A look at some small-cap stocks making news - or about to.
Canada’s S&P/TSX Small Cap Index (TXTW-I) is up by about 55 per cent over the past 52 weeks. It hit a record 1,496.55 on June. 2. The Russell 2000 in the U.S. is up about 40 per cent over the past 52 weeks. It hit a record of 2,996.42 on June 15.
Small-cap summary:
MDA Space Ltd. (MDA-T) announced its buying spacecraft and satellite component manufacturer Blue Canyon Technologies LLC in an all-cash transaction valued at US$620-million.
“The acquisition of Blue Canyon Technologies is expected to accelerate our growth strategy by increasing our U.S. market opportunities with highly complementary capabilities, local manufacturing footprint and a skilled and specialized talent base,” said CEO Mike Greenley in a release on Friday. “Securing those strategic benefits on an accretive basis with a profitable and cash-generating business makes this an ideal fit for MDA Space expansion and continued shareholder value creation.”
The company said the acquisition will add a “profitable, cash-generating business that is expected to be accretive to Adjusted EBITDA and Adjusted EPS in 2027,” the company stated.
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Ag Growth International Inc. (AFN-T) announced a formal review of strategic alternatives a month after coming to an agreement with an activist shareholder.
After markets closed on Thursday, the grain handling, storage and equipment company said it has established a strategic review committee, including chair Gary Anderson and independent directors George Armoyan and Mick MacBean, to conduct the review. It has also hired financial and legal advisors.
“There can be no assurance that this strategic review process will result in any transactions or other outcomes,” the company stated.
The announcement comes after the company last month said it had reached an agreement with activist shareholder Plantro Ltd. on board appointments.
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Reitmans (Canada) Ltd. (RET-X) reported higher revenue and trimmed its loss in its first quarter.
After markets closed on Tuesday, the retailer reported revenue of $160.1-million for the quarter ended May 2, up about 1 per cent from $158.9-million a year earlier. The company had seven fewer stores year over year.
Comparable sales, including e-commerce net revenues, were up 0.3 per cent year over year.
Adjusted EBITDA was negative $5.4-million for the quarter, up from negative $10.6-million last year.
Its net loss of $6.3-million or 13 cents per share compared with a loss of $10-million or 20 cents last year.
CEO Andrea Limbardi said net revenues from retail stores were up 2.9 per cent “as Canadians continued returning to stores, particularly in shopping malls.”
Added Ms. Limbardi: “Our investments in the store fleet are beginning to pay off, with non‑comparable locations contributing more strongly to revenue growth. We also grew net revenues while operating with lower inventory during the quarter."
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High Tide Inc. HITI-X reported second-quarter results that beat expectations.
After markets closed on Monday, the Calgary-based company reported revenue of $179.3-million for the three months ended April 30 compared to $137.8-million for the same period last year. The result beat expectations of $171.2-million, according to S&P Capital IQ estimates.
It said the 30-per-cent increase represented the fastest growth rate in 11 quarters. “Despite the quarter being seasonally slowest and having three fewer days, this was the fourth consecutive quarter marking a new all-time high in revenue,” the company stated.
Adjusted EBITDA was a record of $13.9-million, up 73 per cent compared to last year, “marking the fastest growth rate in nine quarters, and up 21 per cent sequentially despite there being three fewer days in the quarter,” it stated. The result exceeded expectations of $10.3-million.
Net income of $24-million or a penny per share improved significantly from a loss of $2.8-million or 4 cents last year.
“Our second quarter results highlight the strength of High Tide’s diversified growth strategy and our ability to execute at a high level across multiple geographies,” stated founder and CEO Raj Grover in a release.
Canaccord analyst Luke Hannan said the positive stock reaction to the results earlier in the week was due to the “upside surprise” in revenue and profitability for its Remexian Germany subsidiary.
“In our view, investors are likely to look through the near-term slowdown in Canadian same-store sales, which is primarily driven by macro headwinds and format trade-downs outside of HITI’s control, and instead focus on the durability of the domestic platform, which still outperformed industry peers,” the analyst wrote. “Against this backdrop, we expect increasing attention on HITI’s multiple avenues for growth, including the continued scaling of Remexian, disciplined Canadian retail M&A, and the emerging pipeline of international opportunities in Europe and the UK.”
He reiterated his “buy” rating and increased his target price to $7.50 from C$7.25.
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Canopy Growth Corp. (WEED-T) shares fell this week after the company reported fourth-quarter results that missed expectations.
Before markets opened on Monday, the Smith Falls, Ont.-based cannabis company reported net revenue of $71.2-million for the quarter ended March 31, up from $78-million for the same period last year. The expectation was for revenue of $74.4-million, according to S&P Capital IQ estimates.
Its net loss from continuing operations was $154.7-million or 40 cents per share compared with a loss of $197.7-million or $1.27 last year.
Its adjusted EBITDA loss was $6.3-million, an improvement from a loss of $9.2-million last year. The expectation was for an adjusted EBITDA loss of $3.5-million.
The company also said it expects to reach positive adjusted EBITDA during fiscal 2027.
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Happy Belly Food Group Inc. (HBFG-CN) shares surged earlier this week after the restaurant brand owner announced a multi-unit development agreement for 45 new Heal Wellness restaurants over the next three years.
Heal Wellness is one of the company’s brands, alongside Yolks, Lettuce Love Cafe and Rosie’s Burgers, to name a few.
“The agreement is with a group of experienced entrepreneurs, restaurateurs and also with Bedford Park Capital, an investment firm,” said Stifel analyst Martin Landry in a note.
He said the development will “significantly” accelerate Happy Belly’s growth.
“We view this agreement very positively,” he wrote. “It shows significant interest in the Heal Wellness banner, a sign that the unit economics are attractive for franchisees and that the concept is getting traction with customers. While we are not changing our forecasts at this point, this agreement supports our forecasts and provides visibility into the company’s growth.
He also said the announcement could open the door to more multi-unit development agreements in the years ahead.
Mr. Landry maintained his “buy” rating and $2.30 target.
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Andrew Peller Ltd. (ADW-A-T) shares surged this week after the wine producer said it struck a deal to be taken over by Fairfax Financial Holdings Ltd. (FFH-T) in a deal valued at $579-million on the Canadian wine producer.
On Monday, the company said holders of the Class A non-voting shares will receive $8 in cash per share, while holders of the company’s Class B voting shares will receive $12 per share in cash.
In connection with the transaction, John Peller and certain affiliates have entered into a rollover agreement with Fairfax. The rollover shares represent about 15 per cent of the Class A shares and about 25 per cent of Class B shares.
“This agreement represents a compelling outcome for our shareholders, delivering immediate value and certainty while reflecting the strength of Andrew Peller’s portfolio and market position,” Andrew Peller CEO Paul Dubkowski stated in a release.
Mr. Dubkowski and chief financial officer Renee Cauchi are expected to remain in their current roles once the deal is complete, the company stated.
“We do not see a competing bid for APL following the announcement and believe the path towards the close of the transaction should be relatively straightforward,” stated Canaccord analyst Luke Hannon in a note.
Also this week, the company reported fourth-quarter revenue of $79.5-million, up from $75.5-million a year earlier. The result was below expectations of $78.4-million based on one analyst estimate, according to S&P Capital IQ.
Net earnings were $5.7-million or 14 cents per Class A share for the quarter ended March 31, compared to a loss of $747,000 or 2 cents a year ago.
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Upcoming small-cap earnings:
June 26: Corus Entertainment Inc. (CJR-B-T)
June 30: Tecsys Inc. (TCS-T)
July 15: Cogeco Communications Inc. (CCA-T)
July 29: Secure Waste Infrastructure Corp. (SES-T)