Inside the Market’s roundup of some of today’s key analyst actions
Andrew Peller Ltd. (ADW-A-T)
Luke Hannan, an analyst at Canaccord Genuity, maintained his “buy” recommendation on Andrew Peller Ltd. after the Canadian winemaker reported its fiscal fourth quarter financial results this week.
But the analyst raised his target price on the stock to $13 from $10 previously, based on expected growth and cost-savings in the Canadian wine market this year.
“During fiscal 2025, Andrew Peller grew its market share across all major markets, cementing its position as one of the fastest-growing domestic wine companies in Canada. This was in part due to the company’s success in big box retail, with channel performance exceeding management expectations,” Mr. Hannan said in a note.
He expects that the stock can command a valuation of 11-times his estimated fiscal 2026 EBITDA (earnings before interest, taxes, depreciation and amortization) of $65-million, up from a previous estimate of $54-million in EBITDA for this fiscal year.
Transat A.T. Inc. (TRZ-T)
The encouraging news: Konark Gupta, an analyst at Bank of Nova Scotia, raised his price target on Transat A.T. Inc. to $2 from $1.75 previously, reflecting better-than-expected earnings and cash flows, along with a debt restructuring.
The discouraging news: The new target is below the Transat’s share price ($2.48 at Thursday’s close, after slumping more than 11 per cent).
The new target reinforces the analyst‘s “sector underperform” recommendation.
“Although we are impressed by management’s efforts to improve margins and balance sheet coming out of the pandemic, we are still cautious about share price volatility due to TRZ’s elevated leverage ratio (pro forma sub-5x) and high sensitivity to uncontrollable factors such as demand, competition, inflation, fuel and FX,” Mr. Gupta said in a note.
Methanex Corp. (MX-T)
Israel’s overnight attack on Iran’s nuclear program and military leadership has markets awakening to the near-term impact on crude oil prices (up nearly 8 per cent on Thursday morning) and gold (up nearly US$42 an ounce).
But what about methanol?
Steven Hansen, an analyst at Raymond James, expects that the share price of Vancouver-based Methanex Corp. could rise given the Iran is one of the world’s largest exporters of seaborne methanol.
As he explained in a note: “While no methanol facilities were struck in the initial attack (to our knowledge), we still see indirect implications benefiting the complex, including: 1) sharply higher oil prices that are expected to pull/influence methanol prices higher in tandem; and 2) escalating geopolitical tensions that are likely to introduce additional constraints on Iran’s methanol production/export capabilities over time.”
The overnight attack has reaffirmed Mr. Hansen’s “outperform” recommendation on the stock, with a price target of US$40. The shares closed on Thursday at US$34.43 on the Nasdaq exchange (the shares also trade in Toronto).
Ben Isaacson, an analyst at Bank of Nova Scotia, also has a “sector outperform” recommendation on Methanex, with a price target of US$53.
Telus Corp. (T-T)
Telus has proposed a deal to buy back the shares of its recent spinoff, Telus Digital, for US$3.40 a share. That’s a tiny sliver of good news for suffering Telus Digital shareholders, who saw the share price jump 22.7 per cent on Thursday after the deal was announced (the stock is still down sharply since the spinoff in 2021, when it debuted at $US25).
Now what?
Maher Yaghi, an analyst at Bank of Nova Scotia, said it was too early to know if the deal will go through. And there is always the possibility that Telus may have to add a sweetener to win the approval of Telus Digital shareholders, suggesting it may be worth holding out for more.
As for the parent company, Mr. Yaghi had previously argued in April that this sort of deal would be a rational move for Telus, given the poor performance of the spinoff and the possibility that the parent may want to list its healthcare division within the next couple of years.
However, he maintained a “sector outperform” recommendation on Telus and a target price of $24.50 on Thursday.
“Putting this whole issue with Telus Digital behind it would be a good thing for Telus as it gears towards a possible liquidity event for its Healthcare business possibly in 2026-2027,” Mr. Yaghi said in a note.
K-Bro Linen Inc. (KBL-T)
Count the global laundry and linen processing sector among the areas that have attracted consolidators in search of a bigger global footprint and better efficiencies, with Edmonton-based K-Bro Linen Inc. taking a lead role.
After K-Bro Linen Inc. this week closed a deal to acquire U.K.-based STAR Mayan Ltd. for £107.2-million, Derek Lessard, an analyst at TD Securities raised his target price on the stock to $50 from $49 previously. He maintained a “buy” recommendation.
“We think this deal strongly enhances K-Bro’s position in the U.K. commercial laundry market and balances out the hospitality-skewed U.K. revenue mix,” Mr. Lessard said in a note.
“Given potential upside from new bidding opportunities and more predictable earnings, we think the shares, trading well below historical average, present compelling value,” he added.
The deal gives KBL a top-three position in the U.K. market, with the addition of seven facilities and one distribution depot, giving the company about a 10 per cent market share. It also raises KBL’s exposure to the U.K. healthcare sector to 57 per cent of revenue from 49 per cent previously.
The company expect to find £2-million in cost synergies from the deal. But Mr. Lessard believes that the benefits of the deal will be even bigger.
“We see upside to these figures longer-term, particularly as KBL continues to expand and win share in the U.K. market,“ he said.
The shares closed Thursday in Toronto at $36.05. The price is down 4.8 per cent so far this year.
AtkinsRealis Group Inc. (ATRL-T)
Krista Friesen, an analyst at CIBC Capital Markets raised her target price on AtkinsRealis Group Inc. (formerly SNC-Lavalin) to $106 from $92 – while maintaining an “outperformer” recommendation -- after the engineering firm sold its remaining stake in Ontario’s Highway 407.
The sale gives AtkinsRealis about $2.2-billion in extra spending money, which can go towards the company’s capital allocation strategy of debt repayment, share buybacks and expansion through small- and mid-sized acquisitions.
But apart from the highway sale, Ms. Friesen is upbeat about the company’s nuclear business, which has become a red-hot investment theme recently as the world looks to cheap sources of clean energy.
“While Canada remains the backbone of ATRL’s nuclear business, we believe the company is increasingly well positioned to capture international opportunities as nuclear energy re-emerges as a key pillar in global decarbonization strategies,” the analyst said in a note.
She added that AtkinsRealis is one of the few engineering firms that can offer end-to-end capabilities across the nuclear lifecycle. These capabilities include life extension and reactor support for Canada’s aging fleet of CANDU reactors; new builds as the exclusive owner of the CANDU technology; new builds for non-CANDU technology; and waste management.
Ms. Friesen noted that the company’s nuclear backlog of projects increased to $5.2-billion at the end of the first quarter, up 185 per cent year-over-year and up 64 per cent from the previous quarter. The company now expects that its nuclear business in 2025 can generate revenue of $1.9- to $2-billion, up from an estimate of $1.6- to $1.7-billion previously.
Dundee Precious Metals Inc. (DPM-T)
Bereket Berhe, an analyst at Beacon Securities, expects that Dundee Precious Metals Inc.’s deal to acquire Adriatic Metals for about US$1.25-billion could add at least another $3 to his target price of $22.50 for Dundee after the deal closes.
He’s maintaining a “buy” recommendation on the stock.
The deal, announced Friday and expected to close in September, will give Dundee 100 per cent ownership of Adriatic’s silver, lead, zinc and gold producing mine in Bosnia and Herzegovina.
The mine, according to Dundee, has a 15-year operating life with average annual production of about 168,000 ounces of gold equivalent. The all-in sustaining cost of production is US$893 per ounce, compared with a current price of US$3,455.90 an ounce in early Friday trading.
The deal will raise Dundee’s gold equivalent production profile as high as 458,000 ounces per year, up from current 2025 guidance of 310,000 ounces.
“On pro-forma basis, the transaction creates a $3.8-billion market capitalization company with a strong precious metal production profile, having a significant base metal credit that translates into a very low AISC [all-in sustaining cost] precious metals producer. The structure of the transaction maintains a significant portion of DPM’s strong balance sheet,” Mr. Berhe said in a note.