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

Secure Energy Services Inc. (SES-T) is likely to continue to face weak drilling and completion activity, said Canaccord Genuity analyst John Bereznicki following Tuesday’s release of its second-quarter report that displayed the “strong” headwinds endured by the Calgary-based company.

“We nonetheless believe the company’s cost containment and capital discipline should allow it to stay inside its debt covenants,” he said.

Though the quarterly results fell short of his expectations, Mr. Bereznicki upgraded Secure shares to “buy” from “hold,” seeing an “improving risk-reward profile.”

“After market close, Secure reported consolidated core revenue that missed our estimate by 20 per cent, with headline EBITDA of $20.5-million that nonetheless surpassed our $15.7 million estimate (which approximated consensus),” the analyst said. “Despite facing greater-than-expected volume headwinds in Q2/20, Secure benefited from ongoing cost containment and an $11.2-million benefit from the Canada Emergency Wage Subsidy (CEWS) program to yield normalized EBITDA of $9.3-million. Secure exited Q2/20 with (in-line) net debt of 4.5 times 2020 estimated EBITDA, and the company remains committed to its previously announced $60-million capital program in 2020 and $40-million (annualized) cost reduction program.

“Notwithstanding Secure’s challenging second quarter, we see an improving risk-reward profile as production shut-in risks ease and the company benefits from its strategic investments at Kerrobert and Cushing.”

Mr. Bereznicki raised his target for Secure shares to $2.50 from $2. The average target on the Street is $2.93.

Elsewhere, Industrial Alliance Securities analyst Elias Foscolos said Secure’s second-quarter “boosts confidence” in its ability to navigate the downturn in the energy industry.

Mr. Foscolos raised his target for Secure shares to $2.50 from $2.25, keeping a “speculative buy” rating.

“SES’s Q2/20 results were better than expected, as the Company met lower activity levels with effective cost control,” he said. “Margins were skewed a bit positively by CEWS, and our estimates remain largely unchanged as we believe the quarter mostly reinforces our constructive outlook for the Company. SES broke even on FCF, and cash flow will be further improved going forward due to several factors: a) the expected return of shut in production and an increase in drilling, b) lower go-forward capital spend, c) the reduced dividend, and d) fee-for-service cash flow from the East Kaybob Oil Pipeline. We do not forecast a covenant breach on SES’s debt.”


After reporting “solid” second-quarter results despite the COVID-19 pandemic, Desjardins Securities analyst Benoit Poirier sees TFI International Inc. (TFII-T) “well-positioned to leverage its solid balance sheet to unlock shareholder value through M&A.”

On Tuesday, the Montreal-based transport and logistics company reported revenue before fuel surcharge of $1.025-billion, meeting Mr. Poirier's $1.02-billion expectation. However, adjusted EBITDA and earnings per share of $228-million and $1.04, respectively, exceeded his projections ($167-million and 54 cents). Free cash flow of $216-million also blew past the Street's $103-million estimate.

Mr. Poirier also emphasized TFI introduced a bullish outlook for 2020 "with more to come in 2021 as it reaps the benefits of its recent restructuring efforts."

“As business activity restarts with the reopening of economies in North America, certain cost-saving measures implemented at the beginning of the pandemic have been rolled back,” he said. “TFII has reinstated a full five-day work week for 594 employees and rehired 793 full-time employees who had been furloughed. These improvements in market conditions enabled management to introduce guidance for 2020, which calls for adjusted EPS of $3.40–3.75 (we now forecast $3.52). Management noted that there is even more upside in 2021 considering recent restructuring efforts undertaken during the pandemic. It expects to generate FCF of $425–460-million (we remain conservative and forecast $424-million).”

With his increased earnings expectations, Mr. Poirier raised his target for TFI shares to $65 from $59, keeping a "buy" rating. The average on the Street is $58.55.

“The 2Q results give us further confidence that TFII has what it needs to get through this crisis and emerge even stronger,” he said. “With its solid balance sheet (funded debt/EBITDA of 1.67 times) and disciplined management team, we expect TFII to seize more accretive M&A opportunities to unlock value for shareholders.”

Elsewhere, Laurentian Bank Securities’ Mona Nazir hiked her target to $65 from $49 with a “buy” rating.

Ms. Nazir said: “Despite a cautious tone and prior foreshadowing of Q2/20 softness across over 75 per cent of TFI’s operating segments, we view the 40-per-cent EBITDA beat and 90-per-cent-plus EPS beat vs. consensus as positive, albeit surprising. The 17-per-cent revenue contraction was driven by double digit declines in P&C, LTL, and TL divisions, and was completely offset by its cost containment strategy alongside assistance from the CEWS program. We continue to like TFI due to its strong management team, double digit FCF yield, balance sheet flexibility and diversified business model.”


Desjardins Securities analyst John Chu expects Meta Growth Corp. (META-X) to “to leverage its large retail store network, retail expertise and sales data to emerge as one of the premier cannabis retailers in Ontario and Canada.”

In a research note released Wednesday, he initiated coverage of Toronto-based retailer with a "buy" rating.

"The cannabis retail landscape is poised for strong growth, especially in Ontario," said Mr. Chu. "Canada remains underserved, and specifically Ontario, where significantly more stores are expected to be added going forward (from 75 licences at the beginning of 2020 to 250 by year-end). Retail offers good exposure to the strong growth of the cannabis sector and at a lower risk, in our view."

"Meta ranks among the industry retail leaders in operational stores across five provinces. It also ranks in the top five in terms of total revenue and revenue per store. These metrics should improve as it increases its presence in Ontario."

Mr. Chu said Meta Growth solidified its entry into the Ontario market with three recent acquisitions, and has focused its growth capital on the province. He expects the company to begin receiving licence approvals in the coming months.

“Meta is expected to leverage its scale and retail expertise to efficiently build out new stores. It should also be in a solid position to better control the shelves to help build its brand. Its growing database of sales data should also help it more efficiently manage its inventory, pricing strategy and incentive programs, and stay ahead of changing industry consumer trends.”

Mr. Chu set a target price of 25 cents per share. The average on the Street is 30 cents.

"Meta represents a premium national cannabis retail network driven by innovation, technology and service," he said.


Analysts at Canaccord Genuity reaffirmed their bullish stance on gold on Wednesday, expecting the precious metal to top US$2,000 per ounce.

"We note that gold is up 86 per cent this bull market cycle (starting December 2015), below the average bull market gain of 111 per cent," they said.

In a research report released before the bell, the firm raised its forward-curve price deck by 5 per cent. It's long-term gold price is US$2,015 per ounce, up from US$1,926.

Their bullish stance is based on four factors: continued accomodative fiscal and monetary policies for the foreseeable future; inflation expecations normalizing; slow growth and rising debt levels and supply remaining “challenged.”

At the same time, Canaccord raised its silver price assumption by 25 per cent with a new long-term price of US$25.83 per ounce (from US$20.64).

With its price deck changes, the analysts raised their target prices for stocks in their coverage universe.

Analyst Dalton Baretto made raised his rating for a pair of stocks:

  • Pan American Silver Corp. (PAAS-Q, PAAS-T) to “buy” from “hold” with a US$44 target, up from US$36. Average: US$36.15.
  • Hecla Mining Co. (HL-N) to “hold” from sell” with a US$6 target, up from US$4. Average: US$3.99.

Analyst Carey MacRury made the following target changes to senior producers:

  • Newmont Corp. (NEM-N/NGT-T, “buy”) to US$90 from US$83. Average: US$75.84.
  • Barrick Gold Corp. (ABX-T, “hold”) to $47 from $43. Average: $45.50.
  • Agnico Eagle Mines Ltd. (AEM-T, “buy”) to $120 from $110. Average: $104.18.
  • Kirkland Lake Gold Ltd. (KL-T, “buy”) to $75 from $70. Average: $69.96.
  • Kinross Gold Corp. (K-T, “buy”) to $16 from $15. Average: $12.72.
  • Yamana Gold Inc. (YRI-T, “buy”) to $11 from $10. Average: $8.58.
  • B2Gold Corp. (BTO-T, “buy”) to $11.50 from $11. Average: $9.31.
  • Endeavour Mining Corp. (EDV-T, “buy”) to $47 from $42. Average: $44.36.


Though TSX-listed independent power producers have outperformed recently, Raymond James analyst David Quezada thinks there remains upside for investors.

“Buoyed by a variety of factors including ultra low bond rates, continued ESG inflows, and a relative lack of exposure to COVID-19, the renewable IPPs (INE, BLX, NPI) have outperformed over the past month, rising 15 per cent on average (vs. the remainder of the peer group up 5 per cent and the TSX up 6 per cent). This has brought each of Northland, Boralex, and Innergex to new all time highs,thus prompting the natural question of how much room is left to run. While the potential for the green attributes of these businesses to draw ESG focused investors and drive valuations above historical peaks is difficult to quantify, we also point to the low bond rate environment as supportive of trading multiples toward the high end of historical ranges; we also note, in each case, we do not believe the high end has been reached at this point.”

In a research report, Mr. Quezada raised his target for a trio of stocks and reiterated his "constructive" stance:

  • Northland Power Inc. (NPI-T) to $38 from $33. The average on the Street is $34.55.
  • Boralex Inc. (BLX-T, “strong buy”) to $37 from $34. Average: $34.
  • Innergex Renewable Energy Inc. (INE-T, “strong buy”) to $25 from $23. Average: $22.22.

“After a remarkable run from March 2020
lows, renewable power stocks Boralex, Northland, and Innergex led the pack in terms of performance in recent weeks with the stocks returning an average of 70 per cent (vs. the TSX up 44 per cent) and residing within shooting distance of all time highs,” he said. “By our calculations, this puts respective EV/EBITDA trading multiples above the mid point of historical ranges and in some cases, close to historical highs. That said, with a combined market cap of just $14.2-billion (small relative to the growing pool of capital pursuing such investments), we continue to believe potential upside remains as sustainability focused investors represent a source of inflows. Among the utilities, we maintain a generally positive stance as the effects of COVID-19 on demand have thus far been modest — from an earnings perspective — while the stocks remain materially below recent highs, on average. As such, we regard the current combination of valuations levels and ultra-low bondrates as an outlier relative to the historical relationship.”

At the same time, Mr. Quezada downgraded TransAlta Renewables Inc. (RNW-T) to “market perform” from “outperform” with a $16.50 target (unchanged). The average on the Street is $16.05.

“We note the stock has appreciated roughly 20 per cent since our late March upgrade (vs. the TSX up 22.7 per cent) and, in light of relatively modest growth profile relative to peers,we are adjusting our rating,” he said.


High Tide Inc. (HITI-CN) is “well-positioned to capitalize on the Canadian cannabis retail opportunity,” said Echelon Capital Markets analyst Andrew Semple, pointing to the success of its Canna Cabana retail concept elsewhere.

He initiated coverage of the Calgary-based company with a “speculative buy rating and 35-cent target. He’s currently the lone analyst on the Street covering the stock.

“In Ontario – perhaps the most attractive investment opportunity in the entire Canadian cannabis industry – High Tide has obtained more licenses than any independent cannabis retailer to date,” said Mr. Semple. “In Alberta, its stores generate sales that are approximately 40-50 per cent above the provincial average. Proof that the Company’s business model is working was demonstrated in its FQ220 results, where sales/store reached $2.2-million (the highest amongst peers) and High Tide became the first pure-play Canadian cannabis retailer to report positive adj. EBITDA. We anticipate a sequential improvement to both metrics in FQ320 results.

“We believe High Tide will build on these initial successes, extracting further benefits from operating leverage and economies of scale. In our view, the Company is being unfairly discounted in the marketplace with a multiple well below what is deserved for a high growth retailer of consumer staples products. While High Tide will need additional capital to fuel its steep growth trajectory, we believe further evidence of operational progress and improved profitability should put these concerns to rest, eventually supporting a positive revaluation.”


In other analyst actions:

* Prior to Wednesday morning’s announcement that it has been acquired by Bird Construction Inc. (BDT-T), ATB Capital Markets analyst Chris Murray downgraded Stuart Olson Inc. (SOX-T) to “underperform” from “sector perform” with a 70-cent target, down from $1. The average on the Street is 77 cents.

“Our decision to lower our rating reflects both our assessment of risk and expected returns. The Company’s recent decision to pay interest for the quarter in shares in a dilutive manner highlights to us the risk in the Company’s balance sheet, the Firm’s weak near-term earnings and the lengths it is going to preserve sufficient liquidity to maintain operations.

* Credit Suisse analyst Andrew Kuske downgraded Brookfield Infrastructure Partners (BIP.UN-T, BIP-N) to “underperform” from “neutral” with a US$40 price target (unchanged). The average on the Street is US$47.54.

* RBC Dominion Securities lowered Just Energy Group Inc. (JE-T) to “underperform” from “sector perform” with a 30-cent target. The average on the Street is 40 cents.

* National Bank Financial analyst John Sclodnick downgraded Barsele Minerals Corp. (BME-X) to “sector perform” from “outperform” with a 60-cent target, matching the consensus and down from $1.

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