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

Equity analysts at Scotia Capital sees “significant value” in the Canadian energy space, expressing increasing bullishness on oil prices.

In a research report released Wednesday, Jason Bouvier, Cameron Bean and Gavin Wylie said there’s “plenty” of upside in the sector despite a recent run-up in share price.

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“In the last six months, the Canadian Large Cap space is up almost 67 per cent while the SMID cap oils are up 95 per cent. “Even with the strong move higher, 2022 estimated DAFCF [debt-adjusted free cash flow] yields (at $60 WTI) average 12 per cent, 14 per cent, and 14 per cent in the Large caps, SMID caps, and International names, respectively.”

In order to “increase torque to oil prices,” Mr. Bouvier made a trio of rating changes to stocks in his coverage universe.

He upgraded Baytex Energy Corp. (BTE-T) to “sector perform” from “sector underperform” with a target of $2.25, rising from $1.75. The average on the Street is $1.87, according to Refinitiv data.

“Baytex continues to be focused on balance sheet and cost structure improvement and has made big strides in lowering its GHG intensity,” he said. “In light of the fundamental improvements coupled with our bullish view on oil prices we have increased our TP. Our new implied return is 8 per cent, in line with our Sector Perform–rated companies.”

Conversely, he downgraded Enerplus Corp. (ERF-T) to “sector perform” from “sector outperform” with a $9.25 target, rising from $8.50 but below the $9.38 average.

“Due to FRU’s significant share price appreciation over the past year (up 113 per cent) our implied return is now about 7 per cent, in line with our Sector Perform–rated companies,” he said. “We continue to admire the company’s overall business model (high margin, no debt, no capex, etc.) and applaud the huge increases in shareholder returns (largely through recent dividend increases).”

He also lowered Freehold Royalties Ltd. (FRU-T) to “sector perform” from “sector outperform” with a $10 target, up from $9.50. The average is currently $10.81.

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“Management has done well with asset allocation, including recent acquisitions, and continues to maintain a strong balance sheet,” he said. “However, share price outperformance (up 77 per cent) now results in an implied return of 9 per cent, which is in line with our Sector Perform–rated companies.”

Mr. Bouvier also made these target adjustments:

  • Canadian Natural Resources Ltd. (CNQ-T, “sector outperform”) to $50 from $48. Average: $47.48.
  • Cenovus Energy Inc. (CVE-T, “sector outperform”) to $13 from $12. Average: $12.62.
  • Crescent Point Energy Corp. (CPG-T, “sector outperform”) to $6.75 from $6. Average: $6.17.
  • Imperial Oil Ltd. (IMO-T, “sector perform”) to $42 from $39. Average: $37.94.
  • MEG Energy Corp. (MEG-T, “sector perform”) to $9.50 from $8. Average: $8.63.
  • Suncor Energy Inc. (SU-T, “sector outperform”) to $34 from $33. Average: $33.86.
  • Whitecap Resources Inc. (WCP-T, “sector perform”) to $7 from $6.50. Average: $7.64.


Seeing the outcome of its strategic review as “slightly negative,” Canaccord Genuity analyst Brendon Abrams lowered his rating for Inovalis Real Estate Investment Trust (INO.UN-T) to “hold” from “buy.”

After the bell on Tuesday, the Toronto-based REIT, which is focused on European office properties, announced the findings of its review process, which was first announced last October, and introduced a strategy that includes focusing on investing in “core and core+” assets that meet its investment criteria, primarily in France and Germany, as well as selling or acquiring the remaining interests in its existing joint ventures by the end of 2022.

“It failed to monetize a large portion of the asset base and/or provide a meaningful immediate return of capital to unitholders, although we recognize this was likely the best outcome available at the time given the uncertainty in the office sector,” said Mr. Abrams. “In addition, in our view, the go-forward strategy leaves the REIT ‘on the fence’ in many ways, as it will look to opportunistically acquire assets, while at the same time dispose of assets and return some of the proceeds to unitholders; this is a tricky balance, in our view, particularly given the REIT’s cost of capital.”

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Mr. Abrams expects investors to be “slightly disappointed” by the release, but he does not expect a “significant” unit price decline in response.

“Having said that, we are downgrading our rating ... as the unit price has appreciated materially over the past seven months (up 27 per cent), and we believe the units are now fairly valued, particularly given the lack of clear catalyst following the conclusion of the strategic review process,” he said.

The analyst maintained a $10.50 target for Inovalis units. The current average is $10.

Elsewhere, BMO Nesbitt Burns’ Jenny Ma raised her target to $10 from $9.50 with a “market perform” rating.


Citing its “solid” execution and improved balance sheet following Tuesday’s close of a bought deal raise of $28.8-million, iA Capital Markets analyst Frédéric Blondeau upgraded Firm Capital Property Trust (FCD.UN-X) to “buy” from a “hold” recommendation.

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“Management indicated that the REIT is expected to use the proceeds to essentially repay debt,” he said.

“We would further underline that since the beginning of 2020, FCD has closed on $44.2-million in acquisitions, inclusive of JV interests in two industrial buildings, totalling 90K sq. ft., with 260 multi-residential apartment units and 181 manufactured housing pads.”

Mr. Blondeau now projects the Toronto-based REIT to acquire $20-million in property during the rest of 2021 and $30-million in 2022, though he said those estimates “could prove to be conservative.”

He maintained a $7.50 target, matching the current consensus on the Street.


Though it has lagged its oilfield services peers “materially” during the recent energy sector recovery, Stifel analyst Cole Pereira thinks Enerflex Ltd. (EFX-T) is likely to “inflect moving forward.”

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He initiated coverage with a “buy” recommendation.

“We believe investors should consider adding to or taking positions in EFX due to: (1) an expected nearterm recovery in its core U.S. Engineered Systems business; (2) improving earnings quality; (3) its clean balance sheet; and (4) potential ESG tailwinds,” said Mr. Pereira. “In particular, a recovery in the U.S. Engineered Systems business should lead to a positive step-change in earnings power that should bolster ROCE and support a valuation re-rating from its current trading multiple of 5.0 times 2022 estimated EV/EBITDAS.”

Seeing Eneflex as “attractively” valued, he set a target of $10.50 per share, which falls below the $11.09 average on the Street.

“We believe the primary factor for the stock to re-rate higher will be the recovery in U.S. Engineered Systems, which we expect to occur over the next few quarters. With that in mind we think investors should take or add to positions at current levels,” Mr. Pereira said.


After the closing of a $175-million bought deal equity offering and a 16-per-cent increase to 2021 EBITDA guidance, RBC Dominion Securities analyst Luke Davis upgraded Topaz Energy Corp. (TPZ-T) to “outperform” from “sector perform” with a $19 target, up from $17.50. The average is $18.65.

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Elsewhere, iA Capital Markets analyst Elias Foscolos raised his target by $1 to $20 with a “buy” rating, pointing to “numerous tailwinds, including low debt, high margins, and strategic positioning ingrowth production areas.”

Others making changes include:

* Scotia Capital’s Cameron Bean to $21 from $20 with a “sector outperform” rating.

* BMO Nesbitt Burns’ Ray Kwan to $18 from $17 with an “outperform” rating.


Following the close of a $201-million bought deal offering, a group of equity analysts raised their targets for shares of Tricon Residential Inc. (TCN-T).

Those making changes include:

* Stifel’s Cihan Tuncay to $16.30 from $17 with a “buy” rating. The average is $15.41.

“We think the financing is an important milestone ahead of the expected launch of SFR JV 2. We estimate that the deal should allow TCN to accelerate its SFR acquisition strategy through 2022, and we assume acquisitions of 1,300 home per quarter in 2022 inclusive of SFR JV 2 and the recently announced builder direct JV,” he said.

* CIBC World Markets analyst Dean Wilkinson to $16 from $15.50 with an “outperformer” rating.

* TD Securities’ Jonathan Kelcher to $15.50 from $14.50 with a “buy” rating.

* BMO Nesbitt Burns’ Stephen MacLeod to $15.50 from $15 with an “outperform” rating.


RBC Dominion Securities analyst Joseph Spak took very different views of a pair of electric vehicle manufacturers while initiating coverage on Wednesday.

Calling it “The Asset-Light Auto Co.,” he gave Fisker Inc. (FSR-N) an “outperform” rating, touting an “attractive risk/reward profile” and seeing the potential for “significant” equity value creation if it reaches his projections.

“Fisker plans to bring [battery electric vehicles] to the market in a differentiated way, utilizing third-party BEV platforms and contract manufacturing,” the analyst said. “This leverages the billions of dollars the industry is pouring into the market. The underpinnings of a BEV may be even less differentiated than ICE [internal combustion engine] vehicles, so saving capital on building out a platform and production facility, Fisker can spend resources to differentiate the customer experience (design, software, UX and ownership). The easiest analogy to make is to Apple, which designs its products, but has contract manufacturers assemble/produce them. Fisker has thus far partnered with Magna and Foxconn, which aside from saving money has also led to a faster time to market (first product Ocean SUV is slated for 4Q22).

“Because of this strategy, we see less risk than other BEV startups towards hitting SoP targets. This speed is important because Fisker is a new brand and BEV penetration is happening now. Creating a new brand later in the BEV penetration story could prove more difficult. The model is not without challenges, but if successful, FSR should be able to garner solid initial margins given COGS are more variable, DTC model means it can keep dealer margin, and platform-sharing/contract manufacturing also means potentially lower OpEx. The company is also creating a high-mileage, no-term ‘flexible lease’ to change the ownership experience. This may have some challenges to pull off and will be limited at first given cash flow considerations, but over time could lead to a more steady, higher-margin revenue stream that lets FSR cash in on more of the vehicle’s life.”

Mr. Spak gave Fisker a target price of US$27 per share, exceeding the current average on the Street of US$23.22.

Conversely, the analyst gave Lordstown Motors Corp. (RIDE-Q), an Ohio-based EV manufacturer, an “underperform” recommendation, emphasizing aggressive competition and expecting its deliveries likely to fall “significantly” below management guidance.

“We see some clear positives including saving on time/cost to production given its facility acquisition which allows RIDE to be among the first BEV startups to deliver vehicles,” he said. “But, the fleet pickup market it is going after, while having attractive characteristics, is ultimately small and fiercely competitive. We also see risk from its hub motor tech choice. Our forecasts are significantly lower than management targets and consensus and see significant capital raises as necessary.”

In the near term, Mr. Spak said Lordstown stock is “difficult to value” and sees downside to his target of US$5 per share. The average is US$9.

“Similar to other auto-tech startups, we expect RIDE shares to be volatile with the near-term direction of the stock dictated by sentiment, meeting/achieving certain production goal posts and commercial progress, and cash burn. Hitting proof points (production milestones, orders, partnerships) along the way should give more confidence and de-risk the story (much like FDA trials can be catalysts for biotech stocks),” he said.


After the firm raised its commodities price forecasts “given continued strength in the precious and base metals complex so far in 2Q21,” equity analysts at Raymond James made a series of target price changes to mining stocks in their coverage universe.

“In precious metals, we have revised our gold price forecast higher for 2Q/3Q 2021 to reflect inflation pressure through the middle of 2021 as the re-opening trend continues and with the announcements of government stimulus programs with prices beginning to moderate in 4Q on the potential of a more conservative approach to rate decisions,” they said. “We have also increased our long-term silver price from US$21.50 to US$22.50 to reflect a gold silver ratio of 71 times down from about 74.5 times, more in line with current ratios.\

“In base metals, we have increased our copper forecasts for 2021/22 to reflect the tight physical market, potential for stimulus programs to catalyze demand growth and some near term supply risk in South America. We have also raised our long-term copper price from US$3.25/lb to US$3.50/lb to closer reflect incentive pricing for new supply which, based on industry benchmarking, we believe is greater than US$8,000/t. We have also revised our 2021 price forecasts higher for coking coal, zinc, nickel, and lead on stronger year-to-date pricing.”

Their target adjustments were:

  • Adventus Mining Corp. (ADZN-X, “outperform”) to $2.25 from $2. Average: $1.89.
  • Altius Minerals Corp. (ALS-T, “outperform”) to $21 from $20. Average: $20.17.
  • Ero Copper Corp. (ERO-T, “outperform”) to $30 from $28. Average: $28.23.
  • First Quantum Minerals Ltd. (FM-T, “outperform”) to $40 from $39. Average: $33.83.
  • Freeport-McMoRan Inc. (FCX-N, “outperform”) to US$47 from US$43. Average: US$43.64.
  • Hudbay Minerals Inc. (HBM-T, “outperform”) to $14 from $13. Average: $13.24.
  • Ivanhoe Mines Ltd. (IVN-T, “outperform”) to $12.50 from $12. Average: $9.88.
  • Lundin Mining Corp. (LUN-T, “market perform”) to $16 from $15. Average: $16.25.
  • Marimaca Copper Corp. (MARI-T, “outperform”) to $6 from $5.50. Average: $5.75.
  • Teck Resources Ltd. (TECK.B-T, “outperform”) to $35 from $32. Average: $32.54.
  • Trevali Mining Corp. (TV-T, “market perform”) to 35 cents from 30 cents. Average: 31 cents.
  • Agnico Eagle Mines Ltd. (AEM-N/AEM-T, “outperform”) to US$77 from US$76. Average: US$82.32.
  • Barrick Gold Corp. (GOLD-N/ABX-T, “outperform”) to US$30 from US$29.50. Average: US$29.31
  • Centerra Gold Inc. (CG-T, “market perform”) to $11 from $10.50. Average: $10.41.
  • Coeur Mining Inc. (CDE-N, “market perform”) to US$10.50 from US$10. Average: US$10.97.
  • Franco-Nevada Corp. (FNV-N/FNV-T, “outperform”) to US$172 from US$166. Average: US$171.55.
  • Kinross Gold Corp. (KGC-N/K-T, “outperform”) to US$11 from US$10.50. Average: US$10.92.
  • Lumina Gold Corp. (LUM-X, “outperform”) to $2 from $1.75. Average: $1.78.
  • New Gold Inc. (NGD-N/NGD-T, “market perform”) to US$2.50 from US$2.25. Average: US$2.30.
  • Newmont Corp. (NEM-N/NGT-T, “outperform”) to US$82 from US$78. Average: US$75.75.
  • Royal Gold Inc. (RGLD-Q, “outperform”) to US$146 from US$143. Average: US$140.21.
  • Wheaton Precious Metals Corp. (WPM-N/WPM-T, “outperform”) to US$60 from US$57. Average: US$59.42.
  • MAG Silver Corp. (MAG-T, “outperform”) to $28 from $27. Average: $28.50.


In other analyst actions:

* BMO Nesbitt Burns analyst Peter Sklar downgraded Jamieson Wellness Inc. (JWEL-T) to “market perform” from “outperform” with a $37 target, down from $42 and below the $43.31 average.

* RBC Dominion Securities analyst Sabahat Khan raised his North West Company Inc. (NWC-T) target by $1 to $36 with a “sector perform” rating. The average is $38.

* TD Securities initiated coverage of Cargojet Inc. (CJT-T) with a “buy” rating and $230 target. The average on the Street is $257.

* TD’s Daniel Chan moved Exfo Inc. (EXFO-Q, EXF-T) to “tender” from “hold” with a US$6 target, up from US$4. The average is US$6.25.

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