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

Expecting an extended “lull” in mortgage originations, National Bank Financial analyst Richard Tse lowered Real Matters Inc. (REAL-T) to a “sector perform” recommendation from “outperform” previously.

The downgrade came after Mr. Tse hosted a session between customers, partners and executives of the Markham, Ont.-based company, which specializes in mortgage appraisal and title services, at the annual Mortgage Bankers Association Conference in Philadelphia earlier this week.

“Overall, customer and partner sentiment around Real Matters Solidifi brand remained positive,” the analyst said. “That said, and not surprisingly, the overall mood from customers and partners was one of caution for near-term mortgage origination volumes given the continuing scarcity of inventory, lower home affordability and rising rates. Aside from those obvious macro challenges, the takeaways were: (1) continued growing interest in the Real Matters Solidifi platform albeit with elongated sales cycles; (2) Title & Close (T&C) is also subject to elongated sales cycles; (3) potential wallet share gains still exist in the existing base; and (4) potential new innovations in LLMs to further fortify Real Matters platform value.”

Mr. Tse thinks Real Matters continues to “execute well on what’s within its control,” however he warned the market backdrop has become “more challenging with a material turn in rates (and volumes) looking unlikely near term.”

“Given the 36-per-cent increase in REAL’s stock price year-to-date, largely from an expansion in valuation care of moderating rate expectations, the name is looking reasonably valued against that elongated turn,” he added. “As such, we’re downgrading the name.”

He dropped his target for Real Matters shares to $7 from $8.50. The average target on the Street is $7.25.


Touting its “diversified business model driving growth,” National Bank Financial analyst Vishal Shreedhar is expecting to see “strong” EBITDA gains across all of Parkland Corp.’s (PKI-T) segments when it reports third-quarter results on Nov. 1 after the market close.

Mr. Shreedhar is projecting earnings before interest, taxes, depreciation and amortization (EBITDA) of $533-million, exceeding the consensus forecast on the Street of $499-billion and well above last year’s $328-million result. He attributed that 62-per-cent year-over-year gain to “higher volumes in Canada and International, higher fuel margins, a higher crack spread, non-recurrence of losses in the USA segment (suspension of spot wholesale activities), consolidation of non-controlling interest in SOL, acquisition contribution and favourable FX, partly offset by lower volume in the USA segment.”

“We project Canada segment fuel volumes to be higher year-over-year, reflecting same store volume growth, as well as acquisition contribution,” he said in a research note. “We expect USA segment volumes to be lower year-over-year due to PKI’s decision to limit its spot wholesale activities. Recall, management expects growth in retail and commercial operations to outpace refinery. Since 2018, we calculate that PKI’s marketing business will deliver an EBITDA CAGR [compound annual growth rate] of 21.0 per cent, above refining at 3.8 per cent (adjusted).

“Recall, PKI raised its 2023 EBITDA guidance to $1.800-$1.850-billion. given ongoing business momentum (NBF [estimate] is $1.846-billion and consensus is $1.836-billion).”

After raising his full-year 2023 and 2024 revenue and earnings projections, Mr. Shreedhar bumped his target for Parkland shares to $45 from $43, keeping an “outperform” recommendation. The average on the Street is $44.96.

“We reiterate our positive view on PKI’s current strategy, which seeks to: (i) shift away from acquisitions towards integration, synergy capture and organic growth, (ii) divest non-core assets, and (iii) deleverage and return excess capital to shareholders,” he said. “PKI trades at 7.0 times our NTM [next 12-month] EBITDA, below the five-year average of 8.0 times.”


Desjardins Securities analyst Doug Young sees both Definity Financial Corp. (DFY-T) and Intact Financial Corp. (IFC-T) “well-positioned to grow organically and inorganically,” noting both have been acquisitive as of late.

However, while he raised his 2024 expectations to reflect the impact of higher interest rates, he reduced his third-quarter and full-year 2023 financial expectations based on higher catastrophe and non-catastrophe losses.

“2023 will be a tough comp year versus 2022, and especially 2021, on an underwriting basis as economies continue to reopen, inflationary pressures persist and the frequency of CAT events increases,” said Mr. Young. “However, we expect higher investment income (due to higher interest rates) to be an offset through 2023 and into 2024/25.

“CAT losses will be elevated and will mainly impact the personal property division. Both companies pre-released their CAT loss estimates for 3Q23 from wildfires and other weather events in Canada (and the US for IFC). Our estimates reflect the updated CAT loss estimates.”

Mr. Young does expect market conditions to “remain favourable for the most part and for inflation to moderate sequentially, specifically in personal auto.”

He added: “Macro items impacting results. (1) Movements in interest rates and equity markets negatively impacted book values by our math. (2) Could there be any noise from their direct CRE holdings? Or credit impacts for fixed income investments classified as FVTOCI? (3) For IFC, FX movements had a positive impact on a year-over-year basis and should be a tailwind going forward.”

Mr. Young raised his target for Definity by $1 to $40, keeping a “hold” recommendation. The average on the Street is $42.75.

He reiterated a “buy” rating and $225 target for Intact shares, exceeding the average of $219.32.


Seeing it “building growth credentials,” Canaccord Genuity analyst Aravinda Galappatthige assumed coverage of Stingray Group Inc. (RAY.A-T) with a “buy” recommendation on Wednesday, calling the Montreal-based media company “a well diversified operation with global reach.”

“The cornerstone of our investment thesis is the view that RAY’s valuation represents a significant disconnect from its financial outlook, in that its multiples reflect those afforded to legacy, secularly challenged businesses,” he said. “This varies sharply with our expectation of mid-single digit revenue growth post F24, with the prospect of mid-to-high single-digit EBITDA growth. This is spurred by the BCM [Broadcasting and Commercial Music] segment, where the growth outlook is being rejuvenated by the retail media (in-store advertising) opportunity and a lessening drag from the legacy Pay TV business. In addition, RAY offers a well covered (payout ratio of only 31 per cent) dividend yield of 6.5 per cent and the prospect of meaningful balance sheet de-leveraging over the next 18 months.”

Mr. Galappatthige expects high single-digit growth for its BCM business, which now creates almost two-thirds of corporate EBITDA. He called it “highly diversified, composed of more mature businesses such as Pay TV and commercial music, and on the other hand, growth operations like SVOD, FAST, Retail Media and in-car offerings.”

“In addition to substantial operations in the U.S., RAY’s products also have material penetration globally including Latin America and Europe,” he added. “In fact, this is reflected in the BCM geographic revenue mix of 30 per cent Canada, 44 per cent U.S. and 26 per cent other countries, a rare trait among Canadian Media companies.

“Following the acquisition of ISAN in F2022 and the subsequent sales arrangement with Mood Media Vibenomics, there is increasing visibility around the upside for retail media advertising revenues. Additionally, the in-car opportunity, although in its earlier days, offers up further tailwinds in the outer years. Meanwhile, the SVOD business, though recalibrating towards B2B2C (and away from B2C), also offers incremental tailwinds. All this combines to construct an outlook of high single-digit growth in BCM post F2024. Much depends on Radio holding its own over the near to medium term.”

The analyst sees Stingray “well on its way to de-levering” in the next 9-12 months, which he thinks “likely leads to a de-risking of the investment thesis, in turn re-rating valuations upside.”

He set a target of $8 per share, down from the firm’s previous target of $8.50, representing 80-per-cent upside to current levels. The average is $7.92.

“Our target price is set at $8 per share based on 8 times for the BCM segment and 4.5 times for radio,” said Mr. Galappatthige. “Given our expectation of high single-digit growth in BCM and incremental upside as the growth vectors develop, we believe this is a reasonable valuation. The 4.5 times for Radio is reflective of longer term downside risk counterbalanced by high FCF conversion of EBITDA.”


Calling it “a unique growth opportunity at the intersection of healthcare and AI, offering scarcity value in the public markets,” Eight Capital analyst Christian Sgro initiated coverage of Healwell AI Inc. (AIDX-T) with a “buy” recommendation.

“The company’s mission is preventative care, leveraging technology to identify at-risk patients and drive better healthcare outcomes,” he said. “With material financial and strategic alignment with WELL Health (WELL-T, “buy”, $10.00 target price), we believe HEALWELL is in the early innings of a data-driven land-grab strategy in healthtech.”

On Oct. 3, Vancouver-based Well Health announced the acquisition of Healwell’s clinical assets in Ontario and also became the lead investor in its $10-million convertible debenture offering, contributing $4-million. It became the largest shareholder in Healwell while forging a strategic alliance.

Mr. Sgro called Healwell’s access to Well’s practitioner network, which he estimates contains up to 25 per cent of all patients in Canada, a “competitive advantage,” emphasizing “the technology may be replicable, but a path to market with WELL’s motivated network of practitioners is not.”

“The rebranded, revitalized HEALWELL business is the result of a significant recapitalization and focused alignment of resources,” he said. “The current pro forma business has a run-rate revenue of just under $10-million split between technology, research, and patient services.”

“We see HEALWELL as a disciplined capital allocation vehicle with an opportunity to invest in and partner with companies that enhance the utility of their AI-enabled clinical intelligence platform used by healthcare providers. Having previously worked with more than half of the top 10 largest pharma companies globally, we see an opportunity for heightened interest from these customers given the strategic value unlocked by the WELL partnership and network.”

Currently the lone analyst covering the company, Mr. Sgro set a target of $1.50 per share.


With independent renewable power producers having “substantially underperformed” regulated utilities and broader indexes over the last four months, TD Securities analyst Sean Steuart lowered his target prices for stocks in his coverage universe on Wednesday.

“Since the end of June, share prices of Canadian renewable IPPs have declined 26 per cent, on average,” he said. “This compares with a 9-per-cent average decline for large-cap Canada-listed utilities. Since the end of Q2/23, the S&P/TSX Composite and S&P 500 have decreased 2 per cent. On average, share prices in our renewable IPP coverage universe are 51% below their recent highs from August 2022.

“We believe that recent share-price weakness among renewable IPPs remains chiefly driven by ongoing concerns about interest rates, and also company-specific concerns that include funding constraints.”

Mr. Steuart thinks investor concerns about higher capital costs, IRR pressure, and slowing per-share growth metrics “are valid,” however he thinks tey are factored into trading multiples.

“Valuations have contracted faster than growth prospects, in our view,” he said.

He cut his target for Brookfield Renewable Partners L.P. (BEP-N, BEP.UN-T), which remains his “top pick” in the sector, to US$32 from US$38, keeping an “action list buy” recommendation. The average on the Street is US$34.80.

After assessing the impact on earnings from the sale of its renewable power business, Mr. Steuart cut his Algonquin Power & Utilities Corp. (AQN-N, AQN-T) target to US$6 from US$8 with a “hold” rating. The average is US$8.67.

“We expect that an exit of the non-regulated renewable power segment and divestiture of AQN’s equity stake in AY would be EPS-dilutive,” he said. “On a pro forma basis, our 2025 EPS estimate would decline 21 per cent to $0.45. Our estimates are based on a sale of the non-core assets at a 10.0 times EV/EBITDA multiple midpoint and selling the AY stake at the current share price. We expect that the net proceeds would be earmarked for a combination of debt reduction and share buybacks.

“At our potential estimates, the pro forma dividend payout ratio would be 96 per cent of 2025E EPS. We believe that a payout ratio range of 60-80 per cent, which is in line with the average of North American regulated utilities, would be more reasonable for this company. Recall that AQN lowered its dividend by 40 per cent in Q2/23.”

Mr. Steuart’s other changes are:

  • Altius Renewable Royalties Corp. (ARR-T, “buy”) to $11.50 from $13.50. Average: $12.47.
  • Boralex Inc. (BLX-T, “buy”) to $41 from $46. Average: $41.58.
  • Innergex Renewable Energy Inc. (INE-T, “buy”) to $12 from $15. Average: $17.25.
  • Northland Power Inc. (NPI-T, “buy”) to $27 from $29. Average: $34.57.


Ahead of third-quarter earnings season, RBC Capital Markets analyst Drew McReynolds lowered his target prices for Canadian telecommunications stocks on Wednesday.

They are:

* BCE Inc. (BCE-T, “sector perform”) to $59 from $63. The average is $59.81.

* Cogeco Communications Inc. (CCA-T, “sector perform”) to $84 from $93. Average: $77.79.

* Quebecor Inc. (QBR.B-T, “sector perform”) to $36 from $38. Average: $39.04.

* Rogers Communications Inc. (RCI.B-T, “outperform”) to $69 from $72. Average: $73.07.

* Telus Corp. (T-T, “outperform”) to $29 from $31. Average: $28.

Elsewhere, JP Morgan’s Sebastiano Petti reduced his BCE Inc. target to $59 from $62 with a “neutral” recommendation.


Seeing fund flow as “weak” with the expectation of a “soft” performance until lower market volatility and interest rates emerge, TD Securities analyst Graham Ryding lowered his financial projections for Canadian diversified financial firms on Wednesday ahead of third-quarter earnings season.

“Positive retail fund flows (mutual funds and ETFs ex money-market) typically follow-on from periods of sustained market appreciation, and vice versa,” he said. “On the other hand, flows into money-market funds appear to be highly correlated to the level of interest rates. TD Economics is projecting short-term interest rates to start moving lower in Q2/24, suggesting investors may continue to deploy capital into low-risk income generating money market funds through, at least, H1/24. As such, we see potential for the current trend of soft long-term fund flows and strong flows into money market funds to persist over the near-term. Once we see a combination of interest rates moving lower and low market volatility, we could begin to see investors start to deploy capital back into long-term funds (bonds and equities). Our math suggests that there could be $27-billion to $36-billion of money market AUM that may flow back into longterm funds in H2/2024 and 2025 as interest rates potentially normalize.”

Reducing his forecast due to lower assets under management levels, Mr. Ryding made a series of target changes:

* AGF Management Ltd. (AGF.B-T, “buy”) to $9.50 from $10. The average is $9.13.

* CI Financial Corp. (CIX-T, “buy”) to $18 from $20. Average: $19.50.

* Fiera Capital Corp. (FSZ-T, “hold”) to $6 from $7.50. Average: $7.54.

* IGM Financial Inc. (IGM-T, “buy”) to $38 from $46. Average: $46.67.

* Sprott Inc. (SII-T, “hold”) to $48 from $51. Average: $49.33.

Mr. Ryding raised his target for Onex Corp. (ONEX-T) to $105 from $100, keeping a “buy” recommendation. The average is $105.50.

“Estimates and target prices for most coverage names have come down given the recent market sell-off. In some cases, we have lowered our multiples to reflect the soft organic growth and volatile market backdrop (IGM, FSZ, and SII),” he said. “We are generally forecasting a more muted outlook for flows and AUM growth in 2024 (vs. our previous outlook). We are also introducing our 2025 estimates, which implies an expectation for better flows (vs. 2023/2024), some margin expansion, offset somewhat by modest fee compression. Onex remains our top pick (BUY-rated, $105 target price). AGF, CI, and IGM are also BUY-rated. Sprott and Fiera remain HOLD-rated.”


In other analyst actions:

* Barclays’ J. David Anderson upgraded Pason Systems Inc. (PSI-T) to “equal-weight” from “underweight” with a $15 target, up from $12 but below the $17.07 average on the Street.

* CIBC’s Todd Coupland lowered his BlackBerry Ltd. (BB-N, BB-T) target to US$4.75, below the US$5.25 average on the Street, from US$5.50 with a “neutral” rating.

“Blackberry’s Summit in New York provided known technology updates on the value of its Cyber and IoT units and the company’s convergence strategy,” he said. “The IoT subsidiary IPO for 20-30 per cent of the unit is planned for June 2024 with the S-1 expected in the spring of 2024. A near-term sale of the Cyber business appears unlikely as the company revealed Cyber’s lack of growth and profitability meant it had only received unattractive offers. Finally, no update on CEO John Chen’s plans was provided, as conversations between he and the Board have yet to take place on his contract which expires on November 3.

“Both the Cyber and IoT units continue to face headwinds and are negative for Blackberry’s share price. Chen confirmed that IoT would experience ‘a dent in its rebound,’ but reaffirmed an expectation for record revenues in FQ4. Finally, Blackberry reiterated its intention to repay the debenture (with a November 13 maturity), leaving net cash of $150-million.”

* Barclays’ Theresa Chen lowered her targets for Enbridge Inc. (ENB-T, “equal-weight”) to $48 from $54 and TC Energy Corp. (TRP-T, “equal-weight”) to $50 from $51. The averages are $55.69 and $52.85, respectively.

* Following the release of lower-than-anticipated production results, CIBC’s Bryce Adams cut his Largo Inc. (LGO-T) target to $8.25 from $10 with a “neutral” rating. The average is $10.56.

“Largo reported Q3/23 production of 2,163 tons of V2O5 [vanadium pentoxide], below our expectations of 2,622 tons as production was impacted more than we had expected by a fatality at its processing facility, and crushing circuit availability impacted September operational results,” he said. “Sales of 2,129 tons produced was slightly below our 2,300t estimate. Full-year production and cost guidance was re-affirmed.

“We expect a modest negative market reaction to the operational results. After model updates, we now estimate Q3/23 EPS of a loss of 10 cents and EBITDA of $2.1-million, compared to our previous estimates of a 5-cent loss and $7.1-million, respectively.”

* Reducing his forecast for the second half of 2023 to reflect “moderating” steel prices, Scotia Capital’s Michael Doumet lowered his target for Russel Metals Inc. (RUS-T) shares by $2 to $42, keeping a “sector perform” rating. The average is $42.94.

“Lower steel prices should weigh on RUS sales/margins in the 2H23,” he said. “According to SteelBenchmarker, HRC and plate prices declined 22 per cent and 4 per cent quarter-over-quarter. For RUS, MSC volumes typically moderate from 2Q into 3Q due to the Quebec construction holiday (and other seasonal factors). Similar to the MSC business, we expect normalizing/moderating volumes/margins at SD. We expect activity in EP to remain healthy. Altogether, we trimmed our 3Q23 EPS to $0.90, which includes positive contributions (and a gain) from Trimark (fully divested in September). For 4Q23, we lowered our EPS to $0.72 – which, we believe represents a rough EPS run-rate into 2024E (which is roughly in-line with our view of mid-cycle EBITDA/EPS).”

* Scotia’s Mario Saric trimmed his Tricon Residential Inc. (TCN-N, TCN-T) target to US$10.25 from US$11 with a “sector perform” rating. The average is US$10.20.

“Despite lower estimates (target price down 7.5 per cent) on a 25 basis points uptick in 2024 financing costs and NAV cap rate (both to 5.75 per cent), we think TCN can deliver one of the best NTM [next 12-month] total returns (43 per cent) in our universe as 2023 year-over-year mid-single-digit FFOPS [funds from operations per share] erosion transitions to near-double-digit growth (14 per cent delta in rate of growth). We think TCN (and BN) are the best ways to play a Fed-Pause + Soft landing macro thesis.”

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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 23/02/24 3:59pm EST.

SymbolName% changeLast
AGF Management Ltd Cl B NV
Algonquin Power and Utilities Corp
Altius Renewable Royalties Corp
Blackberry Ltd
Boralex Inc
Brookfield Renewable Partners LP
CI Financial Corp
Cogeco Communications Inc
Definity Financial Corporation
Enbridge Inc
Fiera Capital Corp
Igm Financial Inc
Innergex Renewable Energy Inc
Intact Financial Corp
Largo Resources Ltd
Northland Power Inc
Onex Corp
Parkland Fuel Corp
Pason Systems Inc
Quebecor Inc Cl B Sv
Real Matters Inc
Rogers Communications Inc Cl B NV
Russel Metals
Sprott Inc
Stingray Digital Group Inc Sv
TC Energy Corp
Telus Corp
Tricon Capital Group Inc

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