeil to US$17 from US$20 with a “speculative buy” rating.

* CIBC World Markets’ Hamir Patel to US$12 from US$17 with a “neutral” rating.

* Cowen and Co.’s Jeffrey Osborne to US$12 from US$15 with a “market perform” rating.


BMO Nesbitt Burns analyst Jackie Przybylowski sees Rio Tinto Group’s US$2.7-million proposal to buy the 49 per cent in Turquoise Hill Resources Ltd. (TRQ-T) it doesn’t already own as “fair,” pointing to the “remaining risk.”

In a research note released Tuesday, she raised her rating for the Canadian miner to “market perform” from “underperform,” admitting she was surprised by the offer.

“We currently model Turquoise Hill’s 66-per-cent stake in Oyu Tolgoi at US$7.1-billion (US$35.29 per share) or C$9.2B-billion (C$45.47/share),” said the analyst. “These values are after Oyu Tolgoi-level debt and the ‘forgiven’ partner loans at the asset level, assuming successful debt reprofiling, but before new equity dilution. In our view, Turquoise Hill shareholders may view the Rio Tinto proposal as light on these metrics.”

“We continue to see significant risks in the completion of the underground. These include risks to the copper spot price, risks to project timeline and budget, risks to filling the funding gap - especially through equity raise and debt reprofiling. Accounting for these risks in our model was reflected in our previous C$20 per share target. As a substantially larger and multi-asset company, Rio Tinto is better equipped to weather near-term timing and financing risks.”

To reflect the offer, Ms. Przybylowski raised her target for Turquoise Hill shares to $34, up from $20 and above the $32.33 average.

“We recognize that this offer is below the long-term potential value in Oyu Tolgoi; however, in our view, it’s a fair price given the remaining risks from a TRQ perspective,” she said.

Elsewhere, TD’s Craig Hutchison cut his recommendation to “hold” from “buy” with a $39 target, up from $32.

“We note that TRQ has been significantly de-risked in the last two months and the company is now approximately 12 months from first sustainable production from the Oyu Tolgoi (OT) underground mine,” said Mr. Hutchison. “OT is a Tier 1 asset, in our view, with the capacity to produce over 500kt of copper per year in the second half of this decade, ranking OT as the fourth largest copper mine globally, with cash costs in the lowest quartile.”

Canaccord Genuity’s Dalton Baretto raised his target to $38 from $31, maintaining a “buy” rating.

“We view this $34.00 per share bid by RIO as an opportunistic low-ball offer post de-risking the project and 12 months out from first production,” said Mr. Baretto. “We point to 2/3rds of the 49-per-cent minority shareholder base that have been long-term shareholders that we believe will be unlikely to accept this bid at a time when TRQ’s future has never looked more promising. Indeed, anecdotally, our conversations with some of these shareholders indicated that they believe the shares are worth at least our NAV of $48.67 per share and, in some cases, higher. As such, we believe RIO will eventually increase its offer, but given expected value indicated by the minorities, we believe this attempted acquisition has a high probability of failure.”


Brookfield Infrastructure Partners L.P. (BIP.UN-T, BIP-N) provides “strong growth at a reasonable price,” according to iA Capital Markets analyst Naji Baydoun, calling it an “all-in-one premium infrastructure platform.”

In a research note released Tuesday, he said Brookfield’s near-term growth outlook is the strongest it’s been in five years, seeing the potential for double-digit annual EBITDA and funds from operations per share potential.

“These expectations are driven by (1) elevated organic growth (underpinned by current macro-economic dynamics), (2) robust M&A activity, and (3) BIP’s capital recycling initiatives,” said Mr. Baydoun. “We also see the potential for upward revisions to financial estimates as BIP continues to execute on its growth strategy and delivers strong operational and financial results.”

From a valuation perspective, the analyst sees Brookfield “reasonably” price relative to its peers as well as in a growth context.

“On a per-unit-of-growth basis, BIP is currently trading at (1) the most attractive valuation levels on a forward EV/EBITDA basis, and (2) the second most attractive valuation levels on a forward P/FFO basis over the past five years,” Mr. Baydoun said. “Compared to publicly listed infrastructure peers, BIP’s shares are currently trading at an 13-per-cent premium on a forward EV/EBITDA basis; this is in line with recent historical premiums of 10-20 per cent, and reflective of the Company’s (1) strong cash flow and dividend growth profile, and (2) unique competitive advantages.”

Seeing “best bang-for-your-buck growth,” he added: “Overall, BIP’s (1) strong cash flow and dividend per share growth profile, and (2) current relative valuation levels make for a standout infrastructure investment compared to both the Company’s publicly listed peers and its own recent historical levels. Although we don’t necessarily see significant near-term valuation multiple expansion potential, we believe that BIP could deliver 12-15-per-cent annualized total shareholder returns (TSR) from a combination of growth and yield alone. In our view, this strong TSR potential offers one of the most compelling risk-adjusted returns across our coverage universe.”

Reaffirming his “strong buy” rating for Brookfield, he raised his target to US$72 from US$70. The average on the Street is US$67.92.

“we view BIP as a unique and diversified way for investors to play the broad long-term infrastructure investment theme, with (1) access to a global, large-scale infrastructure investment platform (ownership interests in more than $70-billion of assets), (2) defensive cash flows (90 per cent of FFO regulated/contracted), (3) visible and sustainable organic cash flow growth (6-9 per cent per year, CAGR 2021-26), (4) potential upside from accretive M&A, and (5) attractive income characteristics (3.5-per-cent yield, 60-70-per-cent long-term FFO payout, and a 5-9 per cent per year dividend growth target),” he said. “We continue to see BIP as a standout growth vehicle for long-term shareholders in the current macro-economic context.”


Raymond James analyst Rahul Sarugaser now sees Organigram Holdings Inc. (OGI-T, OGI-Q) in a “top-3 national market share position,” seeing an improving margin trajectory.

“OGI appears to be following its banner 1Q22 revenue with, impressively, an equally strong 2Q22 (estimated revenue $29.0-million, estimated EBITDA a loss of $0.5-million), complete with an addressable market-expanding acquisition and a forward-looking investment in innovation,” he said.

“During OGI’s 2Q22, the company made its first material investment in the Quebec market, acquiring premium craft cannabis grower and popular concentrates maker Laurentian Organic Inc. (private) for $36-million. Laurentian appears to be driving an impressive business in its own right, posting TTM [trailing 12-month] revenue of $20-million and $6-million EBITDA, primarily in the QC market. And, according to our mid-month channel data for Feb., Laurentian was a top-5 producer of concentrates nationally, with its sought-after Tremblant Cannabis brand. OGI already markets its popular SHRED brand in QC; but, with the SQDC’s protectionist policies, we believe OGI’s Laurentian acquisition will serve to materially expand its access to the large QC cannabis market.”

He kept an “outperform” rating. Sarugaser cut his target for Organigram shares to $3 from $5 as the cannabis sector “continues to de-rate.” The average is $3.10.

He kept an “outperform” rating.


In other analyst actions:

* After the release of “soft” fourth-quarter results, Acumen Capital’s Nick Corcoran cut his target for Big Rock Brewery Inc. (BR-T) to $8 from $10 with a “buy” rating.

“Given that we expect BR to face inflationary pressures for the foreseeable future, we take a more cautious stance in the near-term,” he said.

* TD Securities’ Jonathan Kelcher lowered Boardwalk Real Estate Investment Trust (BEI.UN-T) to “buy” from “action list buy” with a $70 target, exceeding the $62.68 average.

“Although we still view Boardwalk’s valuation as attractive, the gap versus its Apartment peers has narrowed over the past seven months, and is the key factor leading to our rating change,” he said. “Boardwalk is now trading at $180,000 per suite and an implied cap rate of 4.9 per cent versus its peers at $275,000 per suite and an average implied cap rate of 4.1 per cent. Boardwalk has generated 28-per-cent total return since our upgrade on August 13, 2021 relative to the negative 7-per-cent average return of its closest peers.”

“Looking forward, we expect fundamentals to continue to improve in the REIT’s two largest markets of Edmonton and Calgary. With occupancy in relatively good shape heading into the seasonally strong leasing period, we believe the REIT should be able to continue reducing incentives, which in turn should drive strong uplifts on renewals. With 70 per cent of its portfolio in markets with no rent control, we also believe Boardwalk is well-positioned to pass through inflation-type increases on renewals.”

* Citing its recent underperformance, Mr. Kelcher upgraded Canadian Apartment Real Estate Investment Trust (CAR.UN-T) to “action list buy” from “buy” with a $70 target, above the $67.54 average.

“CAPREIT units have declined 4 per cent since reporting a Q4/21 ‘miss’ in late-February,” he said. “This compares with its closest peers that have seen unit prices increase by an average of 2 per cent over the same time period (led by BEI.un at up 12 per cent) and the Canadian Capped REIT index, which is up 1 per cent. As we noted, we viewed the Q4/21 miss as one-time in nature (due to a catch-up in R&M costs) and are inclined to look through it to the continued recovery in demand fundamentals.”

“Strong demand for apartment properties by private players has kept asset pricing elevated (low cap rates and high per-suite valuations). This is not being reflected in the public markets, with apartment REITs on average trading at a 9-per-cent discount to NAV. We expect this gap to narrow over the course of 2022 as strengthening demand fundamentals start translating through to financial results.”

* TD Securities’ Daryl Young cut his Boyd Group Services Inc. (BYD-T) target to $230, which is 69 cents below the average, from $255 with a “buy” rating.

“In our view, Q4/21 and Q1/22 could be two of the toughest quarters Boyd has faced, with the existing supply-chain and labour headwinds compounded by Omicron-related absenteeism in December/January and with recent insurance price increases yet to have a meaningful impact,” he said. “Reports indicate that the average U.S. collision repair backlog has ballooned to more than 3.4 weeks, reflecting labour shortages and inability to complete repairs, given parts-availability issues. We believe consensus estimates for Q4/21 and Q1/22 are too high.”

* RBC’s Luke Davis raised his target for Cardinal Energy Ltd. (CJ-T) to $8, matching the consensus, from $6 with a “sector perform” rating.

“Supported by continued strength in oil prices, Cardinal continues to make significant headway on debt repayment, with dividend reinstatement likely in the second quarter. In our view, this has largely been priced in given a notable valuation premium to peers,” he said.

* BMO’s Ben Pham raised his Fortis Inc. (FTS-T) target to $60 from $57 with a “market perform” rating. The average is $59.54.

“We recently hosted investor meetings with Fortis’ Jocelyn Perry (Executive Vice President and CFO) and FortisBC’s Roger Dall’Antonia (President and CEO), the net of which reaffirmed FTS’s defensive characteristics (99 per cent regulated), attractive rate base CAGR, solid balance sheet, and positive ESG profile,” said Mr. Pham. “With recent positive sentiment on safe-haven names like FTS, we have upped our target to $60 from $57 (21 times forward PE vs. 20 times previously) and maintain our Market Perform rating mainly on relative potential total return.”

* Seeing an “attractive” return and believing an “uncompromising” quarterly beat highlights its value opportunity, National Bank’s Zachary Evershed increased his Hardwoods Distribution Inc. (HDI-T) target to $79.50 from $79 with an “outperform” rating, while Canaccord Genuity’s Yuri Lynk lowered his target to $73 from $76 with a “buy” rating.. The average is $71.70.

“We view the pullback following strong results, and indeed the significant valuation discount to peers, as entirely unwarranted and reiterate our Outperform rating given the supportive long-term trends in both new builds and the R&R market,” said Mr. Evershed. “HDI’s valuation has yet to catch up to the company’s transformational acquisitions and organic operational improvements, presenting a high quality value opportunity.”

* BMO’s Joanne Chen cut her Invesque Inc. (IVQ.U-T) target to $2, below the $2.21 average, from $2.50 with a “market perform” rating.

“We view favorably IVQ.U’s ongoing portfolio optimization efforts, which should better position the company over the long term,” he said. “With the rise of the Omicron variant, operating metrics remained somewhat under pressure (though we were encouraged by ongoing rate growth in SHOP). Given the extension of the road to recovery, we expect Invesque will trade at a

discount and thus have reduced our target price.”

* Desjardins’ John Sclodnick raised his Karora Resources Inc. (KRR-T) target to $6.75 from $6.50, keeping a “buy” rating. The average is $6.43.

“We believe the stock has earned a premium valuation given the company’s solid execution on a growth asset in a top-tier jurisdiction,” he said. “While there could be some weakness post-GDX addition on March 18 (KRR has outperformed the GDX by 31 per cent year-to-date), we believe this would present an attractive entry point for the R&R update at the end of 1Q22.”

“Ultimately, there are few stocks that can offer this level of gold production growth in a stable jurisdiction, with by-product credits to help offset inflationary pressures, and where the company has been executing operationally and improving ESG performance too.”

* Raymond James’ Brian MacArthur raised his Labrador Iron Ore Royalty Corp. (LIF-T) to $40 from $38 with a “market perform” rating. The average is $41.71.

“We believe Labrador Iron Ore Royalty Corporation offers investors good exposure to low jurisdictional risk, premium iron ore through its interest in and royalties on Iron Ore Company of Canada (IOC),” he said. “Directly and through its wholly-owned subsidiary, Hollinger-Hanna Limited, LIF owns a 15.1-per-cent equity interest in IOC and receives a 7-per-cent gross overriding royalty on all iron ore produced from leased lands, sold and shipped by IOC and a 10 cents per tonne commission on sales of iron ore by IOC. LIF pays cash dividends from its net income to the maximum extent possible, subject to the maintenance of appropriate levels of working capital, which can provide investors an attractive dividend yield.”

* Raymond James’ Jeremy McCrea raised his Petroshale Inc. (PSH-X) to $1.25 from $1.15 with an “outperform” rating. The average is $1.05.

“Having an experienced management team with a track record of success, PetroShale plans to grow and consolidate areas of the North Dakota Bakken/Three Forks formation,” said Mr. McCrea. “Overall, we calculate that its current highly profitable inventory should serve as a base to rapidly pay down debt given 4-6 month well payouts at current prices. The top tier F&D results (& recycle ratio) released with the reserve report should further confirm the underlying asset quality of PetroShale as well. As the company reduces leverage and embarks on a growth plan, we expect to see the valuation improve as new institutional investors become familiar with the name.”

* RBC’s Walter Spracklin trimmed his target for Westshore Terminals Investment Corp. (WTE-T) to $43 from $45 with an “outperform” rating. The average is $31.20.

“WTE’s dividend announcement was well-received, with investors looking past tough operating conditions in Q1 and toward robust coal demand and long-term opportunity in potash,” he said. “Key from the quarter in our view was that guidance was reaffirmed, despite near-term headwinds, on the back of surging met and thermal coal prices. We continue to expect strong demand to favourably affect sentiment in the shares during the remainder of the year. Reiterate WTE as a top name in transportation.”

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