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

National Bank Financial analyst Cameron Doerksen said better-than-expected preliminary fourth-quarter 2022 results reinforce his positive view on Bombardier Inc. (BBD.B-T), seeing “solid visibility” into this year.

Shares of the Montreal-based luxury jet maker jumped 9.5 per cent on Tuesday after it announced it delivered 123 planes to customers in 2022, in line with the minimum of 120 it had signalled to investors. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at US$930-million, beating its US$825-million guidance, while revenue of US$6.9-billion was also stronger-than-anticipated (US$6.5-billion).

“Bombardier also reported that full-year unit book-to-bill was approximately 1.4 while backlog at year-end was $14.8 billion,” said Mr. Doerksen. “The backlog is down from $15.0 billion at the end of Q3, but this was largely expected given the high delivery total in Q4. We believe Bombardier has good visibility on a 15-20-per-cent increase in jet deliveries in 2023 supported by the backlog that runs to 2+ years of production.”

He also emphasized the company’s balance sheet continues to be “re-shaped”

“Bombardier has launched a new debt issue of $500 million due 2029, the proceeds of which will be used to fully repurchase the remaining $396 million of outstanding 2024 notes as well as $104 million notes due in 2025,” said Mr. Doerksen. “Assuming the transactions proceed as planned, Bombardier will have no debt maturities until early 2025 (about $1.1 billion due), which we believe Bombardier could repay through existing liquidity and expected free cash flow generation. We forecast that Bombardier’s leverage finished 2022 at 5.4 times and we forecast the ratio will fall to 2.8 times by 2025.”

Reiterating an “outperform” rating for Bombardier shares, Mr. Doerksen increased his target to $67 from $65. The average is $66.86.

“We maintain our positive view on the stock supported by good visibility on revenue and earnings growth, a still healthy business jet market, and an improving leverage profile,” he said.

Elsewhere, others making target changes include:

* RBC Dominion Securities’ Walter Spracklin to $86 from $58 with a “not assigned” designation (previously “speculative buy”).

“We are very encouraged by the preliminary release [Tuesday] of BBD’s 2022 financial results, all of which materially exceed prior full-year guidance and were markedly above our and consensus estimates. Management continues to execute on the demand environment and is also taking advantage of its unique position to refinance near-term debt. Our conviction level in the shares continues to rise,” he said.

* Cowen and Co’s Cai von Rumohr to $70 from $61.24 with an “outperform” rating.


In a separate report, Mr. Doerksen, who covers transportation as well as industrial stocks for National Bank Financial, said he prefers the aerospace and airline sectors over freight in 2023, expecting air travel to continue to recover and the reopening of China to provide a “boost.”

“Whereas the aviation and airline industry is still in recovery mode, the preponderance of data suggests that freight demand could be under some pressure in 2023,” he said in a research report released Wednesday.

Expressing a preference for companies with “good visibility” on earnings growth and are “well positioned for deleveraging over the next several years,” Mr. Doerksen named four companies as his “top ideas” for the year. They are:

* Air Canada (AC-T) with an “outperform” rating and $29 target. The average on the Street is $27.13.

“Although investors may have some concerns over the impact on air travel demand from a recession, we note that total passenger traffic in Canada is still trending more than 10 per cent below the demand trend line absent the pandemic,” he said. “We also note Canadian airline industry capacity is currently well below pre-pandemic levels, which should be supportive of fares even in the event of a slowdown in demand. Finally, the reopening of key markets in Asia that only began in Q4 should drive another leg of demand recovery for Air Canada through 2023, especially as China reopens.”

“Given what is expected to be a more challenging macroeconomic backdrop in 2023, we believe investors will be attracted to companies that are reducing leverage over the next several years. With 2023 the first full year of ‘normal’ travel, Air Canada’s EBITDA will improve significantly in 2023 and we also see ongoing significant free cash flow generation. We forecast net-debt-to-EBITDA falling from 5.9x at year-end 2022 to 2.7x at the end of 2023 and we note that Air Canada management has a goal to reduce leverage to 1.0x in 2024″

* CAE Inc. (CAE-T) with an “outperform” rating and $34 target. Average: $33.67.

“CAE’s training network utilization will see tailwinds as airlines continue to fully recover their networks, with the China reopening a key driver of normalizing pilot training demand at the company’s Asian training centres (22 per cent of CAE’s installed base of simulators in its airline training network are in Asia-Pacific),” he said. “We also see ongoing strong demand for full flight simulator sales as commercial aircraft production rates move higher in the coming years.

“Defence margins should steadily improve. CAE’s poor share price performance in 2022 was mainly due to a very poor margin performance in its Defence segment as well as perceived risk around the profitability of its backlog. However, we note that there were no further contract adjustments in the last quarter and Defence backlog now stands at $5.2 billion after five consecutive quarters of a book-to-bill above 1.0 times. Management is confident that the margins in the defence segment will continue to climb as orders for the last two years are at a better level of profitability as a result of bidding on larger contracts with more attractive margins following the acquisition of L3Harris Military Training. We believe that a better Defence margin performance in the coming quarters can be an important catalyst for the share price.”

* Exchange Income Corp. (EIF-T) with an “outperform” rating and $61 target. Average: $61.27.

“EIC management is guiding for 2023 EBITDA of $510-$540 million versus our forecast for $453 million in 2022. We believe EIC has good visibility on this growth,” he said.

“For investors focused on dividends, we highlight that EIC has the highest dividend yield in our coverage universe at 4.7 per cent. We see the dividend as sustainable and likely to grow in the coming years.”

* Heroux-Devtek Inc. (HRX-T) with an “outperform” rating and $23 target. Average: $20.

“With the contract for the repair and overhaul of F-18E/F landing gear set to start in F2024 and ramp-up of numerous other programs such as the F-15 landing gear, CH-53K helicopter, Saab Gripen fighter, MQ-25 UAV and the Lockheed-Martin classified program, defence revenue is set to trend positively in the coming years,” he said. “Additionally, HRX will directly benefit from the secular growth of global defence spending, which will bring new contract opportunities and keep existing programs well-funded.

“Commercial segment outlook is also positive. With both Airbus and Boeing production rates set to climb in the coming years, and business jet production also poised to move higher, we anticipate positive trends for HRX’s commercial segment as well.”


Though its first-quarter results largely fell in line with expectations, Stifel analyst Martin Landry sees limited near-term catalysts for shares of Goodfood Market Corp. (FOOD-T) as customer “erosion” continues to weigh on revenue, wanting to see “a stabilization” in cash flow before he reconsiders his investment thesis.

The Montreal-based food kit company fell 6.8 per cent on Tuesday following the premarket earnings release, which included a year-over-year sales decline of 39 per cent to $47-million. However, an adjusted EBITDA loss of $2.3-million was an improvement from a loss of $14.6-million during the same period a year, which Mr. Landry called “a step in the right direction for the company.”

“The company continues to see its client base erode with 148,000 clients compared to 157,000 at the end of Q4FY22,” he said. “Management argues that the majority of the sequential quarterly decline in active customers comes from the exit of Goodfood on-demand offering, suggesting that the weekly meal subscription customer base is stable. ARPU [average revenue per user] increased to $319, up 4 per cent compared to Q1FY22 as the company narrowed its focus on high-value clients, which also drove credits & incentives as a percentage of sales lower vs. Q1FY22 levels.”

“The profitability improvement comes from higher gross margins, which increased 1295 basis points year-over-year to 36.9 per cent driven by (1) the exit of Goodfood’s ondemand, which was margin dilutive, (2) the simplification of the operations and ingredients sourcing and (3) the implementation of price increases. Additionally, SG&A expenses decreased to $19.7 million compared to $33.2 million in Q1FY22 on the back of head count reduction and contract renegotiation to exit unnecessary leases.”

After Goodfood reiterated its second-quarter guidance, including the expectation for positive EBITDA “driven by further SG&A expense reduction through headcount streamlining,” Mr. Landry said he expects a continuing improvement in cash burn through the year, pointing to a further reduction in lease expense and “a return to the negative working capital benefit of FOOD’s business model.” He’s projecting cash burn of $22.5-million in fiscal 2023 compared to $101 million last year.

He raised his target for the company’s shares by 8 cents to 60 cents, but he kept a “hold” rating, pointing to a “lack of conviction on growth potential” and an economic environment that could result in industry wide slowdown. The current average target on the Street is 62 cents.

“Goodfood’s revenues have been in decline for the last 4 quarters driven by increased competition in the meal-kit subscription sector, which we estimate has reduced Goodfood’s market share by 1000 basis points in the last year (from 35 per cent to 25 per cent),” said Mr. Landry. “The revenue decline in meal kit subscriptions may abate, but we doubt this segment will return to the growth engine it once was.”

“We believe the meal kit industry could experience demand softness due to inflationary pressures and a potential economic slowdown. Canadians appear to trade down to lower priced food alternatives which may be unfavorable to the meal kit industry. This raises concerns as to the near term demand outlook for meal kits.”

Elsewhere, the other two analysts on the Street currently covering the company also made target adjustments:

* Desjardins Securities’ Frederic Tremblay to 70 cents from 80 cents with a “hold” rating.

“FOOD remained on the path to positive adjusted EBITDA and reduced its cash burn in 1Q FY23 as the company returned to its roots (ie focus on weekly meal kits),” he said. “Achieving management’s goal of generating positive adjusted EBITDA in 2Q would be an important milestone, although it could be overshadowed by balance sheet uncertainty. In our view, bolstering the cash position would better position FOOD to capture benefits from its ongoing operational efforts aimed at fueling long-term profitable growth.”

* Canaccord Genuity’s Luke Hannan to 60 cents from 50 cents with a “hold” rating.

“While it’s difficult to quantify the magnitude of growth investors should expect from Goodfood’s business going forward as these initiatives take shape, what’s become clear over the last several quarters is (1) the company’s intention to ensure future growth is profitable, and (2) the gap to such profitability (on an EBITDA basis) has considerably narrowed,” said Mr. Hannan. “We therefore come away from the quarter incrementally positive on Goodfood’s outlook, though a consistent track record of meaningful free cash flow generation is needed, in our view, before taking a more bullish stance.”


Given the “uncertainty” around near-term box office trends, Canaccord Genuity analyst Aravinda Galappatthige thinks Cineplex Inc. (CGX-T) is “interestingly placed at this point.”

Sustained weakness through H1/23 could cause the market to re-rate industry expectations and potentially drive balance sheet concerns as well,” he said. “However, movement towards (or beyond) 85 per cent of pre-pandemic level box office could be a positive, particularly with FCF yield now nearing 15 per cent.”

Ahead of the Feb. 7 release of its fourth-quarter financial report, Mr. Galappatthige expects “challenging” box office trends to weigh on results. The company pre-announced box office revenues of $120.2-million, which is 66 per cent of pre-pandemic levels and below the analyst’s prior 75-per-cent estimate. For total revenue and adjusted EBITDAaL, he’s projecting $331.9-million and $25-million, respectively, which are at 75 per cent and 66 per cent.

“Management noted that December was impacted by winter weather systems and storms across Canada, along with the expected low film release count,” he said. “On a month-wise breakdown, October box office was at 62 per cent of the pre-pandemic levels, November at 73 per cent, and December at 65 per cent.

“We believe CGX’s Q1/23 and Q2/23 attendance numbers will shed more light on whether the underperformance in Q4 included elements of an underlying structural weakening in demand or whether it was largely driven by transient factors. Nonetheless, we still estimate a recovery, with our estimates suggesting 80 per cent of the pre-pandemic level attendance in 1H/23, partly supported by the spill over benefit from Avatar: The Way of Water in Q1 and a generally robust slate starting in March 2023. We are looking for Q4 attendance at 10 million or 59 per cent of the Q4/19 level (down from 63 per cent of the pre-pandemic levels last quarter), with BPP at $12.04, down from a record $12.29 last year. On the other hand, we expect concession revenues, which have so far recovered faster than box office revenues, at $86-million, representing 75 per cent of the prepandemic levels (down from 81 per cent last quarter) benefiting from continued growth in CPP at $8.61, up from $7.49 last year and compared to $8.35 in Q3.”

After lowering his fourth-quarter projections, Mr. Galappatthige trimmed his target for Cineplex shares to $11.75 from $12.25 with a “buy” rating. The average is $12.46.

“We continue to expect Cineplex to achieve 85 per cent and 88 per cent of the pre-pandemic level of box office revenues in 2023 and 2024, respectively. We value theatre operations at 7.5 times EV/EBITDA, Media at 6 times, P1AG at 6x, and 6.5 times for Rec Room (all unchanged). However, given that the current stock price of CGX is materially lower than the strike price of $10.94 per share embedded within the convertible debentures, we have now included the convertible debt in our new debt calculation and have adjusted our share count base accordingly. Our target price trims slightly due to these changes.”


In a quarterly results preview for the industrial and transportation sectors, CIBC Worlds Markets analyst Kevin Chiang made a series of target price adjustments to stocks in his coverage universe on Wednesday.

His changes include:

  • Air Canada (AC-T, “outperformer”) to $32 from $31. Average: $27.13.
  • Andlauer Healthcare Group Inc. (AND-T, “neutral”) to $54 from $59. Average: $55.67.
  • Bombardier Inc. (BBD.B-T, “neutral”) to $65 from $57. Average: $66.86.
  • CAE Inc. (CAE-T, “outperformer”) to $33 from $34. Average: $33.67.
  • Canadian National Railway Co. (CNR-T, “neutral”) to $181 from $182. Average: $161.54.
  • Canadian Pacific Railway Ltd. (CP-T, “outperformer”) to $128 from $130. Average: $114.68.
  • Cargojet Inc. (CJT-T, “outperformer”) to $196 from $207. Average: $191.91.
  • GFL Environmental Inc. (GFL-T, “outperformer”) to $48 from $50. Average: $43.45.
  • Lion Electric Co. (LEV-N/LEV-T, “neutral”) to US$4.50 from US$5. Average: US$4.10
  • Mullen Group Ltd. (MTL-T, “neutral”) to $14 from $15.50. Average: $16.15.
  • TFI International Inc. (TFII-N/TFII-T, “outperformer”) to US$125 from US$123. Average: US$119.64.
  • Waste Connections Inc. (WCN-N/WCN-T, “outperformer”) to US$155 from US$165. Average: US$153.09.

CIBC’s Krista Friesen made these changes:

  • Badger Infrastructure Solutions Ltd. (BDGI-T, “neutral”) to $36 from $32. Average: $34.61.
  • Exchange Income Corp. (EIF-T, “outperformer”) to $60 from $59. Average: $61.27.


Barclays analyst Anthony Linton initiated coverage of the Canadian oil and gas sector with a “positive view” on Wednesday.

“The sector faced a series of headwinds from 2016 to 2020, including commodity price volatility, egress constraints, and demand challenges related to COVID-19,” he said in a note. “However, companies within our coverage were able to capitalize on opportunities through the downturn, reflecting the quality of their operations, and translating into asset growth and improved leverage profiles. We believe these changes should leave them well positioned through 2023 despite recent commodity price volatility. In that regard, our positive view reflects the quality of the operators and their commitment to disciplined production growth with well-defined return of capital initiatives, against a backdrop of improving commodity prices through the year, thus supporting solid leverage profiles. Across oil-weighted producers (ERF, PXT, and WCP), we see the greatest upside potential for PXT and WCP, as reflected in our Overweight ratings. We are Equal Weight ERF following a strong outperformance from the stock in 2022. Despite expectations for lower natural gas prices in 2023 (on both our forecasts and strip), we are Overweight gas-weighted producers (ARX and TOU), as we believe their disciplined growth strategies and sophisticated marketing operations should support solid FCF generation and incremental shareholder returns.”

“We enter the year with cautious optimism on midstream names within our coverage, as the tailwinds of volume growth should support fee-based EBITDA growth and return of capital initiatives. This positive view is counter-balanced by valuation headwinds from a persistently higher rate environment in 2023 (albeit with a dovish outlook later in the year), and a call for lower crude-by-rail volumes. In that context, we orient ourselves within the space to expected near-term volume growth opportunities - exposure to growing Montney volumes. Within the sector, we are Overweight on ALA owing to our favourable view on valuation. We are Equal Weight on PPL and KEY for reasons of valuation and timing of incremental return of capital initiatives, respectively. While we like the strong balance sheet and asset positioning of GEI, our Underweight rating is reflective of what see as a subdued outlook for growth relative to peers in 2023.”

The analyst gave these stocks “overweight” ratings:

  • AltaGas Ltd. (ALA-T) with a $29 target. Average: $31.31.
  • Arc Resources Ltd. (ARX-T) with a $22 target. Average: $24.70.
  • Parex Resources Inc. (PXT-T) with a $29 target. Average: $34.20.
  • Tourmaline Oil Corp. (TOU-T) with a $85 target. Average: $94.69.
  • Whitecap Resources Inc. (WCP-T) with a $14 target. Average: $14.50.

He gave “equal-weight” ratings to these:

  • Enerplus Corp. (ERF-T) with a $28 target. Average: $24.42.
  • Keyera Corp. (KEY-T) with a $34 target. Average: $34.07.
  • Pembina Pipeline Corp. (PPL-T) with a $52 target. Average: $51.29.

Mr. Linton started Gibson Energy Inc. (GEI-T) with an “underweight” recommendation and $25 target. The average is $25.37.


Heading into earnings season for gold and precious metals companies, Scotia Capital analyst Tanya Jakusconek said he’s “most comfortable” recommending Barrick Gold Corp. (GOLD-N, ABX-T).

“We believe [Barrick] has the lowest risk of negative surprises as it pre-released various levels of guidance (short term and long term) at its investor day in 2022 and pre-released Q4/22 operating results,” she said. “Similarly, [Newmont and Kinross] have provided some high level guidance for 2023 (and long term) on their Q3/22 conference calls, but Newmont will be reviewing its dividend with a negative bias; hence we believe there is less risk in Kinross than Newmont heading into year-end results.

“Conversely, we are cautious on [Gold Fields and AngloGold Ashanti]. Both GFI and AU have strongly outperformed peers (more than 20 per cent) and have more downside risk with the upcoming issuance of short-term and long-term guidance. [Franco-Nevada] has also underperformed peers (approximately 12 per cent) and we believe the ongoing uncertainty on Cobre Panama will continue to weigh on the shares. We remain restricted on [Agnico and Yamana].”

Ms. Jakusconek expects the market to focus on both 2023 and long-term guidance and reserve replacement, rather than focusing on fourth-quarter results.

“In 2023, we expect the group’s production to increase 3 per cent year-over-year, operating costs to stay flat and capital spending to increase by 10 per cent over 2022,” she said. “We expect most companies will not replace reserve depletion.”

The analyst made a series of target price adjustments. Her changes included:

  • Barrick Gold Corp. (GOLD-N/ABX-T, “sector outperform”) to US$23 from US$24. Average: US$20.99.
  • Eldorado Gold Corp. (EGO-N/ELD-T, “sector perform”) to US$10 from US$10.50. Average: US$9.
  • Franco-Nevada Corp. (FNV-N/FNV-T, “sector perform”) to US$162 from US$160. Average: US$140.67.
  • Iamgold Corp. (IAG-N/IAG-T, “sector perform”) to US$2 from US$3.25. Average: US$2.64.
  • Kinross Gold Corp. (KGC-N/K-T, “sector outperform”) to US$5.50 from US$6. Average: US$5.28.
  • Triple Flag Precious Metals Corp. (TFPM-N/TFPM-T, “sector outperform”) to US$18.50 from US$18. Average: US$15.51.


With “strong” price fundamentals, “something’s gotta give on valuations” for oilfield services providers in the near term, according to Stifel analyst Cole Pereira.

“OFS return metrics are near or above 10-year highs, FCF generation is at an all-time high and leverage is effectively evaporating from the sector,” he said. “However, despite these points the equities trade at a meaningful discount to prior activity growth years, which supports our bullish view on the space. We expect more modest forward activity growth but stronger pricing fundamentals, and favour businesses with a higher degree of pricing upside - namely drilling and pressure pumping. We view U.S. services as relatively lower-risk, however the Canadian outlook remains attractive and view any concerns on WCSB activity from the natural gas pullback as minimal given the catalysts.”

“The OFS sector’s fortunes have continued to improve as increasing demand for oilfield services and a dwindling supply of excess field-ready equipment have shifted supply-demand and pricing fundamentals in their favour. Moreover, the 3-year average ROCE for many names under coverage is well above the 2017-2019 peak and is near or above the 2011-2014 peak despite activity being meaningfully lower. Additionally, FCF generation is higher than it has ever been with more than half our coverage set to repay their EVs in approximately five years based off 2024 estimated FCF. This is also driving meaningful debt reduction with our sector experiencing an aggregate decline in net debt of 78 per cent to $1.4-billion from $6.2-billion over the next two years, with half of our coverage universe debt free by the end of 2024. We believe these points support higher valuations and yet the sector trades at EV/EBITDAS multiples of 3.8 times in 2023 and 3.5 times in 2024E vs. prior activity growth periods where the space traded at 6-7 times FTM [forward 12-month] EV/EBITDAS.”

In a research report previewing fourth-quarter earnings season in the sector, Mr. Pereira made a pair of rating changes.

He upgraded Enerflex Ltd. (EFX-T) to “buy” from “hold” with a $14.50 target, up from $9 and above the $12.58 average on the Street.

“We had downgraded EFX to Hold following its acquisition of Exterran corporation due to our view that the required working capital and capital expenditure investments would erode FCF generation in the near-term,” said Mr. Pereira. “However, the deal closed in early 4Q22 and with these investments largely taking place in 4Q22E and 1Q23E, we forecast the company to transition to positive FCF in 2Q23E. We forecast the company to generate meaningful FCF of $216-million in 2023E (18-per-cent yield) and $360 mm in 2024 (30-per-cent yield), which should see net debt/EBITDAS decline to 1.6 times by the end of next year. Moreover, we believe the stock has potential for further positive estimate revisions driven by a continued recovery in its core U.S. Engineered Systems business along with the progressing integration of the Exterran integration. The stock lagged its peers materially last year, returning 9 per cent from the date the Exterran deal was announced to the end of the year vs. the peer average of 57 per cent, but is up 13 per cent year-to-date vs. the peer average of 7 per cent.”

Conversely, he lowered Pason Systems Inc. (PSI-T) to “hold” from “buy” with a $19.50 target, down from $21.50 and below the $20.25 average.

“Pason remains a very well run company with an enviable market position on more than 70 per cent of the drilling rigs in North America, along with a strong management team,” he said. “However, we expect most of the positive OFS estimate revisions in 2023 and beyond to be largely driven by pricing, and PSI’s core business has historically had less pricing upside than other OFS subsectors. Pason trades at a deserved premium multiple of 5.9 times 2024 EV/ EBITDAS vs. the sector average of 3.5 times, and while its 2024 estimated ROCE of 30 per cent remains one of the strongest in group, its differential over the peer average of 22 per cent has narrowed as well. Pason has no debt, and we forecast the company to exit 2022 with $197-million of cash, building to $329-million by the end of 2024, and as a result has notably less equity torque than many of its peers. Moreover, with the North American oilfield services market continuing to improve we expect investors will go further down the risk curve which could see less relative funds flow towards larger and more stable OFS companies like Pason. However, it is worth noting that the stock continues to screen attractively compared to the broader market in the context of its valuation relative to its returns and market position.”

The analyst also made these target changes:

  • Precision Drilling Corp. (PD-T, “buy”) to $185 from $165. Average: $152.72.
  • Cathedral Energy Services Ltd. (CET-T, “buy”) to $2.50 from $2.25. Average: $3.33.
  • PHX Energy Services Corp. (PHX-T, “buy”) to $13 from $12.50. Average: $10.80.
  • CES Energy Solutions Corp. (CEU-T, “buy”) to $4 from $4.50. Average: $4.49.
  • Calfrac Well Services Ltd. (CFW-T, “buy”) to $14 from $13. Average: $11.42.
  • Step Energy Services Ltd. (STEP-T, “buy”) to $12 from $11.75. Average: $10.39.

“Our top names in order are 1) PD 2) TCW and 3) CFW, while CET remains our top small-cap idea,” said Mr. Pereira.


Seeing “a near-term trade with long-term value,” Stifel analyst Ian Gillies upgraded Algoma Steel Group Inc. (ASTL-T) to “buy” from “hold” previously.

“The premise for this upgrade is (1) a near-term improvement in financial performance through an increase in volumes and higher unit pricing, which is reflected in our F24E EBITDA increasing 71.0 per cent and (2) the long-term value creation potential from the transition to an electric arc furnace which will better align the company’s cost structure and allow for higher production,” he said. “In our view, the steel market bottomed in November 2022, and calendar 2023 should realize a recovery from those levels.”

Believing its net asset value is “very compelling from a value perspective” and touting “material upside,” Mr. Gillies hiked his target for Algoma shares to $15 from $10.75. The average is $11.67.

“The average steel producer is trading at 4.9 times calendar 2023 estimated EV/EBITDA and 5.2 times C2024E EV/EBITDA, putting ASTL at 3.2 times and 3.8 times discount in each year,” he said. “This discount is due to (1) recent operational issues; (2) perceived risk for the EAF conversion; (3) concerns around motivated selling shareholder base. We would rebuke points (1) and (3). For point (1), we expect volumes to recover meaningfully in F4Q23 which should depict a return to normalized operations, improved pricing relative to F3Q23 and a normalized cost structure. With respect to point (3), ASTL’s combined share volume on the TSX and NASDAQ over the last 200 trading days has totaled roughly 502 mm shares or 5.0 times the outstanding share count. This has given any motivated seller ample time to reduce the position. We believe this creates a significant near-term trading opportunity. In regard to point (2), this risk is likely to be a headwind until there is more clarity on a secured capital cost and firm ISD, but we believe the company has positioned itself well for this transition.”


Calling it a “market leader,” Eight Capital analyst Kiran Kiran Sritharan initiated coverage of Vancouver-based Tribe Property Technologies Inc. (TRBE-X) with a “buy” recommendation on Wednesday, seeing it “benefitting from increasing supply of condos and rentals and macro trends that are beginning to serve as tailwinds for the sector.”

“Macro factors, including demand dynamics and tightening rental conditions, support our positive view,” he said. “Recently, an increase in the backlog of units under construction has restricted new supply. We see this unwinding, driving volume growth for Tribe and the broader property management industry. Evolving demographics, consumer preferences, and expanding regulations also increase demand for efficient and effective community management.”

“We view Tribe’s core product as a premium digital-first solution. The offering has evolved from a software-only model to a comprehensive property management solution. Tribe differentiates itself through a monetized partnership model with retail partners who offer discounted products to Tribe’s communities via a digital marketplace. The efficiencies and convenience brought on by Tribe’s one-stop tech strategy help it maintain industry-low churn with pricing power.”

Believing “fundamental outperformance will drive share price appreciation and increased interest from investors,” Mr. Sritharan set a target of $3.50 per share, matching the current average on the Street.

“We note that the scarcity of publicly traded prop-tech players on the TSX may benefit Tribe’s valuation in a more supportive valuation environment,” he said.


Touting its “strong” leadership, balance sheet and financial track record, Acumen Capital analyst Jim Byrne initiated coverage of Stampede Drilling Inc. (SDI-X) with a “buy” recommendation, seeing its shares trading at an “attractive” valuation.

“The company successfully navigated the downturn in the oil & gas sector in 2019 along with the pandemic impacts on drilling in Western Canada,” he said. “They were able to preserve their balance sheet through their low cost operations and add market share by maintaining crews when many competitors were forced to slow activity. The company generates stronger margins than its peer group along with positive net income.”

Following a “significant” $21.5-million acquisition of five telescopic double rigs and one super-spec triple rig in August of 2022, Mr. Byrne expects Stampede’s revenues to increase “substantially” again in 2023, projecting $114.6-million (versus $66.1-million last year).

“We anticipate increases in day rates and activity levels will push quarterly revenue growth for the next several quarters (ex. seasonally weak Q2 in Canadian operations),” he said. “Day rates in Canada have shown consistent growth thus far in 2022, with growth of 25 per cent in the first nine months. Activity levels have grown considerably for SDI boosted by increased industry drilling and acquisitions.”

He set a target of 60 cents per share. The average is 65 cents.

“SDI shares trade at just 2.8 times 2023 estimated EBITDA, and we believe they are attractively valued given the tailwinds of increasing capital budgets, and constrained crew availability on the services side,” said Mr. Byrne. “We anticipate drilling activity will jump again in 2023 following the past few years of underinvestment and consistently higher commodity prices. The company has successfully added rigs at attractive valuations in the past few years and deployed them at attractive rates in the field. Management has the experience and relationships to continue this strategy, and we believe the shares offer investors an attractive opportunity in the oil field services sector.”


In other analyst actions:

* RBC Dominion Securities’ Geoffrey Kwan downgraded Home Capital Group Inc. (HCG-T) to “sector perform” from “outperform” with a $44 target, rising from $36 and matching the average on the Street.

“We think the announced acquisition of Home Capital by Smith Financial Corp. is likely to be successful ... he uncertainty regarding the macro environment and Canadian housing/ mortgage market was negatively impacting HCG’s share price (pre-takeover bid announcement) and while we like the long-term growth potential at HCG, we think this transaction offers HCG shareholders an opportunity to realize value in the short-term,” he said. “We increase our 12-month price target from $36 to match the $44/share acquisition price and with a more modest implied total return, we reduce our rating to Sector Perform (was Outperform).”

* Jefferies’ Chris Lafemina raised his targets for Barrick Gold Corp. (GOLD-N/ABX-T, “hold”) to US$18.50 from US$15 and Kinross Gold Corp. (KGC-N/K-T, “hold”) to US$4.25 from US$4. The averages are US$21.02 and US$5.24, respectively.

* ATB Capital Markets’ Amir Asif assumed coverage of Crescent Point Energy Corp. (CPG-T) with an “outperform” rating and $14 target, down from the firm’s previous $15 target. The average is $14.02.

“Historically, CPG has traded at a discount to its large cap peers,” he said. “We believe that this was due to its historic balance sheet leverage relative to the group and the mismatch between size of wells relative to the production base of the Company. With the balance sheet improved and the North Dakota Bakken and expanded Duvernay position providing the scalability for a Company of its size, we believe that the discount to group should narrow over time as the Kaybob Duvernay position is further developed and de-risked. With a valuation of 2.8 times 2023 estimated EV/DACF [enterprise value to debt-adjusted cash flow] vs. the group at 3.7 times, only 50 per cent of cash flow being allocated to capex, a meaningful capital return framework in place, and the expanded Duvernay position, we would be buyers of the stock following the recent pullback in the space.”

* Raymond James’ Stephen Boland trimmed his Pollard Banknote Ltd. (PBL-T) target to $24, below the $26.13 average, from $29 with an “outperform” rating.

“We are revising our 4Q22 and 2023 estimates for PBL heading into reporting season,” he said. “In a recent call, management noted that EBITDA margins remain compressed as input costs continue to affect the company. While we had forecasted a more material improvement in margins this year, management expects the recovery to be more gradual. With inflation continuing to run at elevated levels, coupled with the long-term nature of current contract agreements, we now expect margins to remain relatively flat y/y. We are also lowering our revenue estimates for 2023 as price increases are taking longer to take effect than previously expected.

“As we have noted consistently throughout our recent publications, we remain positive on the long-term outlook for PBL. We continue to view the current cost challenges as transitory, and management noted that customers have been understanding of recent price increases given the challenging operating environment. In addition, PBL’s gaming, charitable and iLottery business lines remain relatively unaffected by the current pressures facing the company’s lottery segment.”

* DA Davidson’s Gil Luria assumed coverage of Shopify Inc. (SHOP-N, SHOP-T) with a “neutral” rating and US$34 target, below the US$41.02 average.

“We see a long runway of growth for Shopify, but would like to get closer to a bottoming out of ecommerce growth before we become more positive,” he said.

“Current consumption trends continue to act as a significant headwind. Current trends towards travel, leisure and value do not bode well for typical Shopify merchants, hence our short-term caution.”

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