Inside the market overview of some of today’s key analyst actions
Citing his exposure to European gas prices and improving relative valuation, Scotia Capital analyst Jason Bouvier raised his recommendation for Vermilion Energy Inc. (VET-T) on Monday.
In addition, expecting a “good cash flow profile in 2023 as acquisitions are completed and hedging is reversed,” he moved the Calgary-based company to “outperform the sector” from “sector performance” to a research note.
“WTI prices have fallen by about $ 14 a barrel from their recent high. “Over the same period, European gas prices have risen by 50 percent,” he said. “VET receives about 40-45% of its cash flow from European gas prices. Given that the share price of VET has fallen roughly in line with the group of partners over the last few weeks, the relative valuation of VET has improved significantly. ”
“In 2022, we estimate VET losses from hedging at $ 616 million. Currently, about 40% of the company’s production is hedged in 2022. This drops to 10% in 2023. Oil is not hedged in 2023, and North American gas is hedged at higher prices than in 2022. As a result, of this, although we have basic commodities falling from 2022 to 2023 (band), VET cash flow actually increases from $ 2.2 billion in 2022 to $ 2.4 billion in 2023 (up to 10 percent). “
Mr Bouvier predicts that Vermilion will reach its net debt target of $ 1.2 billion in the third quarter of this year and sees the potential to be debt-free by the end of fiscal 2023.
“Once it achieves its debt target, the company will be in a good position to increase shareholder returns. We expect both increased dividends and SBB in the next 1-2 years, “he said.
He maintained a $ 36 target for the company’s stock. The current average target on the street is $ 36.46, according to Refinitiv.
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Believing that its business model could “surpass its major chemical counterparts in a recession,” Scotia Capital analyst Ben Isaacson said. Chemtrade Logistics Income Fund (CHE.UN-T) of “sector superior” to “sector represents”.
Justifying his change, he pointed to several factors, including the expectation that demand for regenerating acid services should increase in the coming quarters; demand for ultrapure sulfuric acid is “projected to increase” in North America in the medium term; A “relatively strict” outlook for caustic soda and a “fairly stable margin volatility” for the water chemicals business.
“Chemtrade has been proactively cleaning up its portfolio and balance sheet, which we believe could lead to a slight multiple expansion over time,” Mr Isaacson said. “Initiatives include the sale of its non-core specialty chemical business, the $ 10 million sale of an empty site in Augusta, Georgia, and the closure of a chlorate plant in Quebec due to slower demand growth after COVID.
He said Chemtrade’s 7.8 percent return on distribution had “strong support” and saw a “decent” discount in valuation.
“Compared to all shares in S&P TSX Materials with a market capitalization of more than $ 1 billion, CHE offers the second highest return (its market capitalization is slightly less than $ 1 billion),” he said. “As of Q1 / 22, the payout ratio for the 4 quarters is 48%. By the end of the 23rd year, we do not see an allocation ratio for mobile four quarters exceeding 60 percent, providing strong support for an allocation of $ 0.15 / unit per quarter.
“CHE traded 6.1 times and 6.5x ’22 and ’23 EBITDA of $ 325 million and $ 305 million, respectively. This compares with multiples of EV / NTM EBITDA for five and ten years 7.2 and 7.4 times, respectively. The lower five-year multiplier is due to the acquisition of Canexus, which brought more basic chemical volatility to the portfolio. However, if we look at the first full year of CHE after Canexus, by the end of the 23rd (using Street estimates), the average EBITDA is $ 300 million, with very little volatility. Accordingly, we see no reason why the CHE forward should not start returning up to 7.2 times next year. In fact, it is possible to argue for a premium multiple of that amount, given that leverage has improved significantly. “
Mr. Isaacson raised his target to $ 10.25 from $ 9.50. The average street value is $ 10.
“While waiting for (relative) superiority, investors can enjoy a return of nearly 8 percent, well supported by a moving payout ratio of four-quarters, which should not exceed 60 percent by age 23,” he said.
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National Bank financial analyst Vishal Shreedhar expects to see an improvement in the results of MTY Food Group Inc. (MTY-T) when reporting its results for the second quarter in early July, as trends in casual catering are recovering by easing pandemic-related constraints.
However, he warned that a “solid” recovery in Canada could be partially offset by a “reduction in productivity” from Papa Murphy’s pizza chain.
“Investors will focus on evolving consumer behavior as economies continue to reopen (compared to the previous year), especially amid sweeping inflation, supply chain challenges, limited working conditions and concerns about slowing consumer spending, “said Mr Shreedhar.
It forecasts adjusted earnings before interest, taxes, depreciation and amortization for the quarter of $ 46.6 million, above the consensus estimate of $ 45 million and an increase of 7.2% on an annual basis of $ 43.5 million. Revenue is expected to rise to $ 154 million from $ 136 million, which will also exceed Street ($ 136 million).
“During the quarter, OpenTable data suggested a sharp recovery in sedentary restaurants in Canada, as restrictions were gradually lifted. “Canada’s stable recovery is expected to be partially offset by declining demand at Papa Murphy’s (restrained demand for food outdoors),” Mr Shreedhar said.
Citing his “attractive assessment, operational progress and supportive capital allocation results”, he said he remained “constructive” with regard to MTY, although he acknowledged “the increased risk associated with inflation, the supply chain, labor and macroeconomic conditions “.
Maintaining a rating of “superior” for his shares, Mr. Sridhar lowered his target to $ 63 from $ 70 to reflect a multiple decrease in his rating “due to increased uncertainty with the macroeconomic background.” The average value of the street is 68.14 dollars.
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When Alimentation Couche-Tard Inc. (ATD-T) reports its financial results for the fourth quarter after the bell on Tuesday, Desjardins Securities analyst Chris Lee expects to see “strong fuel margins and solid sales and margins of goods offset by increased operating costs, slow fuel volume and higher volatility in Europe “
However, he expects investors to focus on prospects and trends in the current first quarter given the jump in gas prices.
“While the industry’s fuel margins fell from mid to high US30cpg (January-April) to average US28-29cpg in May and June, we believe our forecast for low US30cpg is achievable in the 1st quarter and 23rd financial year, supported by company-specific initiatives (fuel rebranding in Circle K, improved deliveries through partnership with Musket, price optimization and other supply and logistics options). All other things being equal, a change of one cent in the US fuel margin affected earnings per share for fiscal year 23 by $ 0.08 (3 percent). The volume of fuel will be strained by high prices. While general and administrative expenses will remain higher in the short term due to higher labor costs and credit card fees, the pressure should start to decrease in the second quarter. We expect sales and margins in the c-store to remain stable, supported by cost transfer and a positive change in the mix (single service, private label, etc.), partially offset by higher costs for goods (food service) and reduction of discretion (ie car wash). ”
With this change in his valuation of his fuel margin, Mr. Lee raised his full-year earnings forecast for 2022 to $ 2.57 from $ 2.41 and 2023 to $ 2.56 from $ 2. , $ 51.
It maintains a buy rating and a $ 60 target for Couche-Tard shares. The average value of the street is $ 62.72.
“Although we expect profits to remain volatile in the short term due to macro-uncertainty, we remain positive about ATD’s long-term growth potential, supported by a strong set of growth initiatives. Its strong balance is valuable, especially in the current market, supporting the return on capital, “he said.
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CIBC World Markets analysts Scott Fromson, Sumaya Syed, and Dean Wilkinson cut their target prices for real estate shares on Monday.
Their changes include:
- Allied Properties Real Estate Investment Trust (AP.UN-T, “superior”) to $ 47.50 from $ 50. The average value of the street is $ 49.35.
- American Hotel Income Properties REIT (HOT.UT / HOT.UN-T, “neutral”) up to $ 3.80 from $ 4 Average: $ 3.84.
- Automotive Properties REIT (APR.UN-T, “neutral”) to $ 14.25 from $ 15. Average: $ 14.76.
- Boardwalk REIT (BEI.UN-T, “neutral”) up to $ 58 from $ 60. Average: $ 60.95.
- Brookfield Asset Management Inc. (BAM-N / BAM.AT, “better”) up to $ 68 e. from USD 75 e. Average: $ 70.55.
- CAP REIT (CAR.UN-T, “neutral”) up to $ 55 from $ 60. Average: $ 63.22.
- Retirement residences in Chartwell (CSH.UN-T, “superior”) to $ 14.25 from $ 15. Average: $ 14.38.
- Colliers International Group Inc. (CIGI-Q / CIGI-T, “superior”) up to $ 150 from $ 170. Average: $ 162.
- Crombi REIT (CRR.UN-T, “superior”) to $ 18.25 from $ 19. Average: $ 19.42.
- CT REIT (CRT.UN-T, “neutral”) up to $ 18 from $ 19. Average: $ 18.79.
- Dream Industrial REIT (DIR.UN-T, “superior”) to $ 17 from $ 18. Average: $ 18.44.
- Dream Office REIT (D.UN-T, “superior”) to $ 27 from $ 28.50. Average: $ 27.08.
- Dream Unlimited Corp. (DRM-T, “better”) to $ 53 from $ 56. Average: $ 55.33.
- European Residential REIT (ERE.UN-T, “superior”) to $ 5.35 from $ 6. Average: $ 5.74.
- Extendicare Inc. (EXE-T, “neutral”) to $ 8 from $ 8.50. Average: $ 8.15.
- First Capital REIT (FCR.UN-T, “superior”) to $ 19.50 from $ 21. Average: $ 20.54.
- FirstService Corp. (FSV-Q / FSV-T, “neutral”) up to $ 140 out of $ 145. Average:…
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