Inside the Market’s roundup of some of today’s key analyst actions

WSP Global Inc. (WSP-T) is “beating all the metrics,” according to National Bank Financial analyst Maxim Sytchev, who said its fourth-quarter results displayed “predictable growth from the industry leader.”

“We get questions around what will propel WSP shares higher over the coming years,” he said. “1) Ability to trust the management to do the right thing around capital allocation (read M&A) is a large part of the story; 2) Path towards 20-per-cent EBITDA margin (from 17.1 per cent in 2022) over time is a material improvement when taking into context it’s a $10-billion top line firm now (hence, “extra $300-million EBITDA really matters at 15 times=plus EV/EBITDA multiple = $4.5-billion in EV); 3) Positive industry backdrop, focused on resiliency, scarce natural resources management, maintenance of critical infrastructure and urban environments’ densification are all part and parcel of WSP’s core offerings. We view WSP shares as a key compounder in a global industrial portfolio and company’s results/guidance align with our thinking.”

On Thursday, shares of the Montreal-based consultancy company closed down 0.14 per cent after it reported quarterly revenue rose 19 per cent year-over-year to $2.554-billion, exceeding both Mr. Sytchev’s $2.462-million forecast and the consensus estimate of $2.472-billion. Adjusted earnings before interest, taxes, depreciation and amortization of $446-billion was also better than anticipated ($430-million and $436-million, respectively.

Mr. Sytchev said the company’s post-earnings conference call confirmed a “positive set-up” moving forward, expecting WSP to continuing “capitalizing on broad-based strength in end-market demand.”

“Long-term margin achievement of 20-per-cent EBITDA is within realm of possibility as management sees many levers it can pull; 2) M&A story in the industry and for WSP specifically is still very much intact as large/leading firms will continue to consolidate (we expect some private assets to come out of PE portfolio over the next two years); 3) Industry backdrop remains strong across all geographies and practice areas,” he said.

Raising his 2023 and 2024 revenue and earnings estimates, Mr. Sytchev increased his target for WSP shares to $195 from $185, citing “consistent execution and rebounding valuations for international peers. The average target on the Street is $190.31.

“As per management’s guide, we are raising our margin profile for the forecasted years and slightly raising our top line to fall within the midpoint of ranges,” said the analyst, maintaining an “outperform” recommendation. Alternatively, the billable hours cadence of last year will return to normal this year, so we should see more of a balanced organic growth outlook between Q1/23E and Q4/23.”

Elsewhere, others making changes include:

* ATB Capital Markets’ Chris Murray to $190 from $174 with a “sector perform” rating.

“WSP delivered solid results broadly in line with our expectations, with year-over-year revenue and EBITDA growth driven by 4.8-per-cent organic growth and the closing of several acquisitions in H2/22,” said Mr. Murray. “Guidance for 2023 calls for double-digit revenue growth, reflecting positive organic trends and M&A and margin expansion, consistent with our expectations. We expect WSP to remain an active acquirer over the near term, as leverage sits at the lower end of management’s targeted range, but we continue to view valuations as a potential constraint. While we remain positive on the Company’s longer-term outlook, prevailing valuations reflect our growth expectations and keep us neutral.”

* Desjardins Securities’ Benoit Poirier to $201 from $186 with a “buy” rating.

“WSP is our preferred name in engineering & construction for many reasons: (1) a disciplined approach toward M&A and ability to take advantage of opportunities that could arise from a potential slowdown; (2) solid organic growth opportunities; (3) push toward a 20-per-cent EBITDA margin in the long term; and (4) ESG tailwinds,” Mr. Poirier said.

* Canaccord Genuity’s Yuri Lynk to $200 from $190 with a “buy” rating.

“WSP’s global leadership position in engineering consulting and strong secular tailwinds make it a core industrial holding, in our view,” said Mr. Lynk.

* Stifel’s Ian Gillies to $185 from $176 with a “buy” rating.

“At this juncture, investors adding to WSP share positions are giving the company credit for not-yet realized EBITDA margin expansion and M&A given its current 2024E P/E is 23.2 times,” said Mr. Gillies. “The company’s long track record of successful M&A leaves us comfortable with this approach given what we expect will be a more conducive M&A environment over the next few years. We are leaving the stock as a Buy despite tepid implied total return potential of 4.5 per cent, as we believe an investor needs to own the stock into M&A events rather than upgrading the stock again post an event.”

* BMO’s Devin Dodge to $194 from $183 with an “outperform” rating.

“In our view, there is a favourable outlook for 2023 underpinned by strong demand trends, margin improvement potential, and continued solid execution. The M&A pipeline is active and WSP has significant capacity to self-fund deals. Though the valuation premium vs. peers has pushed higher in early 2023, we believe the potential for positive earnings revisions and M&A upside provide sufficient support for our constructive view on the shares,” he said.

* RBC’s Sabahat Khan to $198 from $190 with an “outperform” rating.

“Looking ahead, we reaffirm our positive view on WSP driven by its consistent results, favorable top-line and margin outlook, and potential for further M&A given its balance sheet position,” said Mr. Khan.

* CIBC’s Jacob Bout to $188 from $185 with an “outperformer” rating.

“Similar to its engineering/design peers, WSP provided 2023 guidance that reflects organic net revenue growth and further expansion in margins this year. Despite ongoing macro uncertainty, WSP’s core end-markets and regions remain resilient, with management noting that it is not seeing any major areas of softness at the moment. While backlog did marginally contract quarter-over-quarter, it is still meaningfully higher year-over-year, with quoting activity strong. Further, with pro-forma net debt / EBITDA now at 1.5 times, WSP has a lot of dry powder to deploy funds for M&A, particularly if we see a market downturn and compression in private company multiples,” said Mr. Bout.

* TD Securities’ Michael Tupholme to $205 from $190 with a “buy” rating.


The outlook for Spin Master Corp. (TOY-T) is better than its valuation suggests, according to Stifel analyst Martin Landry.

“With 22 per cent of its market cap in cash, Spin Master provides investors with ample optionality, which is not reflected in the valuation, in our view,” he said. “TOY’s shares trade at less than 6 times EBITDA representing an appealing entry point.”

Shares of the Toronto-based rose a mere 0.19 per cent on a rough Thursday for the market following the release of fourth-quarter results that exceeded the projections of both the analyst and the Street. However, its 2023 guidance “came-in slightly lower than expectations with stable revenues year-over-year and slightly higher EBITDA margins.”

“Higher amortization of development expenses are weighting on our 2023 EPS estimates and account for the majority of the downward revision,” said Mr. Landry. “This is due to several entertainment releases in 2023 including two new properties, Vida The Vet and Unicorn Academy. The toys related to these new properties will follow in 2024, providing visibility on future revenue streams.”

“We are decreasing our 2023 EPS by 20 per cent, on higher amortization expense. Spin Master’s expects H1/23 to be challenging driven by lower shipments year-over-year as retailers continue to work through elevated inventory levels and seasonality of shipments returns to historical patterns. Additionally, 2023 will be a big year for Spin Master entertainment with lots of content releases. As a result, amortization costs are expected to be elevated in 2023, with limited revenues associated with these costs given the timing of toy release more weighted into 2024. Our 2024 estimates remain largely unchanged and calls for EPS growth of 33 per cent year-over-year.”

Despite the negative revision, Mr. Landry emphasized the potential upside from the second Paw Patrol movie, which is scheduled for a debut in theatres at the end of September followed by a release of Paramount+ just 45 days later.

“This differs from the first movie, which was released on streaming platforms and in theaters on the same day,” he said. “The economics of the movie are also different with TOY expected to receive a compensation for only a portion of the development costs as opposed to 100 per cent for the first movie. In exchange, Spin Master will participate in the upside of potential earnings from the box office and streaming. We estimate that this approach could generate between $10-20 million in net earnings for Spin Master, or 6-10-per-cent upside to our 2023 EPS estimate.”

Seeing its inventory levels in a better position than peers and touting its balance sheet optionality, Mr. Landry raised his target for Spin Master shares by $1 to $49, maintaining a “buy” recommendation. The average is $47.89.

“We expect Spin Master to grow its revenues year-over-year by mid-to-high single digits organically,” he said. “The development of in-house evergreen properties complemented by the in-licensing of well established IP should allow the company to reach its revenue target goal. We expect EBITDA margins to increase and exceed 20 per cent as revenues from lucrative digital games increase as a proportion of sales. Revenue growth combined with margin expansion and M&A opportunities should lead to EPS growth in the mid-to-high teens sustainably.”

“Shares of Spin Master are currently trading at 6 times on a EV/forward EBITDA basis, a discount of 3 multiple points vs. its 5-year average. In our view, Spin Master’s valuation should be higher than historical levels given the recent operational performance, the increased size of the company, reducing product concentration risk, and Spin Master having the largest net cash position since its IPO in 2015.”

Elsewhere, other changes include:

* Canaccord Genuity’s Luke Hannan to $46 from $44 with a “buy” rating.

“All told, despite industry conditions remaining unfavourable over the near-term (and in Q1/23 in particular), we remain bullish on the stock for several reasons: (1) the back half of the year looks particularly strong, with several new content releases (the most notable of which in our view being the new PAW Patrol movie and the PAW Patrol Academy digital game), (2) cost headwinds associated with freight, resins, and electronics are showing signs of dissipation, and (3) the uncertain near-term environment is, in our view, more than reflected in the stock’s valuation, which trades at a steep discount to peers,” said Mr. Hannan.

* RBC’s Gerrick Johnson to $47 from $46 with an “outperform” rating.

“Spin Master reported Q4 Adjusted EBITDA ahead of Street forecasts, while 2023 guidance was shy of expectations. The puts/takes on the 2023 guidance essentially point to flat year-over-year Adjusted EBITDA, which we view as a reasonable starting point for the year given the uncertainty on how the macro backdrop may evolve,” said Mr. Johnson.

* CIBC’s John Zamparo to $42 from $41 with a “neutral” rating.

“Spin Master’s 2023 guide contains some nuance, but we ultimately view it positively because of better-than-expected profitability, partly the result of a cost-cutting program. While we believe TOY is deftly managing its own operations, industry conditions remain challenging, particularly retailers’ inventories and cash-strapped consumers. We see multiple opportunities for TOY to re-rate, but wish to see progress on industry conditions stabilizing before becoming more constructive on the stock,” said Mr. Zamparo.


Following the release of stronger-than-anticipated fourth-quarter 2022 financial results, a group of equity analysts on the Street raised their forecasts and target prices for units of Granite Real Estate Investment Trust (GRT.UN-T).

On Wednesday after the bell, the Toronto-based REIT, which focuses on industrial, warehouse and logistics properties, reported funds from operations of $1.20, up 19 per cent year-over-year (from $1.02) and exceeding the Street’s forecast of $1.11. It benefitted from higher net operating income, partly from higher rent, as well as lower net interest costs and expenses.

RBC Dominion Securities’ Pammi Bir called it a “strong finish” to the year and believes Granite “sets up well, amid macro visibility in short supply.”

Calling the “view from the ground pretty strong,” Mr. Bir said: “Post a strong Q4 finish, our outlook for GRT remains constructive. Supported by continued strength in leasing, fundamentals are in solid shape, with organic growth accelerating and 2023 guidance raised. The development program is also making a stronger mark on earnings and value creation as deliveries ramp up. In short, with multiple levers of growth and a discounted valuation, we think GRT sets up well in an environment where macro visibility remains in short supply.”

Maintaining an “outperform” recommendation for Granite units, he raised his target to $103 from $100. The average is $94.80.

“We see current levels as an attractive entry point to a name with a solid earnings and NAV growth profile, below average leverage, a sizeable pipeline of value-creation opportunities, and capacity for further distribution growth,” said Mr. Bir.

Others making changes include:

* National Bank’s Matt Kornack to $93 from $91 with an “outperform” rating.

“Q4 was a big quarter for Granite as it beat us materially on NOI as a result of strong operating performance, expansion/development delivery timing and FX tailwinds (we model the net impact so some of this was offset in higher costs),” said Mr. Kornack. “Guidance was also strong with management calling for a slightly higher SPNOI growth range with costs tracking prior forecasts. Spot rates on the Euro and USD represent a further catalyst as they are at or exceed the high end of management’s outlook. On the operations front, leasing activity has been significant with spreads tracking our expectations for 70-per-cent-plus spreads in Canada and low-to-mid 20-per-cent growth on renewals in the U.S. While there will be some transitory vacancy in 2023, confidence is high that this will be filled quickly. Notwithstanding a challenging interest rate environment, we are taking our target higher on better earnings growth expectations.”

* Canaccord Genuity’s Mark Rothschild to $97 from $90 with a “buy” rating.

* CIBC’s Dean Wilkinson to $95 from $90 with an “outperformer” rating.

* TD Securities’ Sam Damiani to $100 from $95 with an “action list buy” rating.


When Empire Company Ltd. (EMP.A-T) reports its third-quarter results before the bell on March 16, National Bank Financial analyst Vishal Shreedhar predicts investors will focus on growth drivers as its performance is likely to “remain short of peers.”

He’s forecasting consolidated earnings per share for the parent company of the Sobeys supermarket chain of 67 cents, down 12.5 per cent year-over-year (from 77 cents) and a penny below the consensus estimate on the Street. He attributed the drop to “impacts related to a broad-based cyberattack (expected to be partially adjusted out of earnings), increasing competitive activity in grocery and higher SG&A in part related to investments (personalization, loyalty, space productivity, etc.).”

“We consider FR [food retailing] segment results to be more meaningful than total company results for the purposes of evaluating recurring earnings power (total company results include contribution from the Investments/Other income segment),” he added. “For reference, we model FR EPS of $0.61 versus $0.66 last year.

“We forecast core FR sssg [same-store sales growth], excluding fuel, of 1.5 per cent versus down 1.7 per cent last year. This is below recent peer reporting with [Loblaw] delivering sssg at 8.4 per cent and [Metro] delivering sssg at 7.5 per cent (this is due to timing differences, in addition to estimated market losses in part owing to a lower mix in the discount grocery segment).”

With the Project Horizon initiative nearing a conclusion, Mr. Shreedhar expects Empire to largely deliver on its EBITDA target of $500-million, however he thinks it will fall “moderately” short of its EBITDA margin target of 8.2 per cent.

“We understand that EMP intends to review improvement opportunities after the completion of PH (Scene+, productivity investments, conversions, etc.),” he said. “Given that EMP has underperformed peers, we look for specific colour from management on initiatives to accelerate growth.”

After trimming his 2023 and 2024 revenue and earnings estimates, Mr. Shreedhar cut his target for Empire shares to $38 from $40, keeping an “outperform” rating. The average is $39.

“We believe valuation is attractive, trading at 6.8 times NTM [next 12-month] EV/EBITDA for the Retail business (5-year average is 7.2 times),” he said. “Furthermore, we believe that Empire’s growth challenges are transient to a large degree and expect it to deliver comparable performance versus the other grocers over the medium term.”


Citi analyst Vikram Bagri sees North American renewable energy companies “well positioned to grow.”

“Renewables remain a sector of focus for governments, investors, and consumers alike as the world goes through the most rapid and transformational change in terms of how energy is produced, stored, and consumed,” he said. “We believe the solar sector should continue to see unprecedented growth due to geopolitics, focus on ESG, environmental concerns, government incentives and most importantly, due to attractive LCOE relative to alternatives.

“We expect year-over-year U.S. and EU solar installations to grow 21 per cent and 17 per cent this year, respectively. Citi’s forecast for overall global solar installations calls for a 39.1-per-cent increase in 2023 vs last year. However, domestically, rising interest rates and NEM 3.0 in California have created undercurrents leading to a tough medium term outlook for residential installations. In comparison, commercial and utility scale installations benefit from IRA, improving component availability and decreasing costs. We are modeling California residential solar installations declining 50 per cent year-over-year in late 2023 through mid-2024. Furthermore, in 2022, several other states including Florida, Indiana, Idaho, Michigan, and North Carolina, saw bills that were aimed at reducing net metering and/or imposing fixed charges for residential customers. We believe the action by California sets an important precedence that lays the framework and path forward for other states to follow.”

In a research report released late Thursday, Mr. Bagri launched coverage of four stocks and assumed coverage of seven others, moving the firm’s recommendation for Guelph, Ont.-based Canadian Solar Inc. (CSIQ-Q) to “neutral” from “buy” previously.

“CSIQ operates in a rapidly growing industry and benefits from being one of two vertically integrated players in our coverage,” he said. “However, the obvious drawback of vertical integration is relatively high capital intensity. Significant manufacturing capacity expansions (the first phase of 14GW in wafer/cell capacity expansion commences in 2H23) should mean that FCF will get incrementally more negative in the near to medium term, before turning positive in 2025. Manufacturing capacity expansion is taking place just as the core CSI segment could face ASP pressure from lower module prices. In all, we struggle to envision CSIQ generating more than high single digit ROICs, which is only marginally above our estimated WACC. We expect the company will stay disciplined in its capital allocation strategy and may not spend capital on building polysilicon capacity. Especially, when corporate leverage remains relatively high and polysilicon capacity in PRC is increasing substantially this year (see commodity section for more details). We rate CSIQ High Risk due to its high volatility and exposure to potential rapid changes in commodity prices.”

While he expects margin expansion in the near term, Mr. Bagri thinks Canadian Solar’s “long-term commodity benefit should only be marginal” and warned of tariff risks from its operations in Thailand.

His target for Canadian Solar slid by US$1 to US$44, remaining above the US$42.92 average.

“Our top picks are Buy-rated ENPH, NETI, SEDG, and SHLS,” said Mr. Bagri. “These companies are leaders in their respective domains, are gaining market share, and growing more than overall growth in the sector. Our least preferred names are GNRC and SPWR as challenging end markets could put guidance under pressure. We are also recommending a pair trade of overweight RUN/underweight SPWR.”


ATB Capital Markets analyst Tim Monachello sees Thursday’s 19.9-per-cent share price drop endured by Shawcor Ltd. (SCL-T) following its fourth-quarter earnings release as a “knee-jerk reaction.”

That view led him to raise his recommendation to “outperform” from “sector perform” previously.

“We believe the selloff in SCL shares is unwarranted and likely stems from a misinterpretation of 1) SCL’s 2023 guidance, which we believe is largely intact on a full-year basis, and 2) the FCF generation profile of SCL’s Southern Gateway Project and its capital investment requirements, which are being fully funded by the customer,” the analyst said. “All told, we believe SCL’s 2023 outlook remains largely intact, if not improved, and its balance sheet position is materially improved compared to our estimates given significant prepayments received in Q4/22 related to the SGP project. SCL’s industrial business lines continue to perform as expected, and management is moving forward with their high-return organic growth strategy within the Company’s industrial business lines. All told, we view the pullback in SCL shares as a strong buying opportunity for investors.”

Mr. Monachello maintained a $16.75 target for Shawcor shares. The average is $15.38.

Conversely, BMO Nesbitt Burns analyst John Gibson downgraded the Toronto-based oilfield services company to “market perform” from “outperform” with a $13 target, down from $17.

“Our downgrade reflects the pro forma entity, which we are currently valuing at 6.5 times 2023 EV/EBTIDA and also assumes an additional $50-100 million (over and above a large prepayment in Q4/22) in proceeds is recouped from the sale of its pipe coating division,” said Mr. Gibson. “SCL shares should begin to re-rate post sale, although this could take some time as the company proves out the pro forma business.”

Others making target changes include

* Cormark Securities’ David Ocampo to $18.50 from $22 with a “buy” rating.

* TD Securities’ Aaron MacNeil to $12.50 from $14.50 with a “hold” rating.

* National Bank’s Zachary Evershed to $17.50 from $18 with an “outperform” rating.


Following its fourth-quarter earnings release, Raymond James analyst Brad Sturges still sees Minto Apartment REIT (MI.UN-T) as “great value,” however he lowered his recommendation to “outperform” from “strong buy” based on a “muted” forecast for funds from operations growth versus last year as well as higher assumed financing costs.

“While we are a little less constructive on Minto’s price appreciation prospects possibly over the next few quarters, our new Outperform rating still reflects Minto’s deep NAV discount, and the REIT’s improving 2023E SP-NOI growth outlook,” he said.

Mr. Sturges target fell by a loonie to $18.75. The average is $19.90.

Other target changes include:

* Scotia Capital’s Mario Saric to $19.25 from $19.50 with a “sector perform” rating.

“Overall, this doesn’t seem like a market long on patience, but we think MI is setting up quite nicely for a unit price recovery in 2H/23,” said Mr. Saric. “We still believe MI can generate superior NTM NAVPU growth (13 per cent) at a sizeable 26-per-cent discount to NAV.”

* RBC’s Jimmy Shan to $22 from $21.50 with an “outperform” rating.

“High variable debt exposure hurt the quarter,” said Mr. Shan. “But terming out debt on Niagara & International, top up financing and potential asset sale should lead to interest expense savings and variable debt exposure to reduce to 14 per cent. FFO/unit growth should improve in H2 and even more in 2024. NOI picture looks good with expected mid-to-high single digit NOI growth in 2023. Valuation is attractive at implied 4.7-per-cent cap, with 20-per-cent upside to NOI from gain-to-lease.”

* TD Securities’ Jonathan Kelcher to $21 from $20 with a “buy” rating.


In other analyst actions:

* TD Securities’ Tim James upgraded Transat AT Inc. (TRZ-T) to “hold” from “reduce” with a $4 target, up from $3. Other analysts making changes include: National Bank’s Cameron Doerksen to $3 from $2.50 with an “underperform” rating, Scotia’s Konark Gupta to $2 from $1.50 with a “sector undeperform” rating, CIBC’s Kevin Chiang to $2.50 from $2.20 with an “underperformer” rating and Desjardins Securities’ Benoit Poirier to $4 from $3.50 with a “hold” rating. The average is $2.90.

“The Q1 results reinforce our confidence that Transat’s EBITDA and cash flow will continue to improve through F2023 and into F2024,” said Mr. Doerksen. “Indeed, at the end of January, Transat’s customer deposits for future travel stood at a record level, 11 per cent higher than the prior record at the end of January 2020 just before the onset of the pandemic. However, leverage remains too high in our view, and we continue to see a risk of future shareholder dilution.”

* Echelon Partners’ Andrew Semple downgraded Ayr Wellness Inc. (AYR.A-CN) to “speculative buy” from “buy” with a $10 target, dropping from $25 and below the $18.07 average.

“Despite our optimism on the [fourth-quarter] results, the outlook, and fundamental performance of the business, we are making some significant changes to our valuation model with this update. Ayr’s positive fundamental outlook has been overshadowed by tightening capital markets conditions and investor concerns over leverage,” he said. “We believe Ayr is now amply capitalized for 2023, though we note that it will need to refinance $243-million of senior notes due December 2024 sometime that year. With over 20 months until maturity, we believe Ayr has a sufficient window to demonstrate improved financial performance, supporting our ongoing bullish view, but we acknowledge that macro conditions outside of the Company’s control have increased the risk profile of the business and narrowed its margin of safety. We believe Ayr’s risk profile due to capital markets conditions has become more than is typical, warranting a rating revision to Speculative Buy (prev. Buy). This brings our rating for Ayr in line with other mid and small cap U.S. cannabis coverage names where we are bullish.”

* With its announcement of the $62-million acquisition of the assets of Hawaii Pacific Teleport, Canaccord Genuity’s Doug Taylor raised his target for Calian Group Ltd. (CGY-T) to $83 from $80, keeping a “buy” rating, while Echelon Partners’ Amr Ezzat bumped his target to $90 from $85 with a “buy” rating..The average target is $80.75.

“The financial accretion appears considerable given 6.5 times EBITDA paid (CGY 10 times), accretion to its margin profile, and cross-selling potential with major satellite operators (particularly LEO),” said Mr. Taylor. “Calian has ample balance sheet capacity with cash on hand to close this deal and expects to do so in Q3. We conservatively model a July 1 close.”

* Scotia’s Michael Doumet trimmed his Dexterra Group Inc. (DXT-T) target to $6.25 from $6.50 with a “sector perform” rating. Other changes include: Raymond James’ Frederic Bastien to $7 from $7.50 with a “market perform” rating and ATB Capital Markets’ Chris Murray to $8.40 from $9. with an “outperform” rating. The average is $8.

* Canaccord Genuity’s Robert Young increased his Docebo Inc. (DCBO-T) target to US$50 from US$40 with a “buy” rating. Others making changes include: Cormark Securities’ Gavin Fairweather to $72 from $74 with a “buy” rating, Scotia Capital’s Kevin Krishnaratne to US$49 from US$42 with a “sector outperform” rating and CIBC’s Stephanie Price to$ 69 from $66 with an “outperformer” rating. The average is $72.61.

“Docebo reported a strong Q4 with in-line revenue and a beat on EBITDA and ARR,” said Mr. Young. “It also provided Q1 guidance for the first time, with 32-per-cent cFX revenue growth at the mid-point and 4-5-per-cent EBITDA margins, in line with consensus estimates. Docebo highlighted strong demand and a healthy enterprise pipe including multiple large deals with potential to close in the near term. Docebo also reported year-over-year improvement in gross retention. Given 80 per cent of ARR is tied to multi-use case deployments and 65 per cent tied to customer training, we argue Docebo has a stickier base of revenue than perceived. Despite adding 149 net new logs, consistent with the recent pace, net new win and expansion is incrementally difficult. Similar to enterprise software vendor peers, macro caution and stringent purchase controls has delayed new and expansion deals leading to a 400 basis points decline in net revenue retention of 109 percent. While ARR growth remains the focus, Docebo is aiming to exit Q4/23 with “double-digit” EBITDA margins, ahead of our and Street expectations. Management also touted the benefits of its early focus on Generative AI tools, including Shape, which had record attach in Q4. … We continue to find Docebo shares attractive.”

* CIBC’s Nik Priebe raised his target for ECN Capital Corp. (ECN-T) to $5, above the $4.79 average, from $4.50 with an “outperformer” rating.

“We are resuming coverage of ECN Capital following a brief period of research restriction related to the announcement of a strategic review,” said Mr. Priebe. “We suspect that the sharp underperformance of ECN’s share price played a role in attracting third-party “interest” and that the company could evaluate a wide range of options to enhance shareholder value. Although we are not speculating on the outcome, in our view it seems more likely than not that a transaction (of some form) materializes. We expect the review process will take time to play out, but believe that ECN will carefully weigh all options and only act on an offer that is materially value-creating.”

* CIBC’s Bryce Adams bumped his First Quantum Minerals Ltd. (FM-T) target to $28 from $26 with a “neutral” rating. The average is $30.47.

* CIBC’s Cosmos Chiu moved his Franco-Nevada Corp. (FNV-T) target to $240 from $230 with an “outperformer” rating, while Canaccord Genuity’s Carey MacRury cut his target to $202 from $205 with a “hold” rating. The average is $210.43.

* CIBC’s Dennis Fong increased his Imperial Oil Ltd. (IMO-T) target to $80 from $76, keeping a “neutral” rating. The average is $78.75.

* Mr. Fong raised his target for MEG Energy Corp. (MEG-T) to $23 from $20 with a “neutral” rating. The average is currently $24.83.

* Canaccord Genuity’s Derek Dley cut his Maple Leaf Foods Inc. (MFI-T) target to $27, below the $31.67 average, from $31 with a “buy” rating.

* CIBC’s Dean Wilkinson cut his Melcor REIT (MR.UN-T) target to $6 from $6.25 with a “neutral” rating. The average is $5.21.

* RBC’s Paul Treiber cut his Softchoice Corp. (SFTC-T) target to $19 from $21 with an “outperform” rating. Other changes include: BMO’s Deepak Kaushal to to $19 from $20 with an “outperform” rating, Cormark Securities’ Gavin Fairweather to $21 from $25 with a “buy” rating National Bank’s John Shao to $23 from $28 with an “outperform” rating and Scotia Capital’s Divya Goyal to $20 from $22 with a “sector outperform” rating. The average is $20.72.

“Q4/22 was a softer than expected quarter given reasonable guidance estimates as of Q3/22 results,” said Ms. Goyal. “While we believe the company’s Software & Cloud business remains fairly robust, the hardware and services, esp. professional services business could see some headwinds. The company has discontinued its quarterly/annual guidance now onwards. We believe this could be potentially due to the uncertain macro conditions which could lead to project delays/ cancellations, as broadly observed across the sector.”

* CIBC’s Hamir Patel raised his Stella-Jones Inc. (SJ-T) target to $62, exceeding the $61.43 average, from $57 with an “outperformer” rating.

“While SJ remains one of the most defensive names in our coverage universe, with close to two-thirds of its revenues typically derived from poles and railway ties (historically tied to maintenance spending), the company is poised to benefit from a multi-year period of very strong pole demand. Over the next few years, we expect the company to benefit from an emerging replacement cycle in poles augmented by federal infrastructure spending, electrification of mobility and 5G roll-out,” he said.

* Mr. Patel lowered his target for Transcontinental Inc. (TCL.A-T) to $16 from $18 with a “neutral” rating. The current average is $18.67.

“While we are encouraged by the volume outlook for the company in Packaging (supported by its product innovation pipeline), the story is somewhat catalyst lite in H1 as inflationary pressures on Printing customers seem likely to accelerate permanent demand declines in the segment (given fixed marketing budgets at many retail customers). We expect these volume headwinds to weigh on Printing segment margins as the company works to adjust its cost structure,” said Mr. Patel.

* ATB Capital Markets’ Nate Heywood cut his Tidewater Midstream and Infrastructure Ltd. (TWM-T) target to $1.50 from $1.70 with an “outperform” rating. Other making changes include: RBC’s Robert Kwan to $1.50 from $1.60 with an “outperform” rating, Scotia’s Robert Hope to $1.30 from $1.50 with a “sector outperform” rating and CIBC’s Robert Catellier to $1.60 from $1.65 with an “outperformer” rating. The average is $1.57.

“Tidewater Midstream’s shares were very weak (down 9 per cemt) following Q4 results, where it increased the cost of its associated renewable diesel facility (HDRD) by $82-million,” said Mr. Hope. “The higher capital cost of the project introduces some funding risk at Tidewater Renewables (LCFS), which holds the HDRD and which Tidewater Midstream has a 69-per-cent interest. Our estimates come down materially in 2023 to reflect a slower ramp up of the HDRD as well as higher maintenance capital expenditures. Our sum of the parts target price moves down to $1.30 from $1.50 to reflect the higher capital cost and lower estimates. We see considerable valuation expansion potential in the shares as the HDRD enters service and the company quickly moves down leverage. In addition, any asset sales or other transactions that highlight the value of its asset base could be well received.”

* Mr. Kwan also lowered his Tidewater Renewables Ltd. (LCFS-T) to $18 from $20 with an “outperform” rating, while Mr. Catellier cut his target to $16 from $19 with an “outperformer” rating. The average is $17.39.


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