Inside the Market’s roundup of some of today’s key analyst actions
Calian Group Ltd. (CGY-T) is in a strong position to benefit from increased defence spending and military equipment and infrastructure outsourcing in Canada, said Rob Goff, an analyst at Ventum Capital Markets.
On Monday, Prime Minister Mark Carney outlined a plan to meet NATO’s 2-percent military expenditure target this fiscal year, which would represent the largest increase in Canadian defence spending since the Second World War.
The government’s allocation to the Department of National Defence this fiscal year is now set to rise by nearly one-quarter, pushing total defence-related spending to $62.7-billion in 2025-26, or roughly 2 per cent of the country’s gross domestic product.
The move pulls forward “a massive catalyst originally expected to materialize over the coming half-decade,” Mr. Goff said. “We view these commitments as a meaningful tailwind for Calian given its scale as a unique defense contractor and its diversified portfolio of service offerings in Canada.”
Defence spending represented about half of Calian’s revenues in the most recent quarter, following the company’s declaration of a realigned focus on its core pillars of defence, space and health.
“We remain cautious about the exact capacity and pace of the government to meet these objectives,” Mr. Goff said. “Nevertheless, we expect the large incremental spending to significantly benefit Calian and its close defense peers.”
He maintained a “buy” rating and a target price of $60, which would represent a 34-per-cent upside from Tuesday’s close.
Further spending commitments would also benefit Calian, as the NATO military alliance discusses raising its defence spending target to 3.5 per cent, Mr. Goff said.
“While the 2 per cent commitment is an important near-term milestone, adoption of 3.5 per cent across NATO would represent a powerful supplementary tailwind.”
After the close of trading yesterday, Stingray Group Inc. (RAY.U-T) announced fourth-quarter results that came in ahead of expectations, and the beats are starting to add up for the company, said Desjardins Securities analyst Jerome Dubreuil.
“With an free cash flow yield of 14 per cent, consistent execution, reasonable leverage, and the retail media and Free Ad-Supported Streaming TV opportunities still looking to be in the early innings, we would buy RAY shares.”
Revenue for the quarter was up 15 per cent year over year, easily beating the Street’s estimates. Adjusted earnings before interest, taxes, depreciation and amortization rose by “an impressive” 19 per cent over the prior year, Mr. Dubreuil said.
“We were also encouraged by the company’s rapid deleveraging in the quarter.”
The company took advantage of a seasonably strong quarter for cash flow to reduce its net debt 2.28 times pro forma adjusted EBITDA, which is down from 2.54x last year. Stingray is now targeting a leverage ratio of close to 2.0x.
For the current fiscal year, “the company will continue investing in high-growth areas of the business while pursuing debt repayment,” Mr. Dubreuil said. He reiterated a “buy” rating a kept his target price at $11.50 per share.
Canaccord Genuity hiked its targets on several mining royalty companies following first-quarter financial results from asset operators, while highlighting Sandstorm Gold Ltd. (SSL-T) as the top pick in the space due to the company’s “growth profile, ongoing deleveraging, and inexpensive valuation,” analyst Carey MacRury said.
It was a quarter that saw strong acquisition activity, with around $1.8-billion in deals announced so far this year, including Franco-Nevada’s acquisition of a 7.5-per-cent gross margin royalty on the Côté/Gosselin complex in Northern Ontario.
The group of royalty companies had a blockbuster quarter with an average return of 44 per cent, outperforming the rise in gold prices of around 26 per cent. Valuations are still in line with historical averages, however, at around 1.48 times net asset value.
Mr. MacRury made the following changes to his target prices:
- Franco-Nevada Corp. (FNV-T) to $267 from $262
- OR Royalties Inc. (OR-T) to $40 from $37
- Triple Flag Precious Metals Corp. (TFPM-T) to $37 from $34
- Royal Gold Inc. (RGLD-NASDAQ) to US$203 from US$202
- Sandstorm Gold Ltd. (SSL-T) to $17 from $15.75
- Wheaton Precious Metals Corp. (WPM-T) to $134 from $131
- Metalla Royalty and Streaming Ltd. (MTA-TSXV) to $8.25 from $7.75
Large-scale undeveloped copper-gold projects, like the one owned by Western Copper & Gold Corp. (WRN-T) in west-central Yukon, should be recognized for strategic importance to Canada’s nation-building plan, said Stifel analyst Ralph Profiti.
The Casino Project, which is located in the Whitehorse Mining District, has one of the world’s largest undeveloped copper-gold deposits.
The mine is also expected to produce large quantities of molybdenum and silver. The project’s permitting stages are on track for sometime this year, with construction potentially getting underway by mid-2028.
“Over time, we see an increased probability of consolidation of the Casino Project into a larger mining entity once permitting and development progresses and key infrastructure advancements allow for a potentially greater scale of operations,” Mr. Profiti said.
He initiated coverage on the company with a “buy” rating and a target price of $5.50 per share.
NervGen Pharma Corp. (NGEN-TSXV) presented encouraging data from its early-stage clinical trials for its drug designed to treat spinal cord injuries, said Raymond James analyst Michael W. Freeman.
“We believe there’s a drug here — these data hint at a practice-changing advance in the treatment of spinal cord injury.”
There is more data disclosure to come, as well as talks with U.S. regulators, but the results raise the probability of the drug advancing to Phase 3 clinical trials.
Should that occur, the stock’s likely valuation would push share price to around $14, Mr. Freeman said. For now, he is reiterating an “outperform” rating and raising his target price to $6 from $4.50.
Conservative math for this kind of drug in the U.S. market, with pricing of around US$250,000 per year yields a market potential of greater than US$30-billion, Mr. Freeman said.
“We also remind clients that no drug has given rise to functional improvement in this population to date, so, assuming approval, we think >10 per cent penetration is in the realm of possibility.”