A trader watches his screen on the floor of the New York Stock Exchange February 18, 2014.Reuters
Inside the Market's roundup of some of the Canadian small caps making news and on the move today. This post will be updated during the trading day.
Cantor Fitzgerald analyst Peter Prattas upgraded Rocky Mountain Dealerships Inc. to "buy" from "hold" after the agriculture and construction equipment dealership company released better-than-expected earnings Tuesday night.
The company's second-quarter revenue rose 2 per cent from a year earlier to $242-million, with construction sales rising by 19 per cent. That surprise came on the bottom line, where earnings per share grew to 31 cents from a year earlier, well ahead of the consensus call at 24 cents. Rocky also announced leadership changes effective Dec. 31st: CEO Matt Campbell and President Derek Stimson will be retiring but both will remain on the board.
"Rocky's improved margin adds confidence that it can significantly improve upon a soft second half of 2013, which was plagued by lower manufacturer incentives, write-downs and other factors," said Mr. Prattas.
He maintained a $12 (Canadian) one-year price target. Shares are up nearly 3 per cent in late afternoon trading at $10.96.
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Bellatrix Exploration Ltd. reported its second-quarter results overnight, with cash flow per share of 39 cents missing the Street consensus of 45 cents. Production of 36,342 barrels of oil equivalent per day was a little lower than consensus expectations of 37,000.
But AltaCorp Capital Reserch analyst Jeremy McCrea was overall quite pleased with the results and reiterated his "outperform" rating and $14 (Canadian) price target.
"While the quarter was in line for us, the weakness in gas prices continues to weigh on the stock price," Mr. McCrea commented in a research note. "We'll remind investors, however, that given its joint venture partners, individual well paybacks are within 6-12 months, and even under lower AECO (gas prices), economics still stand to be top tier in the basin....The company continues to be a very attractive buy for long-term investors."
Investors today appear to be coming around to that assessment. The stock initially traded lower this morning but by mid-afternoon was up 1.4 per cent on the TSX.
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Sandstorm Gold Ltd. announced that it will increase its investment in Luna Gold Corp, purchasing up to 30 million shares at $1.02 per unit for a total of up to $30.6-million. Sandstorm already owns 8.5 million shares, with the agreement stating that the company will purchase a minimum of 19.5 million shares. The purchase will make Sandstorm Luna's largest shareholder, and the company will also appoint one member to Luna's board. The private placement will also provide much-needed capital for Luna, as the company has been set back by lower-than-expected cash flows and cost overruns at its Aurizona mine in Brazil.
Luna also lowered its fiscal 2014 guidance, expecting gold production this year of between 75,000 and 80,000 instead of 85,000 to 95,000. Cash costs have also been revised to $825 to $900 (U.S.) per ounce from $690 to $740. A portion of the Phase 1 expansion at Aurizona has been delayed because of cost overruns.
At least two analysts downgraded their ratings on Luna Gold upon hearing of the lowered guidance and Sandstorm deal. Canaccord Genuity downgraded Luna Gold to "hold" from "buy" and cut its price target to $1 (Canadian) from $1.60. National Bank Financial downgraded the stock to "underperform," with its price target dropping to 75 cents from $1.50.
"While we continue to believe there could be addition value to unlock from Aurizona, it is difficult to speculate on the timing and terms of a potential solution which may be several months away," commented Canaccord analyst Rahul Paul. "In the interim, Luna will have to take a more prudent approach to allocating available capital. As the largest shareholder and board participant, we also expect that Sandstorm will take a more active role in key capital allocation decisions."
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Mediagrif Interactive Technologies Inc. fell short of analyst expectations as it reported a fiscal first quarter EPS of 21 cents versus the consensus 24 cents. Revenues were up 17 per cent from the year before to $17.7-million, in part due to its acquisition of Jobboom & Réseau Contact from Quebecor Media Inc.
Desjardins Securities analyst Maher Yaghi said the results were pretty close to his expectations. "The company's acquisition strategy is helping to more than offset small declines in organic growth. Earnings were impacted by a foreign exchange loss relative to last year, resulting in slightly lower-than-expected EPS," he commented.
"Overall, we continue to expect EDI and government procurement to be attractive areas in which Mediagrif could undertake further acquisitions. Combined with its existing operations, this should allow the company to expand margins and continue to drive improvement in ROE over the long term," he added.
Mr. Yaghi maintained a "buy-speculative" rating and $22 (Canadian) price target.
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WSP Global Inc. released its second-quarter earnings this morning, showing a 16.7 per cent rise in revenues from a year earlier, with adjusted net earnings of 43 cents up 26.5 per cent. The results were mostly in line with expectations, according to Desjardins Securities analyst Benoit Poirier.
"Looking ahead, we are encouraged by WSP's growing backlog of C$1.8b, which represents 9.1 months of work and a 6.3% increase quarter-over-quarter. This increase was concentrated in Canada and driven primarily by the acquisition of Focus. We note that management remains well positioned to pursue further acquisitions, with ample flexibility given net debt to EBITDA of 1.1x," said Mr. Poirier.
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New Look Eyewear Inc. met analyst expectations with a second-quarter EPS of 24 cents. Revenues reached a record $35.1-million, up 47 per cent from last year on the back of the company's acquisition of Vogue Optical late last year. The takeover brought in an extra 65 stores for New Look, in addition to six other stores opened in the last year. The company also announced that it has entered into an agreement to acquire Greiche & Scaff, an optical company based in Quebec, for $17.75-million. New Look shares have risen 39 per cent year-to-date.
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Andrew Peller Ltd. reported that second-quarter sales were up 9.3 per cent to $79.5-million from $72.7-million this time last year. Adjusted net earnings also rose 11.4 per cent, with sales growth mainly driven by the launch of new products both this year and last year. The company said that an aggressive promotional strategy is expected to take sales higher.
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CT Real Estate Investment Trust reported an EPS of 24 cents, meeting consensus estimates as revenues totalled $83.3-million. Having completed its IPO last October, the REIT said that the past quarter has seen the closing of seven previously-announced acquisitions, in addition to two previously unannounced ones. The purchases include a distribution centre in Calgary and a one-third leasehold interest in Canada Square, a mixed-use commercial development in downtown Toronto. The two unannounced investments cost $90-million in total.
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Parex Resources Inc. posted slightly disappointing results as the company's second-quarter EPS of 10 cents (U.S.) missed expectations of 17 cents by a wide margin. Oil and gas revenues rose to $182.9-million (U.S.) from $147.5-million last year and quarterly oil production also reached a record 19,876 barrels per day. The company said that cash flows are expected to increase in the latter half of the year. Shares have skyrocketed 114 per cent so far this year.
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Space hardware company COM DEV International Ltd. has been awarded an authorization to proceed with a contract to deliver components for a high-capacity communication satellite. The full contract value is expected to come in at $11-million, with completion expected by late 2015.
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New Flyer Industries Inc. reported its second-quarter revenue rose 30 per cent from a year ago to $346.5-million (Canadian), while its adjusted EBITDA rose 49.3 per cent to $27-million.
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Wajax Corp. reported second-quarter revenue of $374.4-million, up 3 per cent from a year ago, while net earnings of 73 cents were down from 81 cents.
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Carfinco Financial Group Inc. announced that it reached a record $17-million in Canadian loan originations in July, which beat the previous record achieved in June.
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Canaccord Genuity analyst Scott Chan initiated coverage of Sprott Resource Corp. with a "buy" rating a $3.75 (Canadian) price target.
Sprott Resource is a Canadian-based company that invests and operates through its subsidiaries in the natural resource sector. Its focus includes energy, agriculture, and mining.
The holding periods on Sprott investments are typically four to six years, similar to traditional private equity. It targets an internal rate of return (IRR) of 25 per cent, and over the past five years, has generated an IRR in the high-teens.
Mr. Chan thinks Sprott offers investors a way to invest in the resource sector at a discount.
"Currently, the combination of SCP's publicly traded holdings equate to SCP's market cap. We estimate investors receive SCP's private investments (i.e., InPlay Oil Corp., Union Agriculture, One Earth Farms, One Earth Oil & Gas, etc.) essentially for free," he said.
"Despite SCP's year-to-date stock increase of 32 per cent, SCP is still trading at a 35 per cent discount to our next 12 month net asset value and a 20 per cent discount to SCP's reported first quarter 2014 net asset value."
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ZCL Composites Inc. reported fully diluted earnings of 15 cents per share for the second quarter, just missing estimates of 16 cents. Revenues were down 12 per cent from the year prior at $41.7-million due to customer-requested shipment delays and weak demand for its aboveground storage tanks. Shares are down 10 per cent so far this year.
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Savanna Energy Services Corp. reported a loss of 13 cents per share for the first quarter, missing expectations of a 9-cent loss. Though revenues were up 33 per cent to $148.9-million from last year, the gains were offset by depreciating assets, higher share-based compensation and higher finance expenses based on outstanding debt. The company also experienced losses through foreign exchange. Savannah also announced that it has scure da multi-year contract for its third new-build triple drilling rig, which is expected to commence operations in the U.S. in the first quarter of 2015.
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Intertape Polymer Group Inc. reported a 4.9 per cent rise in revenue for its second quarter, while adjusted EBITDA rose 4.1 per cent to $29.5-million.
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Majestic Gold Corp. announced an update on activity at the company's Songjiagou Gold Mine, located in Shandong Province, China. Majestic is working toward executing on a development scenario from the August 2013 SRK Consulting (China) Ltd. Preliminary Economic Assessment that envisioned production of up to 7,400 tonnes per day utilizing existing infrastructure. It has been determined that the other scenarios outlined in the SRK PEA are not attainable without significant capital investment and will therefore not be considered for the foreseeable future.
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Orbite Aluminae Inc. announced that it has commenced construction activities at its high purity alumina production facility in Cap-Chat, Quebec.
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Niocan Inc. said the TSX has determined it will delist the company's common shares at the close of market on Sept. 5 for failure to meet continued listing requirements.
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Raymond James cut its price target on Imperial Metals to $11.75 (Canadian) from $17.50 and maintained a "market perform" rating after the Mount Polley tailings spill this week.
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BMO Nesbitt Burns upgraded Caribbean Utilities to "market perform" and hiked its price target to $10.50 (U.S.) from $10.
Darcy Keith