Inside the Market’s roundup of some of today’s key analyst actions
TD Securities analyst Jonathan Kelcher downgraded Interrent REIT (IPP-UN-T) to “sell” from “hold” and cut his price target to C$13.55 as he threw in the towel on his belief that the company would be able to secure a better purchase offer.
In May, the executive chair of InterRent, Mike McGahan, offered to acquire the apartment owner for $2-billion with the backing of Singapore sovereign wealth fund GIC.
CLV Group, a private company owned by Mr. McGahan, and GIC bid $13.55 per unit for InterRent, which owns more than 12,000 apartment units in three provinces. Mr. McGahan is the REIT’s former chief executive officer.
“Our thesis had contemplated a bump to the initial offer price; however, with the 40-day go-shop period completed with no offers, we have changed our view. We view the $13.55 offer price as the low end of fair value, with this deal being one of the few REIT M&A transactions completed below NAV,” Mr. Kelcher said in a note to clients.
CLV/GIC’s initial public offer of $13.55/unit will now go to unitholder approval in a special meeting scheduled for the third quarter. If 66.7% unitholders approve - which Mr. Kelcher said is fully expected - the acquisition is anticipated to close by early 2026.
Mr. Kelcher hopes other similar “opportunistic” deals won’t occur in the future. The REIT, he noted, was under no operating or financial stress.
“Historically, REIT M&A transactions for well-run companies with good assets have been at premiums to NAV, not discounts. We hope this does not set a precedent,” he said.
The average analyst price target is C$13.54, according to LSEG data.
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Acumen analyst Nick Corcoran cut his price target on MTY Food Group Inc. (MTY-T) after the company’s quarterly results last week raised questions about the health of the U.S. consumer.
While results overall were only slightly below Mr. Corcoran’s estimates, with same-store sales in Canada growing, sales in the U.S. slipped 3.8% amid broad-based weakness across operations.
Another negative for Mr. Corcoran: M&A appears on hold, with no suitable targets.
His price target was cut C$10 to $50, but he maintained a “buy” rating.
Scotiabank analyst John Zamparo maintained his C$45 price target and “sector perform” rating, but cautioned investors may need to be patient.
“We believe MTY’s U.S. results partly represent brand-specific challenges in addition to varying consumer headwinds and ongoing promotional emphasis within the restaurant space stateside,” Mr. Zamparo said in a note to clients. “Ultimately, we expect investors will be willing to pay a higher multiple only when organic growth improves, and that could be challenging in 2H/25 given recent U.S. results, ongoing turnaround efforts at Papa Murphy’s and difficult conditions for M&A. We reiterate our Sector Perform rating and $45 target.”
Elsewhere, RBC cut its price target to C$48 from C$51.
The average analyst price target is now C$47.67, down from C$50.80 a month ago.
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Canaccord Genuity analyst Luke Hannan nudged up his price target on AutoCanada Inc (ACQ-T) following news that executive chair Paul Antony will be transitioning from his current role as the company searches for a new CEO.
Upon the appointment of a CEO, Mr. Antony will then become non-executive Chair of the board to ensure continuity and oversight during this transition period.
Mr. Hannan said investors will welcome the news because it signals the company is addressing governance and succession issues.
“Recall, AutoCanada has technically been without a CEO since August 2018, though since then, Mr. Antony has been the company’s de facto CEO. Conducting a thorough evaluation of both internal and external candidates for the CEO role and, implicitly, establishing a succession plan thereafter should provide investors a higher degree of confidence that ACQ is well positioned for long-term value creation,” Me. Hannan said in a note to clients.
Mr. Hannan’s price target went to C$28 from C$24 and he is maintaining a “buy” rating. The average analyst target is C$23.12.
“Alongside this news, we have modestly increased our target multiple to 8.0x (from 7.5x) to reflect the steadying Canadian consumer spending backdrop, though we otherwise leave our estimates unchanged,” he said. “We continue to like ACQ’s near-term growth prospects, primarily given the progress on cost rationalization and the likely sale of the US business (which would almost instantly reduce net leverage by more than two turns), both of which should leave the business well positioned to resume consolidating the Canadian automotive retail market.”
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Ventum Financial analyst Connor Mackay initiated coverage on Versamet Royalties Corp (VMET-X) with a “buy” rating and C$2 price target.
He thinks the company is uniquely positioned in the gold royalty space in Canada.
“Versamet comes charging into the scene, providing exactly what we think the junior royalty space has been missing: a company with a solid stable of producing assets and imminent production growth driving near-term cash flow, that can slot into the ‘missing middle’ of gold-focused royalties,“ the analyst said in a note to clients.
“With the sector consolidating at the top end of the cap table, we see limited competition in the range ofUS$500M to +US$3.0B market cap, where we expect Versamet will be well-positioned to pursue accretive M&A, focused on assets too small to interest the seniors, but too big for most other juniors. In our view, this creates a clear and scaleable growth path toward the power vacuum left behind by the sector’s significant consolidation over the last five years,” he added.
Versamet has four producing royalties/streams and two more expected to start delivering gold equivalent ounces by year-end. “This puts VMET’s production on track to eclipse junior peers by 2026, at a level that we see generating a significant profit margin that can support acquisitions in a thin marketplace,” he said.
He noted that the company is led by CEO Dan O’Flaherty, who previously co-founded Maverix Metals in 2016 and was CEO until its US$700-million acquisition by Triple Flag Precious Metals. He brings several members of Maverix’s former team and a well-rounded board occupied by current and former executives of major global mining companies, the analyst said.
“A flurry of recent M&A in the royalty space solidifies that premium multiples are to be paid if the largest players want to continue growing. Despite our view that VMET will itself become a consolidator in the space, it too will stick out as a clear potential target, and our valuation leaves plenty of upside on the table, considering the majors could theoretically pay up to about 2.0x NAV for an accretive acquisition,” Mr. Mackay said.
There is no other analyst coverage for the stock, according to LSEG data.
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Needham analyst Scott Berg initiated coverage on Shopify Inc. (SHOP-N, SHOP-T) with a “buy” rating and US$135 price target.
He believes Shopify still has a lot of growth ahead, especially given recent investments internationally and in B2B strategies.
“We are a touch cautious on the current domestic consumer, but consumer spending remains strong and the recent U.S. tax bill can spur near-term consumer spend that can positively impact SHOP’s GMV [gross merchandise value],” Mr. Berg said.
Shopify trades at a hefty 26 times near-term gross profit, but the analyst believes the ecommerce firm can grow its revenues at 20% of more for the next two to four years.
The average analyst target price on Shopify is US$114.55.
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In other analyst actions:
Coelacanth Energy Inc (CEI-X): Roth MKM initiates coverage with price target C$1.05 and “buy” rating
Inplay Oil Corp (IPO-T): Roth MKM initiates coverage with price target C$18 and “buy” rating
Logan Energy Corp (LGN-X): Roth MKM initiates coverage with price target C$1.20 and “buy” rating
Saturn Oil & Gas Inc (SOIL-T): Roth MKM initiates coverage with price target C$6 and “buy” rating
Suncor Energy Inc (SU-T): Jefferies raises target price to C$53 from C$48
Stella-Jones Inc (SJ-T): RBC raises target price to C$82 from C$76
Surge Energy Inc (Alberta) (SGY-T): Roth MKM initiates coverage with price target C$8.50 and “buy” rating
Caterpillar Inc (CAT-N): Bernstein raises target price to US$432 from US$304
Best Buy Co Inc (BBY-N): Piper Sandler cuts target price to US$75 from US$82 and downgrades rating to “neutral” from “overweight”