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

George Weston Ltd.’s (WN-T) plan to sell its North American bakery business is a positive move toward “unlocking value” and allows it to focus on its core retail and real estate businesses, according to Desjardins Securities analyst Chris Li.

“WN indicated that both L and CHP.UN are well-funded and there would be no need for incremental capital in the normal course of business,” he said. “Competitor Aryzta is selling its North American bakery business to private equity Lindsay Goldberg for US$850-million cash at an implied valuation of 10.3 times EV/LTM EBITDA [enterprise value to last 12 month earnings before interest, taxes, depreciation and amortization]. Applying 9–10 times to WF (2020 EBITDA) would impute a sale price of $1.9-billion.”

At the same time, Mr. Li expects the management transition at Loblaw to be “smooth,” calling the incoming team “highly experienced and familiar with Loblaw and the grocery industry.”

Reiterating a “buy” rating for George Weston shares, he raised his target to $116 from $112. The target on the Street is $117.83.

“Our pro forma NAV (2021) is $127 per share, which implies a 15-per-cent holdco discount,” he said. “As there is better visibility from the sale and use of proceeds, we expect the holdco discount to narrow to 10 per cent, which in turn increases our target to $116 from $112. While the ‘right’ holdco discount is debatable, we believe there is also upside from our L price target, which may be conservative as the company continues to improve on its execution and achieve its growth objectives. Our $69 target for L implies 13.7 times P/E (2022 estimates) vs current valuation of 15.0 times (2021 estimates); applying a 15 times P/E multiple supports a $75 target. L plans to provide an update of its strategy post the management transition in May.”

Elsewhere, Scotia Capital analyst Patricia Baker increased her target to $117 from $115, maintaining a “sector outperform” rating , while BMO Nesbitt Burns’ Peter Sklar hiked his target to $120 from $107 with a “market perform” recommendation.


In response to recent share price appreciation, Raymond James analyst Steven Hansen lowered CanWel Building Materials Group Ltd. (CWX-T) to “market perform” from “outperform” on Wednesday.

“We are downgrading our rating on CanWel Building Materials ... based upon the stock’s outsized surge over the past 10 weeks, leaving it just shy of our current target price (unchanged),” he said. “Our robust fundamental outlook with respect to the company’s key end-markets remains unchanged.”

Seeing its shares starting to reflect that outlook, he maintained a $10.50 target, exceeding the $10 average.

“CanWel shares have enjoyed a tremendous performance over the past year (CWX: up 270 per cent vs. TSX: up 68 per cent), including an outsized 28-per-cent surge over the past three weeks,” said Mr. Hansen. “As suggested in our recent company comments ... we remain demonstrably upbeat on CanWel’s key end-markets, with housing activity and LBM prices perched at near-record levels on the back of ultra-low interest rates, a brisk economic recovery, and shifting urban vs. rural demographics. That said, with only 6-per-cent upside remaining to our current (unchanged) target, we feel it prudent to move to the sideline at this juncture.”


Ahead of the release of its first-quarter results on March 31, Desjardins Securities’ Gary Ho reaffirmed AGF Management Ltd. (AGF.B-T) as his top asset manager pick, seeing the Toronto-based firm “humming along.”

The analyst expects AGF to reported earnings per share for the quarter of 13 cents, matching the result of the same period a year ago and a penny above the consensus forecast on the Street. He’s projected assets under management of $36.7-billion, up from $36.2-billion in the first quarter of 2020 and $34.5-billion in the fourth quarter of that year.

“We foresee a few near- or medium-term positive catalysts: (1) proceeds to redeploy into organic growth, seed new private alt strategies and share buybacks; (2) growth in fees/earnings from its alt platform; (3) execution on SG&A cost reduction to improve EBITDA and EBITDA margins; and (4) DSC ban benefiting FCF and EPS,” said Mr. Ho.

Maintaining a “buy” rating for AGF shares, he increased his target to $9.50 from $9. The current average is $7.86.


Summit Industrial Income REIT (SMU.UN-T) provides “premium growth prospects with pure-play industrial exposure to Canada’s strongest markets,” according to Raymond James analyst Brad Sturges.

In a research report released Wednesday, he initiated coverage with an “outperform” recommendation.

“Summit is uniquely positioned as the largest pure-play Canadian REIT that is solely focused on the Canadian industrial property market,” said Mr. Sturges. “Specifically, the Greater Toronto Area (GTA) and Greater Montreal Area (GMA) property markets account for 65 per cent of the REIT’s industrial facility portfolio footprint. Both Toronto and Montreal feature: 1) low average vacancy rates; 2) growing leasing demand for high-quality industrial real estate; 3) limited land available to develop modern, ecommerce friendly industrial facilities; and 4) rising land and development costs (partly through increasing municipal development charges). Given these factors, both Toronto and Montreal are forecasted by many industry observers to generate robust industrial rent psf growth year-over-year in 2021, and beyond.”

With it “ramping up” its development program to take advantage of the strong property fundamentals, Mr. Sturges set a $15.75 per unit target. The average is now $15.

“We expect Summit’s relative P/AFFO multiple and NAV premium valuation can continue to be supported by the long-term favourable outlook for above-average rent growth in the REIT’s largest markets,” he said. “In the meantime, Summit has been afforded a favourable cost of capital to execute its acquisition and development growth strategies, which if successfully executed, could drive additional AFFO/unit accretion for Summit.”


After “solid” fourth-quarter financial results, Canaccord Genuity analyst Derek Dley thinks Trulieve Cannabis Corp.’s (TRUL-CN) 2021 guidance “leaves plenty of room” to surpass expectations again.

Before the bell on Tuesday, the Florida-based company reported quarterly revenue of $168 million, topping Mr. Dley’s $159-million estimate and consensus forecast of $162-million. Adjusted EBITDA of $78-million was in line with the analyst’s $79-million forecast and ahead of consensus at $76-million.

“Trulieve reported another strong quarter, with robust sequential revenue growth and continued industry leadership on the EBITDA margin line,” said Mr. Dley. “Despite ramping up a new state in Pennsylvania during the quarter, Trulieve still delivered a 46-per-cent EBITDA margin during the quarter, which remains best-in-class by a wide margin. Looking ahead to 2021, Trulieve’s guidance implies a healthy mid-40-per-cent EBITDA margin which remains the industry standard for 2021.”

Concurrently, Trulieve released 2021 guidance of $815-850 million in revenue and $355-375 million in EBITDA, which represents year-over-year growth of 60 per cent and 45 per cent at the midpoint, respectively.

“For context, in Q2/20 Trulieve bumped its 2020 guidance to $475-million in revenue and $215-million in EBITDA,” the analyst said. “The company delivered $522 million in revenue and $251 million in EBITDA, or 10 per cent and 17 per cent above guidance.

“Given the company’s ample growth opportunities in its core markets of Florida, Pennsylvania, and Massachusetts, we expect Trulieve to step on the gas in terms of growth initiatives within those core states. Trulieve plans to open 39 new dispensaries in 2021, having already opened eight new dispensaries to start the year, reaching 114 dispensaries nationwide by the end of 2021. Trulieve’s store network remains highly productive with fully ramped stores generating between $10-11 million in annual revenue.”

To reflect its “position as a true multi-state operator with footprints in some of the most favourable markets in the United States,” Mr. Dley raised his target for Trulieve shares to $87 from $75, maintaining a “speculative buy” rating. The average is $79.65.

“Given Trulieve’s healthy financial position, access to capital, and best-in-class profitability metrics, we believe the stock is attractive for investors looking for cannabis exposure to a high-quality operator with a proven ability to generate strong EBITDA and profitability,” he said. “With Trulieve currently trading at 11 times our 2022 EBITDA estimate, and given Trulieve’s dominant and growing position in the attractive Florida market and exposure to the high-growth Pennsylvania and Massachusetts markets, we believe the shares are undervalued at current levels.”

Meanwhile, Haywood Securities analyst Neal Gilmer raised his target to $80 from $55, keeping a “buy” rating.


Touting its multi-segment strategy to capture market share in the medical direct-to-patient and Canadian adult-use channels,” Canaccord Genuity analyst Shaan Mir initiated coverage of WeedMD Inc. (WMD-X), an Aylmer, Ont.-based cannabis company, with a “speculative buy” rating on Wednesday.

“We believe the company offers a unique medical cannabis strategy that has secured preferred access to 350,000 patients while sharing in the upside potential of the Canadian adult-use market (with brands that have already begun to garner attention),” he said. “In addition, WeedMD has coupled with a strategic partner in LiUNA pension fund of Canada, which holds an 29-per-cent stake (and 33 per cent when including insiders) and offers access up to a potential more than 500,000 union members across its North American profile (contingent on signing additional LiUNA localities).”

“Although management is still actively pursuing new relationships, focus has now shifted to increasing patient adoption rates, which should drive profitable growth for the segment.”

Mr. Mir said limited product diversity has led to “modest “exposure for WeedMD in the Canadian recreational market, however he thinks its sales are now “primed for growth.”

“The company’s products have gained attention after winning Sativa Flower of the Year at the 2020 KIND awards and placing as the OCS’s top vape cartridge shortly after launch. We believe continued product diversification (with hash, live resin and rosin expected in H1/20), along with new manufacturing partnerships and sales representatives, will support increased recreational market penetration throughout FY21,” he said.

Touting its attractive valuation compared to its peers, Mr. Mir set a 60-cent target for WeedMD shares, exceeding the 30-cent average.

“WeedMD trades at 1.5 times our calendar 2022 EV/ Rev estimate, a notable discount to the Canadian LP peer average at 4.7 times and Tier-3 operators at 2.3 times,” he said. “With infrastructure set to realize growth through both medical and adult-use markets, trailing revenues ahead of Tier-3 peers, and no balance sheet overhang, we believe the company should close the gap to mid-tier operators which currently trade at 3.5 times.”


Pure Extracts Technologies Corp. (PULL-CN) is well positioned for success with its Cannabis 2.0 offerings and the potential gains from functional mushrooms, according to Fundamental Research analyst Sid Rajeev.

Emphasizing its “strong” cash position from a recently completed $8.5-million equity financing, he Initiated coverage of the Vancouver-based company, which began trading on the Canadian Securities Exchange in November of 2000, with a “buy” rating.

On Tuesday, Pure Extracts announced its first order of mushrooms for its e-commerce store. That followed the sale of its first batch of cannabis oil extracts to a German pharmaceutical company on March 11.

“Considering the company already has its production facility set up and licensed, with distribution arrangements locally, and shipments internationally, we believe Pure Extracts has high growth potential within the growing Cannabis 2.0 industry, and the budding medical cannabis segment of the pharmaceutical industry,” he said. “Although we are not in a position to verify the company’s claims regarding high purity levels, we believe the German pharmaceutical sales order is highly encouraging.”

Currently the lone analyst on the Street covering the stock, Mr. Rajeev set a fair value of 90 cents per share.


In other analyst actions:

* Morgan Stanley analyst Ioannis Masvoulas downgraded Lundin Mining Corp. (LUN-T) to “equal-weight” from “overweight” with a $13.50 target, up from $12.80.

* TD Securities analyst Menno Hulshof upgraded MEG Energy Corp. (MEG-T) to “buy” from “hold” with a $9.50 target, up from $7 and above the $7.72 average.

* TD’s Dustin Besaw moved his target Crescent Point Energy Corp. (CPG-T) to $8 from $4.25 with a “buy” rating. The average is $5.71.

* PI Financial analyst Phil Ker initiated coverage of Benchmark Metals Inc. (BNCH-X) with a “buy” rating and $2.20 target.

“We view Lawyers project as an overlooked Au-Ag project that warrants merit based on its near-surface above average grade potential which offers project optionality. Plus, we see resource growth upside from untested targets and underground potential,” said Mr. Ker.

* Canaccord Genuity analyst Robert Young raised his target for Enthusiast Gaming Holdings Inc. (EGLX-T) to $12 from $8.75, keeping a “buy” rating, while Colliers Securities analyst Derek Soderberg hiked his target to $12 from $6.50 also with a “buy” recommendation. The average is $12.33.

“Enthusiast reported Q4 results comfortably ahead of our model on the top line alongside better-than-expected gross margins, benefitting from expansion of the direct sales and subscription elements of the business,” he said. “EBITDA was modestly below our expectation due to a pickup in hiring to build capacity in front of demand. Management’s tone was bullish with a shift from audience building towards a focus on monetization. The direct sales business is beginning to accelerate as the front of the funnel benefits from growing RFP volume, growing conversion to bookings and as customer mandates grow in size. Also in the quarter, the subscription business continued to grow through user growth and shift towards annual plans from monthly plans. Despite the recent share appreciation, we remain confident in Enthusiast’s ability to grow revenue and expand margins in 2021 and 2022.”

* Canaccord Genuity analyst Doug Taylor increased his target for Mogo Finance Technology Inc. (MOGO-T) by a loonie to $14 with a “hold” recommendation (unchanged). The average on the Street is $12.25.

“Mogo reported Q4 results on Tuesday with revenue and EBITDA ahead of expectations driven by stronger than expected activity on its MogoCard and MogoCrypto trading platform,” he said. “The company has been utilizing its rising share price to rapidly expand its capabilities through M&A. Today’s Moka acquisition is the latest example following Coinsquare in February. We view Mogo’s use of its improved valuation to consolidate synergistic fintech assets as a positive development. We have raised our target to reflect the company’s ongoing acquisition activity and continue to see the current valuation as reasonable in the context of recent M&A and the offsetting dilution.”

* TD Securities initiated coverage of Altius Renewable Royalties Corp. (ARR-T) with a “speculative buy” recommendation and $15.50 target.

* Piper Sandler analyst Tyler Van Buren raised his Aptose Biosciences Inc. (APTO-Q, APS-T) to US$12 from US$10 with an “overweight” rating, while Oppenheimer’s Matthew Biegler bumped up his target to US$9 from US$8 with an “outperform” recommendation. The current average is US$11.11.

* * Raymond James analyst Rahul Sarugaser bumped up his HLS Therapeutics Inc. (HLS-T) target by $1 to $28 with an “outperform” rating. The average is $32.54.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 16/04/24 2:47pm EDT.

SymbolName% changeLast
Lundin Mining Corp
Trulieve Cannabis Corp
George Weston Limited
Altius Renewable Royalties Corp
Aptose Biosciences Inc
AGF Management Ltd Cl B NV
Enthusiast Gaming Holdings Inc
Mogo Inc
Meg Energy Corp
Crescent Point Energy Corp
Hls Therapeutics Inc

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