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Suncor, Canadian Natural shares could surge over next year: Barron's

These are stories Report on Business is following Monday, Feb. 25, 2013.

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Suncor, Canadian Natural could rise, Barron's says
Keep an eye on shares of Suncor Energy Inc. and Canadian Natural Resources Ltd. today: The Canadian energy giants are in the spotlight after an article in Barron's that suggests their shares could trade sharply higher over the next year.

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"The depressed shares of both companies look appealing trading for a fraction of their 2008 peaks," the influential investment publication says in its latest publication.

Suncor and Canadian Natural trade at 9.5 times and 13 times their forecast 2013 profits, respectively, the publication says. They are valued equally with their U.S. counterparts, but have "more attractive assets."

Citing price targets from Macquarie, Barron's says both stocks could trade "into the $40s" over the next year, compared to Friday's close in New York of $31.27 (U.S.) for Suncor and $29.76 for Canadian Natural. Shares of both were up today.

Both could attract the attention of activist shareholders, Barron's said, noting U.S. activists are "less restrained" than shareholders who "tend to be docile" in Canada.

The publication cited how activist Bill Ackman of Pershing Square Capital Management did battle with Canadian Pacific Railway Ltd., whose shares have since climbed after its Ackman-inspired overhaul.

Where Suncor's concerned, the company has "significant free cash flow" and is under growing pressure to hike its dividend, Barron's said, while Canadian Natural, hurt by softer prices for Canadian oil and gas, will gain if TransCanada Corp.'s Keystone XL pipeline is approved by the United States.

Working against them, however, is the growing production in the United States, which could keep the pressure on Canadian prices.

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How to win a currency war without even fighting
The Japanese yen and the British pound slipped today, the former on speculation over the next central bank chief and the latter on a downgrade.

The yen sank again as reports suggested Japan's new government is about to name Haruhiko Kuroda, the chief of the Asian Development, as the next governor of the Bank of Japan.

He's seen as someone who will launch aggressive easing measures to pull the country out of its slump.

"He has already gone on record as saying that there is substantial room to ease policy further by the Bank of Japan," noted senior analyst Michael Hewson of CMC Markets in London

The pound, in turn, fell after Moody's stripped Britain of its triple-A rating last Friday, though it came off its lows as few observers were particularly surprised.

"The decision was based on weakness in the growth outlook into the second half of decade, which complicates the government's fiscal consolidation program; accordingly the U.K. faces a high and rising debt burden with a deterioration in the shock absorption capacity of the government," said chief currency strategist Camilla Sutton of Bank of Nova Scotia.

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CCS project funding cancelled
A key carbon capture and storage project in Alberta has been hit with a major setback, the second blow to the nascent industry in the province in the past year, The Globe and Mail's Richard Blackwell reports.

The Alberta government has cancelled its funding of the CCS project associated with the proposed Swan Hills Synfuels LP synthetic gas plant. The plant, which is to turn underground coal into synthetic natural gas, was supposed to include a carbon capture project that would have stored the resulting carbon dioxide and sold it for use in enhanced oil recovery.

But the agreement that would have seen $285-million from the Alberta government to support the CCS project has been discontinued.

Saputo closes shop in Europe
Saputo Inc. has decided to pull the plug on its modest operations in Europe after concluding that the market is too challenging, The Globe and Mail's Bertrand Marotte reports.

But that doesn't mean the cheese producer is irrevocably giving up on the region, says president and chief executive officer Lino Saputo Jr.

"The European market is quite challenging," said Mr. Saputo.

"There is very limited access to milk, with a small pool of milk for a large number of processors. I'm not saying we will never be in Europe. But we would have to have a large and diverse product portfolio, with branded products."

Canada's largest dairy processor said it's closing its cheese manufacturing facility in Heiden, Germany and has entered into a 30-day consultancy period for the proposed closure of its plant in Newcastle Emly, Wales.

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