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

It’s “back to growth" for Bank of Nova Scotia (BNS-T, BNS-N), according to RBC Dominion Securities analyst Darko Mihelic, who feels its “re-positioning” through acquisitions and divestitures is “complete.”

Before the bell on Tuesday, Canada’s third-largest bank reported adjusted earnings per share for the fourth quarter of $1.82, exceeding the projections of both Mr. Mihelic and the Street by a penny.

“From a business segment perspective, Canadian Banking and International Banking came in below our expectations but was offset by better than expected results in Global Banking and Markets and Corporate,” the analyst said.

With Scotiabank expecting 2020 organic earnings growth in the mid-single digit range, Mr. Mihelic added: “With 4 divestitures still yet to close, it’s difficult to accurately put a pin in what the expected earnings dollar value is at this time as earnings contribution from pending divestitures could be material. We expect to receive some ‘firmed-up’ guidance at BNS’ 2020 investor day in January. However, from a business segment perspective the bank did disclose it expects Canadian Banking to deliver low‐to‐mid single digit earnings growth in 2020. Global Banking and Markets is expected to deliver mid-single digit earnings growth and both Global Wealth Management and International Banking are expected to deliver high single digit organic earnings growth next year. Given the recent creation of the standalone Wealth segment (effective November 1, 2019), BNS expects to release re-segmented financials sometime in January 2020. It will likely prove challenging to reconcile our existing segment-level forecasts to the new segment guidance provided this quarter, hence we caution readers that our current estimates are subject to change in early 2020.”

With the results, Mr. Mihelic lowered his 2020 and 2021 EPS projections to $7.61 and $7.86, respectively, from $7.80 and $8.01.

“We have lowered our assumed Canada P&C margin after a weaker than expected result this quarter,” he said. “We modestly lowered assumed revenue growth and slightly increased our assumed PCLs for the International segment in Q1/20 given the ongoing geopolitical uncertainty in some Pacific Alliance countries. We reduced our earnings growth forecast for Global Banking and Markets to better align with the bank’s guidance. We also made some other tweaks that did not have an overly material impact on our EPS estimates.”

Keeping a “sector perform” rating for Scotiabank shares, he trimmed his target to $78 from $80. The average target on the Street is currently $78.07, according to Bloomberg data.

Elsewhere, Desjardins Securities’ Doug Young lowered his target to $80 from $82 with a “buy” rating (unchanged).

Mr. Young said: “While BNS’s repositioning makes sense to us, the acquisitions and divestitures have created lots of noise, making modelling the company tough. Looking through this though, the integration of BBVA Chile is ahead of plan, we expect to get more clarity on management’s outlook at an upcoming investor day and valuation remains compelling.”

Canaccord Genuity’s Scott Chan reduced his target by a loonie to $76.

Mr. Chan said: “We maintain our HOLD rating and slightly decrease our target price to $76 per share ... primarily from lowering our fiscal 2020 EPS forecast to $7.28 (from $7.54). This mainly is due to the four divestitures that are expected to close by year-end (with the largest one being Thanachart) and a higher tax rate (guides for 21-25 per cent in F20).”


Harvest One Cannabis Inc.'s (HVT-X) first-quarter results “raise caution,” said Haywood Securities analyst Neal Gilmer.

“The Q1/F20 results showed some solid growth in the cultivation segment but the Company’s other segments trailed our expectations,” he said. “Harvest One’s strategic review and cost reductions are necessary as the Company used more cash in the recent quarter than we had expected. In this market environment HVT’s need for capital will weigh on the share price until it secures funding.”

Based on that concern, Mr. Gilmer lowered his rating for the Vancouver-based company’s stock to “hold” from “buy" with a target of 20 cents, down from 60 cents. The average is 43 cents.

“Based on the current cash position of $7.3-million and the need for the Company to secure further financing to support its objectives, we are lowering our recommendation to Hold,” he said.


Though Newmont Goldcorp Corp. (NEM-N, NGT-T) remains his top pick among senior gold producers, Canaccord Genuity analyst Carey MacRury lowered his earnings expectations for the miner ahead of the Dec. 2 announcement of its 2020 and long-term guidance.

“2019 has so far been a disappointing year for Newmont,” he said. “The company’s acquisition of Goldcorp has faced setbacks including intermittent blockades at Penasquito and the Musselwhite fire amid a general lack of clarity regarding Newmont’s plans to optimize the Goldcorp assets. As a result, Newmont’s shares have lagged its senior peers (up 10 per cent year-to-date versus 33 per cent for the senior group). We expect improved operating performance in 2020 and additional clarity on the company’s plans starting with its upcoming investor webcast.”

For 2020, Mr. MacRury is now projecting attributable gold production of 6.85 million ounces, falling from his previous estimate of 7.27 million ounces due largely to the sale of Red Lake and a slower ramp-up at Musselwhite than originally anticipated.

“Despite the revisions, we forecast 2020 production growth of 8 per cent, driven by a full year of production from the Goldcorp assets and a return to higher grades at Penasquito,” he said. "We forecast AISC [all-in sustaining costs] declining to $955/oz in 2020, from $1,033/oz in 2019.

“Based on our revised production forecast and lower expected G&A and other operating costs, we forecast 2020 attributable EBITDA increasing 46 per cent to $5.6-billion as compared to $3.7 billion in 2019. We also forecast FCF increasing to $2.8-billion (9-per-cent FCF yield) from $1.7 billion in 2019.”

Overall, his EBITDA and earnings per share projections for 2020 fell to US$5.56-billion and US$2.48, respectively, from US$5.93-billion and US$2.62.

With a “buy” rating (unchanged), he lowered his target to US$57 from US$60. The average target is US$46.72.

“We see the company as offering investors a steady production profile centred on geopolitically stable jurisdictions, with a deep project pipeline, strong balance sheet, and proven operating team," he said.


Calian Group Inc.'s (CGY-T) new “divide and conquer” strategy is likely to help investors better understand its growth prospects, said Desjardins Securities analyst Benoit Poirier.

On Monday after the bell, the Ottawa-based firm reported fourth-quarter results that Mr. Poirier deemed “decent.”

Revenue rose 16 per cent year-over-year to $91-million, falling in line with the expectations of both the analyst ($94-million) and the Street ($92-million). Adjusted earnings per share of 74 cents exceeded projections (66 cents and 61 cents).

Mr. Poirier also called the company’s fiscal 2020 guidance of revenue of $365–395-million and adjusted EPS of $2.35–2.65 “encouraging.”

With the results, Calian introduced a new operating segments structure, which it hopes will “better reflect” its core businesses. The two-divisional structure comprised of the former BTS Division and the Systems Engineering Division has been replaced by four operating segments: Advanced Technologies, Health, Learning and Information Technology.

Mr. Poirier thinks the change will both help investors grasp the company’s “story” and provide the “opportunity to unlock value in the long term.”

“In FY19, all segments generated positive revenue growth, with three generating double-digit revenue growth: Information Technology (up 22 per cent), Health (6 per cent) and Advanced Technologies (11 per cent),” he said.

Also feeling its “well-positioned to pursue its growth strategy through M&A," Mr. Poirier increased his target to $43 from $40 with a “buy” rating. The average on the Street is $43.33.

“We continue to like CGY for its robust acquisitive and organic growth profile. On the M&A front, we remain confident in management’s capability to pursue larger transactions and create shareholder value,” he said.

Meanwhile, Canaccord Genuity analyst Doug Taylor hiked his target to $45 from $40, keeping a “buy” rating.

Mr. Taylor said: “The company’s new segmentation should help with the understanding of the underlying growth drivers. The conclusion remains the same: Calian is executing well operationally with a gradually improving top-line growth trajectory and strong cash flow that supports dividends and reinvestment. This is combined with an under-levered balance sheet and a track-record of strong capital allocation. The company trades at a discount to peers (10.4 times vs. peers at 12.8 times), which we attribute partly to low liquidity.”


Equity analysts at Canaccord Genuity adjusted their target prices for a group of cannabis stocks on Tuesday.

Following better-than-anticipated third-quarter results and the announcement of its the termination of its agreement to acquire Florida medical marijuana provider VidaCann, Derek Dley thinks Cresco Labs Inc.'s (CL-CN) balance sheet has been “solidified” while revenue growth continues.

“The company ended the quarter with $73-million of cash on the balance sheet, which combined with the $84-million raised through sale leaseback activity subsequent to the quarter end, leaves the company in a stronger capital position than many of its peers heading into 2020," he said. “The company has additional financing capacity available through incremental sale leaseback activity and the potential to raise non-dilutive debt in the near term.”

With a “speculative buy” rating, Mr. Dley trimmed his target for the Chicago-based company to $18 from $19 to reflect the removal of VidaCann and a slower roll-out in Massachusetts. The average on the Street is $17.55.

“In our view, Cresco is well positioned to capitalize on the increasing acceptance of cannabis within its core states, boasts a best-in-class management team, and offers investors a differentiated cannabis opportunity through its focus on both wholesale and retail,” he said.

Separately, Mr. Dley lowered his target for shares of Green Growth Brands Inc. (GGB-CN), despite seeing sequential improvement with its first-quarter 2020 results.

After the bell on Monday, the Toronto-based reported revenue for the period of $13-million, ahead of Mr. Dley’s $12-million estimate. However, an adjusted EBITDA loss of $15-million fell short of his projection by $9-million, which he attributed to the company remaining in “ramp mode.”

“GGB continues to develop its CBD segment through the rollout of their CBD kiosks in premium malls across the U.S., with 193 shops open to date, and plans to exit the year with over 200 locations," he said. "We continue to believe GGB will be able to capture a portion of the CBD wallet as it offers a mass market product with broad retail distribution. The MSO segment for the time is focused on Nevada, where the company operates two dispensary locations, both of which are highly productive. We continue to like the economics of GGB’s current operations in Nevada and expect more growth in the near term after the addition of another dispensary in the state. Having said that, GGB’s rollout in the state will be limited in the near term given the lawsuit against the state’s licensing process. We believe GGB’s expansion in Nevada will be considerably slowed until the case is resolved. Furthermore, we expect GGB to open dispensaries in Florida during Q4/F20, as the company was able to secure a lease on a greenhouse location which will be used for cultivation beginning mid 2020.

“Given some of the recent restructuring of, and in some cases termination of M&A announcements within the cannabis space, we are electing to remove Moxie for the time being from our estimates going forward, until the transaction closes.”

With a “speculative buy” rating, he lowered his target to $2.10 from $2.25, versus the $3.55 consensus.

Canaccord’s Matt Bottomley thinks MedMen Enterprises Inc.'s (MMEN-CN) balance sheet continues to be a primary concern, following the release of its first-quarter results that fell short of top-line estimates.

However, Mr. Bottomley added the results were “slightly better than we had anticipated in the company’s ability to taper back its opex and capex spend given the stretched nature of its balance sheet."

“As at the end of FQ1/20, MedMen had US$42.2-million of cash on hand and subsequently brought in net proceeds of US$12.5-million from the sale of its stake in Treehouse REIT with another US$10-million slated to hit the books from strategic partner Gotham Green later this week,” he said. “However, with a current quarterly opex+capex burn of more than US$50-million (albeit improved from greater than US$90-million in the prior quarter), the company is still operating with a near-term funding gap. Currently MMEN has US$115-million left of its convertible facility with Gotham Green (but requires consent from both parties to be drawn) that we believe could provide the company with some flexibility; however, in our view, MedMen will likely need to dispose of a number non-core assets.”

With an unchanged “hold” rating, Mr. Bottomley shrunk his target to $1 from $2. The average is $2.71.

“On the back of MMEN’s plan to refocus its efforts on key markets, we have made substantial downward revisions in many of the company’s non-core regions (namely AZ and NY) and lowered our FL outlook given the company’s plan to stand pat on additional retail rollouts for the time being to align on estimates with management’s expectation of reaching an overall retail revenue run-rate of US$300-million by end of CY2020 (i.e., five quarters from now),” he said. “In addition, after modeling in further financing dilution (which admittedly could be mitigated via potential asset sales), we are lowering our price target.”


There were no surprises in Lundin Mining Corp.'s (LUN-T) three-year guidance update, according to Raymond James analyst Farooq Hamed.

LUN’s 3-year production outlook and detailed 2020 operating and capex guidance was generally in-line with our expectations and previous guidance," said Mr. Hamed in a research note released Wednesday. "Minor year-over-year production variances across the assets were primarily due to refinements in mine plans and had negligible impact on our NAV [net asset value].

“In addition to the operating outlook, LUN indicated that it intends to increase its quarterly dividend by 33 per cent in 2020 (subject to Board approval) taking the annual dividend to 16 cents per share (from 12 cents) which would represent a 2.2-per-cent yield on the current share price (current yield of 1.6 per cent). LUN also indicated that it expects to renew its NCIB which is scheduled to expire on Dec. 6. The NCIB is expected to cover 10 per cent of shares outstanding not controlled or owned by LUN and its officers/directors. We are modeling increasing FCF [free cash flow] in 2020 and 2021 and expect LUN to be in a good position to continue to return capital to shareholders and/or engage in further M&A."

Though he trimmed his 2020 earnings per share expectation by 4 cents to 24 cents, Mr. Hamed maintained a “market perform” rating and $9 target for Lundin. The average is $8.85.

Elsewhere, RBC Dominion Securities analyst Sam Crittenden kept an “outperform” rating without a specified target.

Mr. Crittenden said: “Overall we expect a neutral reaction to Lundin’s three-year outlook with production and costs largely as expected, although capex for 2020 was above our estimates.”


In other analyst actions:

* Calling it “an active player that will continue to grow in a niche market,” Haywood Securities analyst Kerry Smith initiated coverage of Metalla Royalty & Streaming Ltd. (MTA-X) with a “buy” rating and $2 target, exceeding the consensus of $1.63.

“Metalla is one of the newest players in the royalty space but the Company has wasted no time in growing its asset portfolio,” he said. “While attributable production is expected to decline over the next two years, once the Endeavor Deep Zinc Lode and/or Endeavor Tailings come online, as well as several silver/gold development assets, the Company will have a growth trajectory to generate more free-cash-flow.”

* Barclays analyst Jeremy Campbell raised TD Ameritrade Holding Corp. (AMTD-Q) to “equal-weight” from “underweight” with a target of US$53, rising from US$33. The average on the Street is US$45.61.

Mr. Campbell also raised Charles Schwab Corp. (SCHW-N) to “equal-weight” from “underweight” and increased his target to US$49 from

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