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

Equity analysts at RBC Dominion Securities added three TSX-listed companies to their “Q1/21 Global Mining Best Ideas Portfolio” on Tuesday.

“For Q1/21, we are maintaining Precious Metals at Overweight and Base Metals at Market Weight,” they said. “We are increasing Diversified/Bulk Commodities and Fertilizers to Overweight, from Market Weight and Underweight, respectively. We are also lowering Uranium to Underweight, from Market Weight.”

Additions to the portfolio were:

* Champion Iron Ltd. (CIA-T)

Firm: “Champion offers investor exposure to growing free cash flow and high quality iron ore production in a stable jurisdiction. As the recently approved Phase 2 expansion to double production at the company’s flagship Bloom Lake mine is developed and derisked we expect Champion shares to re-rate. We also expect Champion to benefit from the current strong iron ore prices and estimate the company can generate $105-million in FCF [free cash flow] per quarter at spot prices, while funding the Phase 2 development (annual FCF yield of 14 per cent). If iron ore prices remain elevated, we could see Champion start to return capital to shareholders within the next 12-months. At spot prices, the shares are trading at 2.1 times calendar 2021 estimated EV/EBITDA compared to the iron ore producers at 4.4 times and the global diversifieds at 3.5 times.”

* Labrador Iron Ore Royalty Corp. (LIF-T)

Firm: “LIF provides investors with exposure to high-quality royalty income. We believe The Iron Ore Company of Canada (IOC) royalty stream provides investors with leverage to iron ore’s upside while limiting operational downside risk. We expect rising sustainable sales volumes, lower unit costs, and reduced capital expenditures at IOC to provide support to LIF’s earnings and distributions. Longer term, IOC’s quality assets and strong growth potential provide additional upside potential. Vale’s lowered production guidance together with record steel production in China underscores the tightness in the iron ore market which we expect to continue in 2021.”

* Osisko Gold Royalties Ltd. (OR-T)

Firm: “Upcoming catalysts include: (1) Initial production from Bonanza Ledge in 1H21, with 62koz of gold expected over a 2-year period, and a feasibility study for the Cariboo asset by 2H21 (22 per cent of NAV from a royalty + equity interest), (2) Further exploration upside as well as a feasibility study for the Windfall project expected 1H22 (9 per cent of NAV from a royalty + equity interest), (3) Resource update and PEA for the Malartic mine by 1Q21 (19 per cent of NAV) operated by Agnico and Yamana which we forecast could extend mine production to >2040 vs. reserve depletion in 2027, (4) Completion of the debottlenecking project at Mantos (10 per cent of NAV) by 4Q21 which is expected to contribute to 50 per cent higher output, (5) Ramp-up to steady state at Eagle Ridge (6 per cent of NAV) expected in 2021.”

TSX-listed stocks remaining on the firm’s list are: Cameco Corp. (CCO-T); Ivanhoe Mines Ltd. (IVN-T); First Quantum Minerals Ltd. (FM-T); Kirkland Lake Gold Ltd. (KL-T); Kinross Gold Corp. (K-T); Endeavour Mining Corp. (EDV-T); Barrick Gold Corp. (ABX-T); Nutrien Ltd. (NTR-T) and Teck Resources Ltd. (TECK.B-T)

“The Q4/20 RBCCM Global Mining Best Ideas equal-weighted portfolio was up 20 per cent (USD) in the quarter, 2 per cent more than the MSCI World Metals and Mining Index benchmark performance of 18 per cent,” the firm said. “Base metals names had the largest gains, driven by a 17-per-cent increase in spot copper price in the quarter due to strong demand from China, low inventory levels, and a softening of the U.S. dollar. Diversified/Bulk names were up 36 per cent in the quarter as iron ore hit $176/dmt, its highest price since September 2011, on record Chinese steel production and a tight supply and demand picture. Fertilizers and Uranium names also had a very strong quarter.”


Scotia Capital analyst Konark Gupta downgraded both Canadian National Railway Co. (CNR-T) and Canadian Pacific Railway Ltd. (CP-T) to “sector perform” from “sector outperform” ratings on Wednesday.

His target for CP shares rose to $465 from $450. The average is $475.71.

His CN target slid to $144 from $152, exceeding the $132.40 average.


Raymond James analyst Frederic Bastien raised his target prices for the Infrastructure & Construction (I&C) and property services providers in his coverage universe on Wednesday.

In a research note reviewing 2020 and looking ahead to this year, Mr. Bastien said: “With trade protectionism giving way to a global fight against a common viral enemy, it paid to stay long the large, defensive and globally diversified stocks we cover. Our best performers for 2019 — long-term compounders Brookfield Renewable, FirstService and WSP Global — took top honours again in 2020 alongside IBI Group. The Street was initially unfriendly to our smaller cap or more geographically concentrated names, but started warming up to them as vaccine progress spread optimism for an economic recovery. Assuming today’s soaring COVID-19 cases do not kibosh this momentum, we expect this ‘rotation’ to continue running its course in 2021.”

His changes were:

  • Aecon Group Inc. (ARE-T, “strong buy”) to $23 from $22. Average: $20.21.
  • Bird Construction Inc. (BDT-T, “strong buy”) to $12.50 from $11. Average: $10.67.
  • Brookfield Infrastructure Partners L.P. (BIP-N/BIP.UN-T, “outperform”) to US$65 from US$60. Average: US$54.23.
  • IBI Group Inc. (IBG-T, “outperform”) to $11 from $9. Average: $10.14.
  • SNC-Lavalin Group Inc. (SNC-T, “market perform”) to $25 from $23. Average: $32.54.
  • Stantec Inc. (STN-T, “outperform”) to $54 from $47. Average: $48.68.
  • WSP Global Inc. (WSP-T, “outperform”) to $140 from $125. Average: $128.38.
  • Brookfield Renewable Partners L.P. (BEP-N/BEP.UN-T, “market perform) to US$45 from US$56. Average: US$40.25.
  • Colliers International Group Inc. (CIGI-Q/CIGI-T, “outperform”) to US$105 from US$90. Average: US$92.67.
  • FirstService Corp. (FSV-Q/FSV-T, “outperform”) to US$155 from US$145. Average: US$128.
  • Black Diamond Group Ltd. (BDI-T, “outperform”) to $4.10 from $3.60. Average: $2.93.
  • Dexterra Group Inc. (DXT-T, “market perform”) to $6.50 from $5.50. Average: $6.46.
  • Russel Metals Inc. (RUS-T, “outperform”) to $27 from $21. Average: $22.93.

“Our favourite small-cap ideas are Bird Construction and Black Diamond Group, which are both entering the year fresh off transformative acquisitions and solid operating results,” said Mr. Bastien. “In the mid-cap category, we believe Aecon Group has the most room to run after a generally disappointing stock performance in 2020, while Stantec arguably has most to gain from a positive re-rating. Lastly, our preferred large-cap option is Brookfield Infrastructure. With some major investments now moving the needle on results, expectations for organic growth to rev up, and an M&A pipeline rich in potential catalysts, we expect our Best Pick for 2021 to lead its industry in cash flow growth this year.”


In a research report previewing the year in the Healthcare and Biotechnology sector, Industrial Alliance Securities’ Chelsea Stellick made a pair of rating changes and unveiled her “2021 Immediate Watch List.”

The analyst upgraded Medical Facilities Corp. (DR-T) to “buy” from “speculative buy” with an $8.60 target (unchanged), which exceeds the $8.21 average on the Street.

“We anticipate that the U.S. will have a decreasingly COVID-19 susceptible population through 2021, making each month less risky than the last with respect to elective surgery and other non-essential services,” said Ms. Stellick. “Over the course of 2020, Medical Facilities (MFC) has better equipped itself to support caseloads during the pandemic. Ambulatory surgical centres (ASCs) can provide an alternative treatment site should case volumes continue to rise, and hospital capacity become strained. MFC has made strategic moves to be in a better position to withstand the continued impacts of COVID-19, such as robust screening and testing processes and increased access to PPE and medical supplies. While we looked at South Dakota as a COVID-19 hot spot, the home of two surgical hospitals, Sioux Falls and Black Hills, MFC has indicated that it continues to see patient volumes rebound to pre-pandemic levels at these centres. The Company has also received inbounds from neighbouring hospitals that need additional support in taking on elective procedures, which is positive for the Company.

“MFC has a growth pipeline of development and M&A opportunities likely to take place through partnerships modelled on its partnership with St. Luke’s Hospital (Private). Growth in the ambulatory surgery center (ASC) market has the potential to grow revenue, grow EBITDA and diversify the geographic mix. We believe MFC will continue to execute positively in 2021 and combined with more confidence and a renewed sense of hope with positive vaccine news, we have increased our recommendation.”

Citing " the risk inherent in holding several development-stage assets without revenue,” Ms. Stellick downgraded Halifax-based Appili Therapeutics Inc. (APLI-T) to “speculative buy” from “buy” with a $3 target (unchanged). The average is $2.37.

The analyst revealed her Watch List, which includes five companies she’s “keeping an eye on” in 2021. They are:

  • Antibe Therapeutics Inc. (ATE-T)
  • Arch Biopartners Inc. (ARCH-X)
  • Medexus Pharmaceuticals Inc. (MDP-X)
  • Opsens Inc. (OPS-T)
  • Sernova Corp. (SVA-X)


Citing its “valuation along with an ability to backfill capital projects in the near term and the near-term visible catalyst in the form of a Feb. 4 investor day,” Credit Suisse analyst Andrew Kuske upgraded Northland Power Inc. (NPI-T) to “outperform” from “neutral” with a $56 target, up from $47.50 and exceeding the $47.71 average.

“For a multitude of reasons, renewable power generation-related stocks largely delivered outperformance over the past year,” he said in a research note. “Most of the performance was attributable to multiple expansion, and we outlined some of the positive issues for the sector in The Renewables Runway and ESG Activity about a year ago. Compared to a year ago, the average EV/EBITDA multiples for the major Canadian renewable stocks moved up by about 4 times (13.2 times to 17.3 times). In addition, on the much-watched yield-related metrics, yields compressed by about 200 basis points. Beyond the expanded multiples, we view pipelines and M&A potential (both as acquirer and target) as becoming a greater part of the valuations across the sector – especially versus other infrastructure areas ... We become more constructive on Northland Power Inc. (NPI) and upgrade the stock to Outperform from Neutral. "

He also raised his targets for these stocks:

  • Boralex Inc. (BLX-T, “neutral”) to $51 from $45. Average: $48.78.
  • Capital Power Corp. (CPX-T, “neutral”) to $40 from $38. Average: $36.82.
  • TransAlta Corp. (TA-T, “outperform”) to $17.50 from $16. Average: $11.67.
  • TransAlta Renewables Inc. (RNW-T, “neutral”) to $21.50 from $19.50. Average: $19.54.

He initiated coverage of Innergex Renewable Energy Inc. (INE-T) with a “neutral” rating and $32 target. The average is $28.19.

“Along with some others, INE is a well-established participant in Canada’s renewable market, with a growing asset base in other markets,” he said. “INE has 2,750MW of net generation capacity and aspirations to grow to 3,500MW. Yet we note that INE is more focused on value per share versus outright megawatt growth alone. On this basis, INE targets a 10-per-cent Adjusted EBITDA Proportionate CAGR by 2025. Given the size of INE’s asset base, we believe that fairly reasonably sized projects can help move the needle and continue to perpetuate the company’s growth. The ability to execute a combination of accelerated development or acquisitions may be partly enhanced given the strategic relationship with Hydro Québec. As with some other renewable stocks, INE’s valuation and cash flow growth profile keeps us on the sidelines.”

Elsewhere, National Bank Financial’s Rupert Merer cut Boralex to “sector perform” from “outperform” with a $54 target, up from $50.


In the response to increases to Industrial Alliance Securities’ copper and nickel price projections, analyst George Topping raised his target prices for base metals producers in a research note titled Reflation has Consequences; Metals Positioned to Take Advantage.

“China, the largest consumer of base metals, actually grew its official GDP by 2.3 per cent last year and will continue to provide strong demand appetite,” he said.. The copper market has enjoyed a strong rebound and the market continues to remain tight (evidenced by exchange stockpiles). Copper COMEX net long contracts are still historically high, so a short-term pullback could be due. But longer term, we think copper will retest the spot high of US$4.60 per pound (2011) on reflation and ‘green’ investment themes to drive demand and hype. As a result, we have advanced our near-term forecasts and adjusted our multiples on benefiting BM equities.”

Mr. Topping made the following changes:

  • Copper Mountain Mining Corp. (CMMC-T, “strong buy”) to $3.80 from $3. The average on the Street is $2.51.
  • First Quantum Minerals Ltd. (FM-T, “hold”) to $26.20 from $19.60. Average: $26.31.
  • Hudbay Minerals Inc. (HBM-T, “buy”) to $14.30 from $12.80. Average: $10.25.
  • Lundin Mining Corp. (LUN-T, “buy”) to $15.70 from $13.90. Average: $12.62.


After its fourth-quarter production and 2021 guidance fell short of the Street’s expectations, a group of equity analysts lowered their target prices for shares of Pan American Silver Corp. (PAAS-Q, PAAS-T).

Those making changes included:

* CIBC World Markets’ Cosmos Chiu to US$43 from US$48.50 with an “outperformer” rating.

* Canaccord Genuity’s Dalton Baretto to US$42 from US$44 with a “buy” rating.

* National Bank Financial’s Don DeMarco to $56 (Canadian) from $60 with a “sector perform” rating.

* BMO Nesbitt Burns’ Ryan Thompson to US$38 from US$42 with an “outperform” rating.

* Deutsche Bank’s Chris Terry to US$26 from US$35 with a “hold” rating.

The average target on the Street is US$41.33.


AGF Management Ltd. (AGF.B-T) now possesses an “attractive valuation with improving fundamentals,” according to Desjardins Securities analyst Gary Ho.

Ahead of the Jan. 27 release of the Toronto-based firm’s fourth-quarter financial results, he raised his earnings expectations for 2020 through 2022.

“We foresee a few near- or medium-term positive catalysts: (1) use of proceeds in relation to debt pay-down, share buybacks and growth initiatives; (2) growth in fees/earnings from its alt platform; (3) execution on SG&A cost reduction to improve EBITDA and EBITDA margins; (4) change in investor narrative; and (5) the shares offer a 5.0-per-cent dividend yield,” he said.

For the quarter, he’s projecting adjusted earnings per share of 15 cents, excluding a gain on the sale of Smith & Williamson, exceeding the 12-cent consensus on the Street.

Mr. Ho increased his 2020, 2021 and 2022 earnings per share projections to 42 cents, 62 cents and 81 cents, respectively, from 38 cents, 423 cents and 68 cents.

Keeping a “buy” rating, he also raised his target for AGF shares by a loonie to $8. The average is $6.67.


Believing the “hydrogen economy has arrived,” Citi analyst P.J. Juvekar initiated coverage of Ballard Power Systems Inc. (BLDP-Q, BLDP-T) with a “buy” rating, calling it the “undisputed leader in heavy duty mobility.”

“After decades of false starts, the hydrogen economy is set to accelerate driven by regulation in Europe, China and now the U.S., after the Democratic win,” he said. “Ballard is focused on fuel cell electric vehicles (FCEVs) for heavy duty (HD) applications including buses, trucks, rail, and marine with a $130B total addressable market by 2030. We conservatively model BLDP sales achieving 2-per-cent global share by 2030. We rate BLDP shares Buy/High Risk, although anticipate growth will be back-end loaded & earnings won’t breakeven before 2023. We expect shares to be volatile with the recent run-up and recommend them for long-term investors. The key risk is that Ballard’s growth depends on its partners scaling up hydrogen infrastructure as Ballard is not back-integrated into hydrogen production.”

Mr. Juvekar set a US$42 target, which exceeds the US$31.24 consensus.

“We like BLDP’s strategy targeting the truck and bus market in China, Europe and California. However, we think that growth is likely back-end loaded in the next five years and the company does not have an end-to-end market strategy relying on the build out of hydrogen supply infrastructure,” he said.


Citi analyst Timothy Thein thinks the risk/reward proposition for Caterpillar Inc. (CAT-N) now “looks fairly balanced,” prompting him to downgrade his rating for the industrial bellwether to “neutral” from “buy.”

“We see a number of factors limiting the read-through between the earnings upcycle that started in 2017 and today,” he said. “Mix in CI is unlikely to provide the same benefit given further projected growth in (lower margin) compact equipment in NA, while China competition has intensified. O&G capex budgets look nothing like they did then, and E&T is unlikely to see a similar benefit from engine overhauls. CAT inventory levels are relatively high today whereas it had de-stocked for 4 yrs into 2017.”

Mr. Thein made the move despite raising his 2021 earnings per share projections to US$7.65 from US$7.20 to reflect stronger end market outlooks.

“We still see scope for upside in the stock especially should the current global reflation/weaker USD theme persist, but not enough to warrant a Buy,” he said. “All else equal, we would need better conviction in a runway to mor ethan $11 per share in 2022 EPS, which we lack at this point. With high buy-side expectations, we see risk that the translation from ‘macro improvement’ to CAT’s bottom line could disappoint.”

His target for Caterpillar shares rose to US$205 from US$175. The average on the Street is US$183.06.

“While we see a favorable reflationary macro backdrop supporting the stock, we believe market expectations for the rate of earnings growth create a challenging set-up for the stock in the nearterm,” the analyst added. “This is not a call on the group, as we still have roughly half of our coverage Buy-rated, but rather our view that we would await a better entry point before building a major position in the stock.”


In other analyst actions:

* Raymond James analyst Bryan Fast raised his target for Blackline Safety Corp. (BLN-X) to $10 from $8.75, which is the current consensus. He kept an “outperform” recommendation.

“Our thesis remains predicated on a very large and lucrative long-term opportunity - one that we do not believe has materially changed with events brought on by the pandemic,” said Mr. Fast. “We expect this industrial IoT company to continue to disrupt legacy markets with its innovative mobile safety devices and expect further commercial success of Blackline’s expanding suite of solutions. Momentum heading into the new year has set the stage for the company to take advantage of a normal business environment. We included Blackline as our Best Pick for 2021 and maintain our constructive view.”

* National Bank Financial analyst Endri Leno resumed coverage of Theratechnologies Inc. (TH-T) with a “sector perform” rating and $3.75 target. The average on the Street is $5.85.

* National Bank’s Adam Shine raised his target for Stingray Group Inc. (RAY.A-T) to $9 from $7.50, keeping an “outperform” rating. The average is $8.

* National Bank’s Cameron Doerksen increased his target for Exchange Income Corp. (EIF-T) to $42 from $40 with an “outperform” rating. The average is $41.15.

* Scotia Capital analyst Jason Bouvier hiked his target for Whitecap Resources Inc. (WCP-T) to $6 from $2.50 with a “sector perform” rating after coming off research restrictions. The average is currently $5.43.

“We believe the cumulative $1.1-billion in transactions provide WCP with the critical mass and operational overlap necessary to lower its cost structure. In addition, we believe the increased scale will help attract institutional investor interest,” said Mr. Bouvier.

* Scotia’s Tanya Jakusconek cut her target for Iamgold Corp. (IAG-N, IMG-T) to US$4 from US$4.25 with a “sector perform” rating, while Credit Suisse’s Fahah Tariq also lowered his target to US$4 from US$4.25 with a “neutral” recommendation. The average is US$4.90.

* National Bank Securities analyst Zachary Evershed increase his target for Canwel Building Materials Group Ltd. (CWX-T) by a loonie to $8.50, topping the $8.44 average. He kept an “outperform” rating.

* Laurentian Bank Securities analyst Jacques Wortman lowered Fortuna Silver Mines Inc. (FVI-T) to “hold” from “buy” with a $10 target, down from $11. The average is $11.16.

* TD Securities analyst Craig Hutchison raised his Capstone Mining Corp. (CS-T) target to $3.50 from $3 with a “buy” rating, while BMO Nesbitt Burns’ Rene Cartier moved his target to $3 from $2.60 with an “outperform” recommendation. The average is $3.02.

* CIBC’s Scott Fromson cut his target for Airboss of America Corp. (BOS-T) to $28 from $31 with an “outperformer” rating. The average is $30.20.

* Canaccord’s Katie Lachapelle raised her target for Neo Lithium Corp. (NLC-X) to $4.20 from $3.40 with a “speculative buy” recommendation. The average is $3.34.

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