Canadian Research at a Glance

Transcription

Canadian Research at a Glance - December 23

EQUITY RESEARCH
CANADIAN RESEARCH AT A GLANCE
December 23, 2014
Company Comments
! Leisureworld Senior Care Corp.
! Sierra Wireless
Summary
Updating estimates
Summary
Acquires Wireless Maingate, completes M2M device-to-cloud vision
Industry Comments
! Global Mining Trends & Values
! Precious Metals & Minerals Weekly
Summary
Summary
Chart of the week: Reaping the benefits of weaker oil prices and currencies
Valuation Tables
Priced as of prior day's market close, EST (unless otherwise noted).
For Required Non-U.S. Analyst and Conflicts Disclosures, see Page 7.
EQUITY RESEARCH
U.S. RESEARCH AT A GLANCE
December 23, 2014
Price Target Revisions
! Reckitt Benckiser Group PLC
! Rex Energy Corporation
Summary
Updated forecasts ex Indivior
Summary
Further Cuts 2015 CapEx To Preserve Liquidity In Challenging Commodity Market
Summary
Reduces 2015 CapEx Budget By 41% But Maintains Strong Liquidity
Summary
Summary
Production Offshore Gabon Comes Back Online; Angola Drilling Commences In January
Summary
Partial SBLF Redemption Announced
Summary
Industry trends steady
Company Comments
! Continental Resources, Inc.
! Sierra Wireless
! Vaalco Energy, Inc.
! Western Alliance Bancorp
Industry Comments
! 4Q14 East Coast Banks Preview
! AUTOS: Forecast December 2014
Summary
SAAR at 16.9mm + RBC Dealer Survey
Global Mining Trends & Values
Summary
Expect Strong Finish to 2014
!
! Health Care Services
! Oil Still Leaking 2015 Estimates
Summary
News from Nashville
Summary
Lower guidance prevailed in blitz of 2015 Outlook meetings and calls
!
Summary
Ethylene Prices Approaching Int'l Floor Levels
Lower
US Chemicals Weekly Watch
Investment Strategy Research
! Russian Energy Sanctions - Congress
Summary
Crashes the Party
2
EQUITY RESEARCH
UK & European Research at a Glance
December 23, 2014
Price Target Revisions
! Reckitt Benckiser Group PLC
Summary
Updated forecasts ex Indivior
Industry Comments
! Global Mining Trends & Values
Summary
Find our Research at:
RBC Insight (www.rbcinsight.com): RBC's global research destination on the web. Contact your RBC Capital Markets' sales representative to
access our global research site, or use our iPad App "RBC Research"
Thomson Reuters (www.thomsononeanalytics.com)
Bloomberg (RBCR GO)
SNL Financial (www.snl.com)
FactSet (www.factset.com)
3
Company Comments
Leisureworld Senior Care Corp.(TSX: LW; 13.71)
Michael Smith, CFA (Analyst)
(416) 842-7805; [email protected]
Matt Logan (Associate)
416 842 3770; [email protected]
Neil Downey, CFA, CA (Analyst)
Ben Halm, CPA, CA (Associate)
52 WEEKS
Rating:
Price Target:
Updating estimates
03JAN14 - 22DEC14
14.00
13.50
13.00
12.50
12.00
11.50
600
400
200
J
F
M
A
Close
M
2014
J
J
A
S
O
N
D
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
FFO/Sh, Ops Diluted Prev.
2013A
0.91↑
0.90
2014E
1.11↓
1.12
2015E
1.17↓
1.21
2016E
1.23↓
1.28
P/FFO
15.1x
12.4x
11.7x
11.1x
All values in CAD unless otherwise noted.
As 2014 comes to a close, we have reviewed our model and believe that our
forecast for 2015 is too high. As such, we are lowering our 2015-2016 FFO/
share estimates by $0.04 and $0.05 to $1.17 and $1.23, respectively. Overall, we
remain positive on LW's underlying operational trends and the company's general
direction. We reiterate our Sector Perform rating.
• We are lowering our 2015 and 2016 FFO per share estimates by $0.04 and
$0.05 to $1.17 and $1.23, respectively – We are lowering our estimates due
to the difference between the headline resident co-pay increase of 1.4% and
the amount that flows through to operators at ~0.7%. For context, we note
that the Ontario Ministry of Health and Long-term Care ("MOHLTC") increased
basic resident co-pay rates by 1.4% to $56.93 per day, from $56.14 in September
2014. However, the underlying increase that flows through to operators is
much less at $53.12 for an increase of ~0.7%. The difference is largely due to
government administration fees, bad debt allowances and allowances to support
rate reductions for those who cannot afford the full resident co-pay amount.
• Operationally the business continues to perform well and is trending in the
right direction – In our view, the underlying business continues to perform well
as the company continues to make steady occupancy gains in its retirement
segment, while also retaining more cash for the upcoming redevelopment of
its Class "C" beds. We note that over the past year its AFFO payout ratio has
declined from 83% in 2013 to 69% in 2014E. Looking forward, the company is
smartly focusing on strategic initiatives including: 1) the lease-up of its retirement
communities; 2) planning for the redevelopment of "C" beds; 3) launching a
new branding initiative; 4) growing its retirement, home care and management
service businesses; and, 5) optimizing back office functions to support future
growth.
Sierra Wireless(NASDAQ: SWIR; 42.18; TSX: SW)
Paul Treiber, CFA (Analyst)
Sean Ray, P.Eng. (Associate)
45.00
40.00
Sector Perform
14.50
Rating:
Price Target:
52 WEEKS
03JAN14 - 22DEC14
Sector Perform
40.00
Sierra’s $90MM acquisition of Wireless Maingate adds M2M connectivity and
other managed M2M services, which helps complete the company’s M2M deviceto-cloud vision. We believe the deal is EPS accretive, increases Sierra’s recurring
revenue, and revenue synergies appear likely. We are maintaining our Sector
Perform recommendation, as we believe the stock is trading near fair value.
35.00
30.00
25.00
20.00
7500
6000
4500
3000
1500
J
F
M
A
Close
2013A
2014E
2015E
2016E
M
2014
J
J
A
Rel. S&P 500
Revenue
441.9
546.1
619.1
686.4
All values in USD unless otherwise noted.
S
O
N
MA 40 weeks
D
• Sierra to acquire Wireless Maingate. Sierra announced this morning the
acquisition of privately held Wireless Maingate, one of the leading providers of
M2M connectivity services in Europe, for $90MM. Wireless Maingate is based in
Sweden; management expects it to generate $19MM revenue and $6MM EBITDA
in CY14, and it has 30 employees. The deal is expected to close in February 2015.
• Premium takeout valuation reflects strategic value of M2M services. The
Maingate takeout multiple is 4.7x CY14 revenue or 15x CY14 EBITDA. The
premium takeout valuation reflects the strategic value of M2M services,
Maingate’s high recurring revenue (85% of total) and profitability (32% EBITDA
margins).
• Completes Sierra’s M2M device-to-cloud vision. Maingate complements Sierra’s
existing business, adding M2M connectivity and other managed services to
4
complete Sierra’s M2M device-to-cloud vision. Maingate has over 500 customers
and manages more than 500,000 devices. Maingate resells mobile network
connectivity for partners and is a full mobile network operator itself.
• Revenue synergies appear likely. Sierra expects to expand Maingate outside the
Nordics (bulk of current revenue) to the remainder of Europe and introduce
Maingate to additional verticals beyond its key markets. Sierra does not
anticipate any meaningful cost synergies.
• Estimate $0.19 to $0.22 accretive to FY16E EPS. Management expects Maingate
to be immediately accretive to EPS. We estimate that Maingate adds $0.14$0.16 EPS to FY15E and $0.19-$0.22 to FY16E, assuming 12-16% annual revenue
growth; every 200bps faster growth adds another ~$0.01 EPS. We are leaving our
financial estimates unchanged pending deal completion.
Industry Comments
Fraser Phillips, P.Eng. (Analyst)
Chris Drew, CFA (Analyst)
+61 2 9033 3060; [email protected]
Timothy Huff (Analyst)
Des Kilalea (Analyst)
Ken Tham, CFA (Analyst)
Global Mining Trends & Values
Commodity Price Performance:
• Metal prices were down on average 1.9% last week. Thermal Coal was the best
performer up 2.6%, followed by moly up 1.1%, and iron ore flat 0.0%. Nickel was
the worst performer down 6.0%, followed by silver down 5.6%, lead down 5.2%,
gold down 2.1%, uranium down 2.0%, coking coal down 1.7%, aluminium down
1.6%, copper down 1.2%, and zinc down 0.7%.
Mining Share Price Performance:
• Mining shares were up on average 7.8% last week. The best performing group
was nickel up 17.0%, followed by coal up 12.0%, iron ore up 11.0%, miscellaneous
up 10.3%, copper up 7.4%, aluminium up 7.2%, the diversified group up 7.1%,
mineral sands up 3.8%, and uranium up 1.3%.
Valuation:
• Mining shares are now trading at an 8.5% premium to NAV at forward curve
prices, versus a 23.5% discount one week ago.
Long/Short Metal Positions:
• RBC CM's proprietary data for the LME shows that the net short positions in
copper, aluminium, zinc, nickel, and lead all increased last week.
Exchange Inventories:
• Total exchange inventories of aluminium and zinc decreased last week, while
total inventories of copper and nickel increased last week.
Stephen D. Walker (Analyst)
Precious Metals & Minerals Weekly Valuation Tables
Dan Rollins, CFA (Analyst)
• This week, we highlight key takeaways from our "Weaker oil prices and currencies
provide average benefit of $50/oz" note released earlier in the week. Beadell,
Northern Star, Newcrest, Regis, Centerra, Evolution, Independence, and Detour
appear well positioned to benefit from weaker local currencies and oil. Perseus,
Teranga, Centamin, B2Gold, Allied Nevada, Randgold, and Semafo should
benefit from lower fuel prices. Polymetal is set to benefit significantly from a
weaker RUB while Silver Lake, New Gold, Timmins, and Alamos should benefit
from weaker currencies.
Weaker oil prices benefit open-pit miners and those without access to reliable
grid power
Sam Crittenden, P.Eng., CFA (Analyst)
Jamie Kasprowicz, P.Eng., CFA (Analyst)
Akbar Badri (Associate)
Mark Mihaljevic (Associate)
Paul Hissey (Analyst)
Cameron Klutke (Associate)
Chart of the week: Reaping the benefits of weaker oil prices and currencies
• With an estimated range of 5–20% of mine-site costs directly linked to fuel, we
estimate an average $27/oz (4%) favourable impact in 2015 from lower oil prices.
However, there is significant variability ($10 to $85/oz) depending on mine type,
5
Jonathan Guy (Analyst)
Timothy Huff (Analyst)
Richard Hatch, ACA (Analyst)
Ioannis Masvoulas, CFA (Associate)
All values in USD unless otherwise noted.
•
•
•
•
•
geographic location, and access to infrastructure (Exhibit 1). Factors influencing
the benefits of lower oil prices are:
Mine type: Open-pit mines tend to be more exposed to fuel prices than
underground mines
Power supply: Access to local power grids reduces reliance on self-generated
power
Fuel subsidies: Operations located in countries with subsidized fuel are unlikely
to benefit
Fuel taxes: Impact may be somewhat negated by taxes, which tend to be applied
on a per-unit basis
Oil hedges: Some companies have hedged future oil requirements above current
prices
6
Required disclosures
Non-U.S. analyst disclosure
Michael Smith;Matt Logan;Neil Downey;Ben Halm;Fraser Phillips;Chris Drew;Timothy Huff;Des Kilalea;Ken Tham;Paul Treiber;Sean
Ray;Stephen D. Walker;Dan Rollins;Sam Crittenden;Jamie Kasprowicz;Akbar Badri;Mark Mihaljevic;Paul Hissey;Cameron
Klutke;Jonathan Guy;Richard Hatch;Ioannis Masvoulas (i) are not registered/qualified as research analysts with the NYSE and/or
FINRA and (ii) may not be associated persons of the RBC Capital Markets, LLC and therefore may not be subject to FINRA Rule
2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held
by a research analyst account.
Conflicts disclosures
This product constitutes a compendium report (covers six or more subject companies). As such, RBC Capital Markets chooses
to provide specific disclosures for the subject companies by reference. To access current disclosures for the subject companies,
clients should refer to https://www.rbccm.com/GLDisclosure/PublicWeb/DisclosureLookup.aspx?entityId=1 or send a request to
RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7.
Please note that current conflicts disclosures may differ from those as of the publication date on, and as set forth in, this report.
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including
total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated
by investment banking activities of the member companies of RBC Capital Markets and its affiliates.
Distribution of ratings
For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories
- Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Top Pick(TP)/
Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively,
the meanings are not the same because our ratings are determined on a relative basis (as described below).
Distribution of ratings
RBC Capital Markets, Equity Research
As of 30-Sep-2014
Rating
BUY [Top Pick & Outperform]
HOLD [Sector Perform]
SELL [Underperform]
Count
858
683
98
Percent
52.35
41.67
5.98
Investment Banking
Serv./Past 12 Mos.
Count
Percent
308
35.90
151
22.11
8
8.16
Conflicts policy
RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request.
To access our current policy, clients should refer to
https://www.rbccm.com/global/file-414164.pdf
or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South
Tower, Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time.
Dissemination of research and short-term trade ideas
RBC Capital Markets endeavours to make all reasonable efforts to provide research simultaneously to all eligible clients, having
regard to local time zones in overseas jurisdictions. Subject to any applicable regulatory considerations, "eligible clients" may
include RBC Capital Markets institutional clients globally, the retail divisions of RBC Dominion Securities Inc. and RBC Capital
Markets LLC, and affiliates. RBC Capital Markets' equity research is posted to our proprietary websites to ensure eligible clients
receive coverage initiations and changes in rating, targets and opinions in a timely manner. Additional distribution may be done
by the sales personnel via email, fax or regular mail. Clients may also receive our research via third party vendors. Please contact
your investment advisor or institutional salesperson for more information regarding RBC Capital Markets research. RBC Capital
7
Markets also provides eligible clients with access to SPARC on its proprietary INSIGHT website. SPARC contains market color and
commentary, and may also contain Short-Term Trade Ideas regarding the securities of subject companies discussed in this or
other research reports. SPARC may be accessed via the following hyperlink: https://www.rbcinsight.com. A Short-Term Trade Idea
reflects the research analyst's directional view regarding the price of the security of a subject company in the coming days or weeks,
based on market and trading events. A Short-Term Trade Idea may differ from the price targets and/or recommendations in our
published research reports reflecting the research analyst's views of the longer-term (one year) prospects of the subject company,
as a result of the differing time horizons, methodologies and/or other factors. Thus, it is possible that the security of a subject
company that is considered a long-term 'Sector Perform' or even an 'Underperform' might be a short-term buying opportunity
as a result of temporary selling pressure in the market; conversely, the security of a subject company that is rated a long-term
'Outperform' could be considered susceptible to a short-term downward price correction. Short-Term Trade Ideas are not ratings,
nor are they part of any ratings system, and RBC Capital Markets generally does not intend, nor undertakes any obligation, to
maintain or update Short-Term Trade Ideas. Short-Term Trade Ideas discussed in SPARC may not be suitable for all investors and
have not been tailored to individual investor circumstances and objectives, and investors should make their own independent
decisions regarding any Short-Term Trade Ideas discussed therein.
Analyst certification
All of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of
the subject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly or
indirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report.
Disclaimer
RBC Capital Markets is the business name used by certain branches and subsidiaries of the Royal Bank of Canada, including RBC Dominion Securities Inc., RBC
Capital Markets, LLC, RBC Europe Limited, RBC Capital Markets (Hong Kong) Limited, Royal Bank of Canada, Hong Kong Branch and Royal Bank of Canada, Sydney
Branch. The information contained in this report has been compiled by RBC Capital Markets from sources believed to be reliable, but no representation or warranty,
express or implied, is made by Royal Bank of Canada, RBC Capital Markets, its affiliates or any other person as to its accuracy, completeness or correctness. All
opinions and estimates contained in this report constitute RBC Capital Markets' judgement as of the date of this report, are subject to change without notice and
are provided in good faith but without legal responsibility. Nothing in this report constitutes legal, accounting or tax advice or individually tailored investment
advice. This material is prepared for general circulation to clients and has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The investments or services contained in this report may not be suitable for you and it is recommended that you consult an independent
investment advisor if you are in doubt about the suitability of such investments or services. This report is not an offer to sell or a solicitation of an offer to buy
any securities. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. RBC Capital
Markets research analyst compensation is based in part on the overall profitability of RBC Capital Markets, which includes profits attributable to investment banking
revenues. Every province in Canada, state in the U.S., and most countries throughout the world have their own laws regulating the types of securities and other
investment products which may be offered to their residents, as well as the process for doing so. As a result, the securities discussed in this report may not be
eligible for sale in some jurisdictions. RBC Capital Markets may be restricted from publishing research reports, from time to time, due to regulatory restrictions and/
or internal compliance policies. If this is the case, the latest published research reports available to clients may not reflect recent material changes in the applicable
industry and/or applicable subject companies. RBC Capital Markets research reports are current only as of the date set forth on the research reports. This report is
not, and under no circumstances should be construed as, a solicitation to act as securities broker or dealer in any jurisdiction by any person or company that is not
legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. To the full extent permitted by law neither RBC Capital Markets nor
any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information
contained herein. No matter contained in this document may be reproduced or copied by any means without the prior consent of RBC Capital Markets.
Additional information is available on request.
To U.S. Residents:
This publication has been approved by RBC Capital Markets, LLC (member FINRA, NYSE, SIPC), which is a U.S. registered broker-dealer and which accepts
responsibility for this report and its dissemination in the United States. Any U.S. recipient of this report that is not a registered broker-dealer or a bank acting in
a broker or dealer capacity and that wishes further information regarding, or to effect any transaction in, any of the securities discussed in this report, should
contact and place orders with RBC Capital Markets, LLC.
To Canadian Residents:
This publication has been approved by RBC Dominion Securities Inc.(member IIROC). Any Canadian recipient of this report that is not a Designated Institution in
Ontario, an Accredited Investor in British Columbia or Alberta or a Sophisticated Purchaser in Quebec (or similar permitted purchaser in any other province) and
that wishes further information regarding, or to effect any transaction in, any of the securities discussed in this report should contact and place orders with RBC
Dominion Securities Inc., which, without in any way limiting the foregoing, accepts responsibility for this report and its dissemination in Canada.
To U.K. Residents:
This publication has been approved by RBC Europe Limited ('RBCEL') which is authorized by the Prudential Regulation Authority and regulated by the Financial
Conduct Authority ('FCA') and the Prudential Regulation Authority, in connection with its distribution in the United Kingdom. This material is not for general
distribution in the United Kingdom to retail clients, as defined under the rules of the FCA. However, targeted distribution may be made to selected retail clients of
RBC and its affiliates. RBCEL accepts responsibility for this report and its dissemination in the United Kingdom.
To Persons Receiving This Advice in Australia:
This material has been distributed in Australia by Royal Bank of Canada - Sydney Branch (ABN 86 076 940 880, AFSL No. 246521). This material has been prepared
for general circulation and does not take into account the objectives, financial situation or needs of any recipient. Accordingly, any recipient should, before acting on
8
this material, consider the appropriateness of this material having regard to their objectives, financial situation and needs. If this material relates to the acquisition
or possible acquisition of a particular financial product, a recipient in Australia should obtain any relevant disclosure document prepared in respect of that product
and consider that document before making any decision about whether to acquire the product. This research report is not for retail investors as defined in section
761G of the Corporations Act.
To Hong Kong Residents:
This publication is distributed in Hong Kong by RBC Capital Markets (Hong Kong) Limited and Royal Bank of Canada, Hong Kong Branch (both entities which are
regulated by the Hong Kong Monetary Authority ('HKMA') and the Securities and Futures Commission ('SFC')). Financial Services provided to Australia: Financial
services may be provided in Australia in accordance with applicable law. Financial services provided by the Royal Bank of Canada, Hong Kong Branch are provided
pursuant to the Royal Bank of Canada's Australian Financial Services Licence ('AFSL') (No. 246521). RBC Capital Markets (Hong Kong) Limited is exempt from the
requirement to hold an AFSL under the Corporations Act 2001 in respect of the provision of such financial services. RBC Capital Markets (Hong Kong) Limited is
regulated by the HKMA and the SFC under the laws of Hong Kong, which differ from Australian laws.
To Singapore Residents:
This publication is distributed in Singapore by the Royal Bank of Canada, Singapore Branch, a registered entity granted offshore bank licence by the Monetary
Authority of Singapore. This material has been prepared for general circulation and does not take into account the objectives, financial situation, or needs of any
recipient. You are advised to seek independent advice from a financial adviser before purchasing any product. If you do not obtain independent advice, you should
consider whether the product is suitable for you. Past performance is not indicative of future performance. If you have any questions related to this publication,
please contact the Royal Bank of Canada, Singapore Branch. Royal Bank of Canada, Singapore Branch accepts responsibility for this report and its dissemination
in Singapore.
To Japanese Residents:
Unless otherwise exempted by Japanese law, this publication is distributed in Japan by or through RBC Capital Markets (Japan) Ltd., a registered type one financial
instruments firm and/or Royal Bank of Canada, Tokyo Branch, a licensed foreign bank.
.® Registered trademark of Royal Bank of Canada. RBC Capital Markets is a trademark of Royal Bank of Canada. Used under license.
Copyright © RBC Capital Markets, LLC 2014 - Member SIPC
Copyright © RBC Dominion Securities Inc. 2014 - Member CIPF
Copyright © RBC Europe Limited 2014
Copyright © Royal Bank of Canada 2014
All rights reserved
9

Canadian Research at a Glance - December 23

Transcription

Similar documents

Document 6443149