Dlouhy's top picks
Dlouhy Merchant Group Inc. unveiled its top picks list for 2004 yesterday. They are CryoCath Technologies Inc. (CYT-TSX), Open Text Corp. (OTC-TSX; OTEX-Nasdaq), Transat A.T. Inc. (TRZ-TSX) and Tundra Semiconductor Corp. (TUN-TSX).
CryoCath is Dlouhy's top pick in the Canadian health care group and is rated a "strong buy." Dlouhy has a one-year price target of $11 on the stock. "We believe the company's cryocatheter ablation technology will continue to demonstrate its utility as a curative treatment alternative for several cardiovascular diseases, chief among them being cardiac arrhythmia," analyst Douglas Loe said. The cardiac arrhythmia market alone represents a $1-billion (U.S.) opportunity, he said.
Open Text was the pick in the Canadian software and information technology services sector. Analyst Tom Liston said Open Text's pending acquisition of the German software firm Ixos Software AG "will vault it to the pure-play leader in enterprise content management." The takeover adds further upside to his share profit estimates, he noted. He also indicated that he will increase his one-year target for Open Text to $31.50 from $28 if the acquisition closes.
Analyst Cameron Doerksen said he expects results for Transat, the largest travel company in Canada, to be considerably better in fiscal 2004 and fiscal 2005 than they have been the past two years. He described the past two years as "extremely difficult" for the company. He estimates that Transat's share profit will rise to $1.25 (Canadian) in fiscal 2005 from a forecast 8 cents in fiscal 2003. His one-year target price for Transat of $15 is based on a conservative 12 times fiscal 2005 share profit.
Tundra got the nod for the top pick in the Canadian semiconductor sector with a "strong buy" rating and a one-year target of $36. "We find the valuation compelling given improving end-market demand, the high degree of operating leverage in Tundra's business model and its strong competitive position," analyst Greg Reid said.
CryoCath closed yesterday at $4.82 on the TSX, Transat at $11.30 and Tundra at $29.95. Open Text ended the session yesterday on the Nasdaq Stock Market at $25.01 (U.S.).