Natural gas wellheads at Shell Canadas Groundbirch site in northeastern British Columbia.Ian Jackson
Inside the Market's roundup of some of the Canadian small caps making news and on the move today. This post will be updated through the morning.
Oncolytics Biotech Inc. announced results of a study on its drug Reolysin and its impact on pancreatic cancer that missed expectations. The stock fell 35 per cent in TSX trading today.
Canaccord Genuity analyst Neil Maruoka commented prior to the start of trading this morning, "Oncolytics again announced disappointing top-line results, missing the primary endpoint in its Phase II study of Reolysin in pancreatic cancer. Nonetheless, a deeper look at the data is suggestive of a positive signal, as Reolysin hints at efficacy in patients with an activated Ras pathway, in our view. We believe that clinical failure is somewhat baked into the shares and, while many investors are likely growing very impatient, we continue to be constructive on Oncolytics in anticipation of additional randomized data this year," Mr. Maruoka wrote in a research note. He lowered his target price to $2.50 from $6.50 and rate the stock "buy."
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TransForce Inc. announced that its $15 (Canadian) per share offer for Contrans has been extended until Oct. 7 in order to give extra time for key stakeholders, including Contrans' shareholders and those related to the Competition Act, to make an informed decision. The offer is conditional on approval by a number of Contrans shares that represent at least 66.6 per cent of the outstanding Class A and Class B shares, and at least a majority of the outstanding Class A shares. Contrans' board had unanimously accepted TransForce's offer.
Desjardins Securities analyst Benoit Poirier commented, "We expect a mixed reaction from the market following this announcement; while we had some concerns about the premium on the offer, we believe some investors were expecting the transaction to move forward easily. Therefore, we believe these investors will consider that the C$0.15 EPS accretion that we calculated from the transaction is now at risk. Applying a 13x P/E multiple on our EPS accretion, we believe the Contrans' acquisition added ~C$2 to the share price. However, as the share price is currently down ~C$2.10 from its 52-week high, we believe that market expectations were already pricing in some of the impact of this event.
Nevertheless, given that Contrans has been for sale for almost two years and did not receive any other offer, we highly doubt that TransForce will raise its bid. In addition, we believe that many other acquisition targets exist for TransForce in the US truckload segment; therefore, even if the transaction is not concluded, we believe TFI will be able to make other strategic M&As that should eventually lead to the division's spin-off. Finally, if the Contrans acquisition does not go forward, we expect TFI's management to use some of its excess capital for additional share buybacks."
He maintained a "buy" rating and $33 (Canadian) price target. Shares in TransForce closed up 1.5 per cent today at $27.30.
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McCoy Global Inc. sold its coatings and hydraulics business for about $9.3-million to Corrosion and Abrasion Solutions Ltd. The business, called Inotec Coatings and Hydraulics, had been placed in McCoy's discontinued operations during the fourth quarter of 2013.
Canaccord Genuity analyst John Bereznicki commented, "While the company had disclosed its intent to sell this segment, its sales price was higher than the $6 million to $8 million we had anticipated. ... With its cash position and access to an undrawn $50 million revolver, McCoy could easily undertake an $80 million acquisition without dilution. This provides the company with significant opportunity to augment its organic growth with an acquisition through our forecast horizon." He reiterated a "buy" rating and $8 (Canadian) price target.
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Mapan Energy Ltd. is reporting that natural gas production from its Deep Basin North properties at Chinook Ridge, Alberta and Hiding, British Columbia will be on restricted rates due to repairs and maintenance. The work, to be conducted by Trans Canada Pipelines Limited on both the 24 inch and the 36 inch NGTL Systems downstream of the Elmworth gas plant, will curtail current production of 28MMCF/d processed at Elmworth to approximately 14MMCF/d. It is anticipated that production will be restricted for a period of at least 14 days.
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WesternZagros Resources Ltd. said it has resumed field operations on the Garmian and Kurdamir blocks following the stabilization of industry conditions and the return of third party oil field services in the Kurdistan Region of Iraq. In August, following consultation with the Ministry of Natural Resources of the Kurdistan Regional Government, the Company undertook the precautionary step of withdrawing non-essential personnel from field locations and company regional offices. "We now look forward to completing the Sarqala-1 workover, the testing of Hasira-1, and the further development of the existing production facilities on the Garmian Block," said Simon Hatfield, WesternZagros CEO.
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Premier Gold Mines Ltd. said initial drilling at its Hardrock project, located near Geraldton, Ontario, has been successful in intersecting mineralization within multiple horizons.
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Quest PharmaTech Inc., a pharmaceutical company developing and commercializing products for the treatment of cancer, said that it and AD Biotech have agreed to terminate a $12-million investment agreement "due to AD Biotech's inability to provide further funding under the agreement." AD Biotech had already provided $2-million under the agreement, for which it will receive some rights to Oregovomab, an antibody.
"As a result of AD Biotech's funding shortfall and in order to provide Quest with time to seek out longer term funding alternatives while continuing with clinical trial programs, Quest has obtained $450,000 of interim bridge financing in the form of 8 per cent demand loans from third parties," the company said.
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Redknee Solutions Inc. said it had obtained orders worth more than $8-million from "a leading communications service provider in the Americas region."
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Energizer Resources Inc. announced a brokered private placement of common shares that will raise up to $4.8-million (U.S.). The issue price will be 14 cents (U.S.) per common share.
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Spain's Banco Santander S.A.'s $11.25 per share agreement to buy Carfinco Financial Group Inc., announced Tuesday, is a "solid" deal for shareholders in the Canadian automobile financing firm, said Industrial Alliance Securities analyst Dylan Steuart. He increased his target price to $11.25 to reflect the offer price, and changed his recommendation to "tender" from "strong buy."
The $298-million (Canadian) all-cash deal represents a 32 per cent premium to the 90 days volume weighted average trading price. A shareholder vote is scheduled for Nov. 3.
"The offer price of $11.25 is a 12.5x multiple to our forward EPS estimate of $0.90. This multiple is below historical transactions in the non-prime space, reflecting depressed valuation as Carfinco implemented its own U.S. expansion strategy over the past year," Mr. Steuart said in a statement.
"However, we view the likelihood of a superior offer as unlikely given management and the Board's support for the transaction (13 per cent insider ownership), CFN management's commitment to staying on post-transaction, and the $7.5-million break fee payable to Santander."