Inside the Market’s roundup of some of today’s key analyst actions
Expecting lower interest rates, National Bank Financial analyst Rupert Merer thinks this year is “shaping up to be much better” for sustainable energy and clean technology stocks following a “volatile” 2023, pointing to “recession-resistant characteristics and visibility on growth initiatives across the sector.”
“The year 2023 was marked by headwinds for the renewable energy and clean tech sectors,” he said in a report released Tuesday. “Despite the global commitment to the energy transition, the industry faced a confluence of challenges. Supply chain disruptions, exacerbated by lingering effects of the pandemic and geopolitical tensions, led to shortages and increased costs for critical components. Additionally, policy and regulatory uncertainties in key markets created a hesitant investment climate. Financing challenges were further compounded by inflation and rising interest rates, which strained project economics. The stocks in our IPP coverage were down 14 per cent on average, while in the EV space, stocks were down 27 per cent on average. The materials and waste management stocks did better, up 9 per cent and 14 per cent, respectively. Yet, in the face of these obstacles, the resilience and innovation inherent in the sustainability and clean tech sector became apparent, as companies adapted to these challenges, seeking new efficiencies and sources of capital to overcome the hurdles of 2023. For 2024 and beyond, we are looking for a fully funded return to growth, with the challenges of 2023 in the rear-view mirror.”
For cleantech investors, Mr. Merer predicts a “better year with rate tailwinds and political headwinds” and feels that reversal should support stock valuations through the year.
“Not surprisingly, lower rates could be most relevant this year, as much of our coverage universe are yield-sensitive infrastructure stocks with significant leverage,” he said. “So far, the stocks have not rebounded as we might have expected on lower yields. We also see renewed confidence in growth for the sector, as last year’s challenges give way to visibility on growth for most infrastructure stocks and the earlier stage EV, H2 and materials stocks in our coverage. We also forecast more asset recycling, industry consolidation and government support for energy transition stocks. However, it could be a volatile year with an election in the U.S. and the potential for changes in political sentiment.”
After updating his target prices across the sector to account for valuation and forecast changes, Mr. Merer named three top picks for the year ahead “based largely on return to target and backed by visibility on growth.” They are:
* Innergex Renewable Energy Inc. (INE-T) with a $17 target, up from $15.75, and “outperform” rating. The average is $14.44.
* Northland Power Inc. (NPI-T) with a $34 target, up from $32, and “outperform” rating. The average is $32.
“With sentiment on a downward spiral in 2023, investors were concerned about the ability for IPPs to create value from growth,” said Mr. Merer. “With new projects delayed by rising costs, price caps in European power markets, and equity dilution to fund growth and poor weather, earnings metrics have stalled in the last few years for the worst performing stocks, INE and NPI. The outlook for growth is improving for these companies, where we should see a return to adj. EBITDA/sh growth for the next three years. This growth is supported by fully funded capacity expansion, normalized weather conditions and inflation.”
* 5N Plus Inc. (VNP-T) with a $5.25 target, up from $4.75, and “outperform” rating. The average is $5.25.
“Visibility at VNP is improving and the company should provide 2025 guidance early in 2024,” he said. “We estimate $57-million in EBITDA for 2025E, driven by continued growth in its terrestrial and space solar businesses. Its AZUR business has a twoyear backlog, and its CdTe semiconductors should continue to see outsized demand from its growing partnership with First Solar (NASDAQ: FSLR, Not Rated), which aims to grow capacity from 12 GW in 2023E to over 22 GW by 2026E. With this improved visibility and strong growth outlook in the near term and beyond, we remain Outperform.”
Mr. Merer’s other target adjustments were:
- Algonquin Power & Utilities Corp. (AQN-N/AQN-T, “sector perform”) to US$7.25 from US$7.50. Average: US$7.21.
- Altiuis Renewable Royalties Corp. (ARR-T, “outperform”) to $11 from $10. Average: $13.57.
- Brookfield Renewable Partners LP (BEP-N/BEP.UN-T, “outperform”) to US$31 from US$29. Average: US$31.06.
- Exro Technologies Inc. (EXRO-T, “sector perform”) to $2 from $2.25. Average: $2.25.
- GFL Environmental Inc. (GFL-T, “outperform”) to $55 from $52. Average: $47.57.
- Lion Electric Co. (LEV-N/LEV-T, “sector perform”) to US$2.25 from US$2.50. Average: US$3.50.
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CIBC World Markets analyst Mark Jarvi made a series of target price adjustments to utility companies in his coverage universe on Tuesday.
“2023 was a challenging year for renewables and the Alberta power names limped into year-end,” he said. “We are optimistic a recovery for most of these names will come in the next few years. We might be early on the renewables call but we see attractive upside for investors willing take a bit more risk (preferred names: BLX, NPI). The outlook for the regulated utilities is fairly stable: it is hard to get excited on valuation and EPS upside, but we believe some core exposure (lean towards quality over recovery) makes sense to hedge against macro/market uncertainty.”
He raised his targets for these stocks:
- Algonquin Power & Utilities Corp. (AQN-N/AQN-T, “neutral”) to US$7.50 from US$7. The average on the Street is US$7.21.
- Boralex Inc. (BLX-T, “outperformer”) to $41 from $39. Average: $39.50.
- Capital Power Corp. (CPX-T, “neutral”) to $44 from $43. Average: $45.22.
- Hydro One Ltd. (H-T, “neutral”) to $40 from $38. Average: $38.46.
- TransAlta Corp. (TA-T, “outperformer”) to $18.50 from $18. Average: $15.39.
Conversely, Mr. Jarvi lowered his target for Innergex Renewable Energy Inc. (INE-T, “neutral”) target to $13 from $13.50. The average is $14.44.
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While “not perfect,” RBC Dominion Securities analyst Drew McReynolds sees a better fundamental set-up for the Canadian telecommunications services industry entering 2024.
“We expect market expansion to moderate competitive intensity, see an unusually uneventful regulatory calendar, and believe valuations look reasonable following a healthy reset in 2023,” he said. “While competition and macro headwinds could temper industry revenue growth, we expect additional cost efficiencies to underpin a forecast average NAV CAGR [net asset value compound annual growth rate] (2023-2026) for the group of 9 per cent. Our two Outperform-rated stocks are Rogers and TELUS.”
In a research report released Tuesday, Mr. McReynolds emphasized the importance of market expansion and rooting out cost efficiencies in driving growth going forward.
“During the two-year approval process for the Rogers-Shaw-Quebecor transactions, there were many public and private sector voices that questioned the industrial logic of industry consolidation and a new 4th national wireless player,” he said. “Within a short nine months following the April 2023 closing of these transactions, wireless and Internet prices have substantially declined, bundling discounts have increased and network quality has improved. In 2024, we forecast average revenue growth of 2 per cent (versus an estimated 3 per cent in 2023) with revenue tailwinds (market expansion, core price increases, 5G-driven revenue) mitigated by potential headwinds (wireless and Internet ARPU pressure, bundling discounts, cord-cutting/shaving, sluggish advertising and business markets). We forecast average EBITDA growth of 3 per cent (versus an estimated 3 per cent in 2023) with choppier revenues mitigated by cost efficiencies. Against this growth backdrop and the decline in bond yields since October 2023, valuations look reasonable with the average FTM [forward 12-month] EV/EBITDA multiple for the group of 7.2 times at the low end of the recent historical range of 7.0-8.5 times, and down versus 7.7 times a year ago.”
“The ten things we are watching in 2024 are: (i) market expansion will be key to moderating competitive intensity; (ii) mid-single wireless network revenue growth will be put to the test; (iii) Quebecor’s incremental wireless impact should be manageable for incumbents; (iv) there is potential for a stepdown in Internet promotional intensity; (v) fixed wireless expansion should remain targeted; (vi) incremental revenue headwinds emerge due in part to a sluggish economy; (vii) lowering the cost to serve becomes a growing part of the playbook; (viii) the regulatory calendar remains unusually uneventful; (ix) balance sheets finally de-lever; and (x) interest rate impacts are absorbed.”
Mr. McReynolds made “minor” estimate revisions for the group and three target price changes ahead of the start of fourth-quarter 2023 earnings season in which he expects to see “continued healthy market expansion” that leads to “another quarter of solid subscriber loading with higher promotional intensity YoY translating to lingering ARPU [average revenue per user] pressure and higher churn.”
“Importantly, we believe a new competitive equilibrium is beginning to emerge in the wake of the closing of the Rogers-Shaw and Quebecor-Freedom Mobile transactions encompassing incremental wireless subscriber traction from Quebecor (albeit alongside notable ARPU pressure), a step-down in postpaid net additions YoY for the Big 3 (with loading still led by Rogers), BCE and TELUS ceding little ground on Internet, and the cablecos leaning on a variety of levers to sustain positive Internet net additions,” he said. “Against this backdrop, we expect the provision of 2024 guidance to be the focus in the quarter with guidance generally translating to: (i) a step-down in underlying year-over-year revenue growth; (ii) a range of underlying YoY EBITDA growth from stable (Cogeco) to low-single digits (BCE, Quebecor) to mid-single digits (TELUS, Rogers); and (iii) BCE and TELUS FCF benefiting from declining capex intensity alongside major restructuring programs.”
Mr. McReynolds’s target changes are:
* Rogers Communications Inc. (RCI.B-T, “outperform”) to $71 from $72. Average: $75.32.
Analyst: “With an eye on our 2025E NAV of $72/share post the Shaw integration, we believe current levels continue to represent an attractive and timely entry point into the stock, reflecting: (i) the realization of >$1B in Shaw operating cost synergies through H1/25 driving an attractive 9-per-cent adjusted EBITDA CAGR (2023E–25E); (ii) what is likely to be a steady de-risking of the stock as visibility on Shaw integration synergies increases, the competitive landscape post-RogersShaw-Quebecor transactions finds a new equilibrium, leverage declines, and management’s track record of improved execution lengthens; (iii) option value on non-core and/or nontelecom asset sales/crystallizations; and (iv) what we believe are recalibrated expectations for wireless ARPU (stable), a sustained tougher cable environment for Internet (telco fibre competition), structural pressure for television (cord-cutting/cord-shaving), and elevated capex.”
* Telus Corp. (T-T, “outperform”) to $30 from $29. Average: $26.93.
Analyst: “TELUS has not been immune to sector headwinds that have included cyclical impacts on TELUS International and TELUS Agriculture & Consumer Goods, inflation impacts on TTech and incremental competitive impacts in the wake of the Rogers-Shaw and Quebecor-Freedom Mobile transactions. While we fully expect these headwinds to persist in 2024, we believe the stock at 8.5 times FTM EV/EBITDA more than adequately reflects the expected impacts given: (i) the reiteration of growth guidance for TTech through 2023 despite having to navigate a more competitive environment; (ii) underlying EBITDA growth in 2024 that should remain at the high end of that for the industry bolstered by additional cost efficiencies; (iii) the sustained stepdown to industry-leading low double-digit capex intensity post-FTTH build that should underpin continued FCF growth and dividend increases; and (iv) management’s consistent track record of network leadership and execution.”
* Quebecor Inc. (QBR.B-T, “sector perform”) to $36 from $38. The average on the Street is $39.40.
He maintained his targets for BCE Inc. (BCE-T, “sector perform”) of $59 and Cogeco Communications Inc. (CCA-T, “sector perform”) of $84. The averages are $57.16 and $71.30, respectively.
Elsewhere, Canaccord Genuity’s Aravinda Galappatthige made these target changes:
- BCE Inc. (BCE-T, “buy”) to $57 from $55.
- Cogeco Communications Inc. (CCA-T, “hold”) to $64 from $63.
- Quebecor Inc. (QBR.B-T, “buy”) to $35 from $33.
- Rogers Communications Inc. (RCI.B-T, “buy”) to $72.50 from $71.
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RBC Dominion Securities analyst Matthew McKellar said there are “reasons to be optimistic” in the North American paper and forest products sector, particularly for wood products companies.
“We expect that interest rates could move somewhat lower through 2024 and begin to catalyze somewhat stronger demand year-over-year, and we expect single-family starts (which consume 3 times as much wood products as multi-family) to be up mid-single-digits,” he said. “We expect R&R spending to remain strong relative to historical pre-COVID levels, supported by increased homeowner equity levels, a solid employment backdrop, and increased existing home sales, although we think spending could moderate somewhat year-overyear.”
In a report previewing 2024, Mr. McKellar updated his commodity price forecast, noting: “Compared to our previous forecast, we assume stronger near-term OSB prices, reflecting that while significant recent capacity additions should pressure prices, it will take some time for the incremental volumes to be felt as new capacity ramps up. We also revise our pulp price assumptions higher, reflecting pricing that strengthened through Q423, although we expect price momentum from here to be limited. We expect containerboard prices to push higher given price hikes announced for January 2024 by most of the top North American producers, but we think the magnitude of the increases will be less than announced given that industry operating rates remain soft.”
The analyst revealed four “favourite names” for Canadian stocks entering the new year. They are:
- Interfor Corp. (IFP-T, “outperform”) with a $30 target. The average on the Street is $28.20.
- Doman Building Materials Group Ltd. (DBM-T, “outperform”) with a $10 target. Average: $9.17.
- Canfor Corp. (CFP-T, “outperform”) with a $22 target. Average: $23.40.
- Cascades Inc. (CAS-T, “outperform”) with a $15 target. Average: $14.20.
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Ahead of the release of its fourth-quarter 2023 financial results, National Bank Financial analyst Cameron Doerksen reaffirmed Bombardier Inc. (BBD.B-T) as one of his top picks for the year, expecting it to “continue to execute on margin expansion and free cash flow growth.”
“Based on data sources we track, we estimate that Bombardier delivered 54 planes in Q4/23,” he said. “While our data has generally proven to be fairly accurate, it is often the case that our estimates are off by a handful of planes. As such, we think Bombardier at least came close to and may have even met its target to hit 138 deliveries for the full year in 2023. With a backlog that sat at $14.7-billion at the end of Q3/23, we believe the company has visibility to increase deliveries to its target of 150 in 2025.”
“According to data provider WingX, in December, global business aviation flights were down 3 per cent year-over-year, but up 16 per cent versus 2019. According to AMSTAT, used jet inventory for sale was up 32 per cent year-over-year, but still down 19 per cent versus the 10-year average. The percentage of used jets for sale stands at 7 per cent of the global business aircraft fleet — historically anything below 10 per cent for sale has been considered a healthy market for new jet orders.”
Mr. Doerksen predicts further margin expansion ahead, calling its progression toward a 2025 EBITDA target of 18 per cent as a “key driver of the investment thesis.”
“We see ongoing margin tailwinds in 2024 (skewed more to H2) including better priced aircraft deliveries, a benefit from higher production rates, further easing of extra supply chain costs later in the year and continued growth of the company’s higher margin aftermarket business,” he said.
“Free cash flow will also grow meaningfully in 2024. Management has guided to 2023 free cash flow of $250-million (we forecast $233-million). Looking ahead to 2024, we note that in addition to expected higher EBITDA, FCF will see tailwinds from no residual value guarantee cash payments (~$125-million), lower capex (as the significant investment in the new assembly plant in Toronto was largely completed in 2023) and lower interest expense due to lower full-year debt levels. We therefore forecast 2024 free cash flow of $475-million. For 2025, we see further tailwinds from higher EBITDA (on higher aircraft deliveries) and more stable working capital as inventory investment related to aircraft production should be stable and lower interest expense. For 2025, we forecast FCF of $779-million, which will drive leverage down to a forecasted 2.1 times at the end of 2025 versus a forecasted 3.7 times at the end of 2023.”
Seeing “material potential upside to shares as the company continues to execute,” Mr. Doerksen raised his target by $1 to $94, keeping an “outperform” recommendation. The average is $77.93.
“If Bombardier can achieve its 2025 EBITDA target of $1.6-billion, based on a conservative 6.5 times EV/EBITDA multiple, we would derive a valuation of $103.00 per share or 100-per-cent upside from the current share price,” he said.
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Analysts at Acumen Capital revealed “Top Ideas” for 2024 on Tuesday.
The list includes nine Canadian equities with a focus “on proven businesses that have historically shown solid execution against a well-articulated business plan.”
“In choosing our candidates, we utilize the following criteria: reasonable valuations in the context of historical trading ranges; strong free cash flow generation supported by recurring revenue; business model that can grow both organically and through acquisitions; strong balance sheet (or the ability to deleverage without external capital) to fund growth strategy internally; catalysts that may result in a step change in the business,” the firm said.
Their picks are:
* ADENTRA Inc. (ADEN-T) with a “buy” rating and $50 target. The average target on the Street is $39.33.
Analysts: “ADEN proved the strength of its business model in 2023. Despite a soft macro environment that weighed on sales, the Company maintained margins, reduced inventory, and paid down debt. We expect ADEN to benefit from a recovery in residential construction that may accelerate with potential interest rate cuts in 2024.”
* Alaris Equity Partners Income Trust (AD.UN-T) with a “buy” rating and $21.50 target. Average: $19.92.
Analysts: “Despite a strong year in 2023 operationally, AD’s stock was volatile driven largely by increased interest rates and ended the year up marginally. We continue to see AD as significantly better positioned today than in the past, while the stock is trading near all-time lows relative to book value and is expected to continue trending higher in 2024.”
* Black Diamond Group Ltd. (BDI-T) with a “buy” rating and $12 target. Average: $10.75.
Analysts: “BDI returns as a top pick for 2024 following a strong showing in 2023 (up almost 76 per cent). We look for continued outperformance this year driven by growth of high margin rental revenue, steadily improving WFS utilization, and scaling of the LodgeLink digital platform.”
* Calian Group Ltd. (CGY-T) with a “buy” rating and $75 target. Average: $73.88.
Analysts: “Calian had a difficult second half of 2023 following its fiscal Q3 results that saw it miss expectations and adjust its IT and Cyberscecurity operations through some restructuring efforts. The company delivered solid Q4/FY23 results, and we believe its FY24 guidance is achievable given the strength in demand in many of its key markets including defense spending, healthcare, and cybersecurity. The company’s shares are trading well below historical norms and with execution of its strategy, we believe the shares are poised to recover in 2024.”
* Cargojet Inc. (CJT-T) with a “buy” rating and $155 target. Average: $137.17.
Analysts: “CJT navigated a weak macro environment in 2023. The Company is expected to show an improvement in margins and strong FCF in 2024. We believe solid financial performance, combined with additional disclosure on progress towards its long-term targets and signs of the macro environment normalizing, will result in share price outperformance as multiples return to historic levels.”
* Gamehost Inc. (GH-T) with a “buy” rating and $13.75 target. Average: $13.75.
Analysts: “2023 was a strong year for GH on the back of strength in provincial consumer spending, adjustments made for inflation, and increased slot commissions. With activity levels in Alberta projected to remain strong along with low levels of unemployment, we believe GH is well positioned for continued outperformance in 2024.”
* Haivision Systems Inc. (HAI-T) with a “buy” rating and $7.50 target. Average: $6.33.
Analysts: “HAI is expected to demonstrate strong financial results following a period of margin compression due to supply chain challenges and recent acquisitions. We expect the stock to outperform as Adj. EBITDA margins near 20 per cent. Our thesis is that this will result in a material rerating of the stock from current levels.”
* Hammond Power Solutions Inc. (HPS.A-T) with a “buy” rating and $94 target. Average: $80.
Analysts: “Hammond has moved from a Dark Horse pick in 2022 to one of the top performing stocks, not only in our coverage universe, but in Canada, in 2023 with a return of 300 per cent. The company is returning to the 2024 Top Picks list as we anticipate strong growth in revenue and EBITDA as many of the demand drivers that pushed it higher over the past two years remain in place. Upgrading of electrical infrastructure, EV charging stations, data centre construction and upgrading due to higher computing power, industrial demand, and expansion of its distribution channels are all pushing revenue growth for the next several years. The company’s shares are just now attracting interest from many institutions, and we believe 2024 will be another rewarding year for shareholders.”
* K-Bro Linen Inc. (KBL-T) with a “buy” rating and $46 target. Average: $43.88.
Analysts: “K-Bro Linen returns to our Top Pick report after a few years as we anticipate strong financial results this year will attract further investor interest. Management has done an excellent job navigating the challenges of the pandemic and has successfully renegotiated the bulk of its long-term contracts to improve margins back to historical levels. We believe the shares are attractively valued at current levels. The company has added to its market share in key Canadian markets in 2023 and we anticipate further acquisition opportunities could add some positive catalysts in 2024.”
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Following Monday’s announcement of the resignation of CEO Nick Brien, Canaccord Genuity’s Robert Young downgraded Enthusiast Gaming Holdings Inc. (EGLX-T) to “hold” from “speculative buy” previously.
“Given the recent management turnover and unexpected departure of new CEO Nick Brien, we see higher risk and prefer to move to the sidelines until we have more clarity on Q4 and the impact of the management transition,” said Mr. Young. We are lowering our recommendation.”
Questioning its profitability, he added: “EGLX was targeting profitability in Q4 on the back of strong seasonality and recent deal activity, including with the NFL. Given the timing of the CEO departure and a lack of financial guidance in the release, the risk that this milestone will be missed is now higher, in our view. As well, we note that EGLX will typically see weaker Q1 seasonality, which makes it unlikely to be profitable, with our current estimates expecting an 11-per-cent quarter-over-quarter dip on the top line. EGLX management signalled positive EBITDA in Q4, though this was critically dependent on activity from Black Friday through to the end of the year. Ad trends appear to be improving, which supports our current estimates that are based on flat growth year-over-year in Q4. This is further supported by estimates from our U.S. Internet Coverage team that are forecasting Q4 ad revenue growth of 15-per-cent year-over-year in their coverage , on the back of a similarly strong Q3 that saw ad revenue up 15 per cent on a tougher comp period.”
Mr. Young now has a 25-cent target, falling from $1.50 and below the $1.71 average.
Elsewhere, Scotia’s Kevin Krishnaratne cut his target by $1 to $1.50 with a “sector outperform” rating.
“Although the loss of a seasoned ad tech veteran may be viewed as a negative, we remain optimistic on the opportunity for EGLX to monetize its unique set of underlying gaming and eSports assets and the coveted Gen Z eyeballs they attract,” said Mr. Krishnaratne. “We continue to see the company as well positioned to drive Adj. EBITDA profitability exiting 2023 as it focuses on its highest-margin revenue streams and executes on cost-optimization efforts. While we maintain our Sector Outperform rating, we are reducing our target to $1.50 (was $2.50), based on 3.0 times EV/GP on F2024E (prior 4.5 times), a roughly 50-per-cent discount to a broad group of digital media and gaming peers given the company’s much smaller revenue base/market cap and lower liquidity.”
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In other analyst actions:
* In response to the firm’s higher precious metals price forecasts and recent share-price weakness, TD Securities’ Craig Hutchison upgraded Endeavour Silver Corp. (EDR-T) to “buy” from “hold” with a target of $4, rising from $3.75. The average on the Street is $5.72.
“We believe that draw-down of the debt-financing facility will be a positive catalyst for the stock, and in combination with a positive 12-month outlook for silver, we view EDR as a high-beta option for investors. The company is also looking to significantly grow its production profile with the start-up of Terronera later this year or early next, which has the capacity to add 7Moz AgEq ounces to the company’s production profile and add 10 years of reserve life,” he said.
* TD Securities’ Derek Lessard hiked his Boyd Group Services Inc. (BYD-T) target to a Street-high $320 from $300, exceeding the $289.79 average, with a “buy” rating.
“We raised 2023 EBITDA forecast by approximately 1.5 per cent reflecting higher Q4 margin assumptions,” said Mr. Lessard. “Also, we have moved to the midpoint of our 14.5-15.5 times target valuation range (pre-IFRS 16 EBITDA) reflecting our increased confidence around Boyd’s growth outlook through 2025.”
“We forecast 14-per-cent revenue CAGR (through 2025) and 23-per-cent EBITDA CAGR given the ongoing margin recovery, making Boyd one of the best earnings profiles in our coverage universe. If Boyd executes against these forecasts, we argue that it should push valuation back up to historical levels.”
* TD Securities’ Cherilyn Radbourne raised her Street-high target for Brookfield Asset Management Ltd. (BAM-N, BAM-T) to US$49 from US$42 with an “action list buy” recommendation. The average is US$39.08.
“We believe that BAM is set to achieve its goal of raising close to $100-billion in 2023, a significant achievement amid one of the most difficult fundraising environments seen in years,” she said. “We attribute BAM’s success primarily to 1) its emphasis on renewables, transition, infrastructure, and credit, which are all growth areas; and 2) the strength of its relationships in the Middle East/Asia-Pacific, where fundraising held up better vs. North America/ Europe. Record 2023 fundraising, plus margin expansion (as BAM winds down recent platform investments), should drive a step-function increase in 2024 fee-related earnings/distributable earnings. BAM’s 2023 fundraising included many company/industry records, most notably the success of BIF V, which raised $30-billion, making it the largest private infrastructure fund ever raised, and the only mega-infrastructure fund to close during 2023 vs. four in 2022.”
* Ahead of the release of its 2024 guidance, Desjardins Securities’ John Sclodnick trimmed his Centerra Gold Inc. (CG-T) target to $11.75 from $12 with a “buy” rating, reaffirming it as his “preferred gold producer pick.” The average is $10.30.
“We have reduced our 2024 copper production and increased our gold production estimates to better reflect the latest comments from management, including on the 3Q conference call, and believe that guidance should be relatively in line with our revised production estimates,” said Mr. Sclodnick. “However, our AISC [all-in sustaining cost] estimate appears to be the Street high and we see risk that 2024 guidance will come in above consensus. However, beyond the guidance announcement, we continue to like Centerra for its best-in-class return-of-capital program, and potential NAV accretion through minelife extension at Mount Milligan and Öksüt, where we model only reserves. Additionally, the company could surface value at its molybdenum business and Goldfields project, and any discoveries at its portfolio of 25 exploration interests are not currently priced into our NAV.”
* Updating his valuation for EQB Inc. (EQB-T) to fall in line with multiple expansion of its peers, TD Securities’ Graham Ryding raised his target for its shares to $105 from $94, reiterating a “buy” recommendation. The average on the Street is $101.88.
“Since EQB’s Q4/F23 results (Dec. 7, 2023), P/E multiples for peers (Big-Six banks and regionals) have increased approximately 1.0 times,” he said. “EQB has moved up in similar fashion. This is likely due to the market putting a higher probability on the potential for interest-rate declines and a softer landing scenario. We are maintaining our estimates at this time. Given the multiple expansion for peers, we are moving our target price multiple higher for EQB (1.2-1.3 times 4QF BVPS [book value per share], up from 1.1-1.2 times previously).”
“In our view, more muted EPS growth in F2024 (vs. recent years) appears reasonable in the context of an environment that could reflect lower loan growth, flat to modestly declining NIMs, and higher PCLs. Nonetheless, EQB has a strong credit track record, and has consistently delivered solid earnings growth, ROE, and BVPS growth. Valuation at 7.7 times 4QF P/E is attractive, in our view, relative to its regional and Big-Six bank peers.”
* Piper Sandler’s Clarke Jeffries increased his Lightspeed Commerce Inc. (LSPD-N, LSPD-T) target to US$20 from US$18, maintaining a “neutral” rating. The average is US$18.97.
* Haywood Securities’ Gianluca Tucci initiated coverage of Tantalus Systems Holding Inc. (GRID-T) with a “buy” rating and $2 target. The average is $2.34.
“Tantalus Systems Holding Inc. is a pure-play smart grid company that is modernizing the utility grid and is already supporting 285 utilities across the U.S., Canada, and the Caribbean Basin with a 99-per-cent retention rate,” he said. “The Company is targeting a $5.8-billio immediate TAM [total addressable market] across the utility sector by upgrading grid infrastructure to support EVs, solar panels, and distributed resource integration. Long-standing customer relationships and high barriers to entry help prioritize the Company’s product roadmap and align with customers’ purpose. Its next-gen TRUSense Gateway should add nine figures of robust opportunity to scale from, providing the next leg of growth.”
“GRID stands to benefit from infrastructural upgrades to ageing and outdated equipment – spending on utility infrastructure and renewable energy projects in North America is expected to continue despite challenges posed by higher interest rates.”
* Stifel’s Cody Kwong cut his Whitecap Resources Inc. (WCP-T) target to $13.25 from $14.75 with a “buy” rating. The average is $13.87.
David Leeder