Canadian Research at a Glance

Transcription

EQUITY RESEARCH
CANADIAN RESEARCH AT A GLANCE
February 5, 2015
Ratings Revisions
! Clearwater Paper Corporation
Summary
Reducing rating to Sector Perform - maintenance/promotional headwinds in 2015
Summary
Even more upside in New England than we had factored in
Summary
2015 Should Be Solid, But Cycle Concerns Could Limit Multiple
Summary
Q4/14 beat, but shares fairly valued
Summary
Reiterating Outperform, raising target to $26
Summary
Pension Solvency Deficit and Dividend Uncertainty to Remain an Overhang
Summary
Building a better business: Price target increase to $14.50
Summary
Taking target to $41 on FX, valuation roll forward, see continued growth ahead
Summary
Remaining on the sidelines. Maintain Underperform rating
Summary
1Q Preview: Healthy FCF Can Support Both Acquisitions And Dividend Growth
Summary
First Glance: Significant EPS miss due to disappointing capital markets results
Summary
Q414 results lower than expected
Summary
Summary
Guidance in line; Rainy River development stretched out
Summary
Q1 First Glance: Not as strong as we expected, but better than some feared
Summary
2Q Preview: Expecting Solid Growth Driven by Acquisitions, FX Tailwind
Summary
Previewing FY14 results
Summary
4Q Preview: Effectively a Single-Issue Stock Until Uses of Cash are Determined
Summary
FQ3/15 results below expectations on muted organic growth; M&A search continues
Summary
DNO; LUPE; KOS; PMO
Summary
January Quickly Shows the Impact of Lower E&P Budgets
Price Target Revisions
! Emera Incorporated
! General Motors Company
! Intact Financial Corp.
! Interfor Corporation
! Manitoba Telecom Services
! Milestone Apartments REIT
! Stella-Jones
! TMX Group Limited
! Transcontinental Inc.
First Glance Notes
! Canaccord Genuity Group Inc.
! Canfor Corporation
! Canfor Pulp Products Inc.
! New Gold Inc.
! Redknee Solutions Inc.
Earnings Preview
! DHX Media Ltd.
! Gold Fields Limited
! Torstar Corporation
Company Comments
! ATS Automation Tooling Systems
Industry Comments
! RBC International E&P Daily
! Turnin' to the Right - Canadian
Oilfield Services Insights
Quantitative Research
! QuaDS Score Model Portfolios
Summary
! - Action-Oriented Research
Priced as of prior day's market close, EST (unless otherwise noted).
For Required Non-U.S. Analyst and Conflicts Disclosures, see Page 16.
EQUITY RESEARCH
U.S. RESEARCH AT A GLANCE
February 5, 2015
Ratings Revisions
! Benefitfocus Inc.
! RWE AG
Summary
Downgrade to Sector Perform
Summary
Reducing rating to Sector Perform - maintenance/promotional headwinds in 2015
Summary
Lower power price and nuclear ruling both hurting
Summary
AGN results provide another positive P&L check on favorable Newco fundamentals
Summary
Moving estimates materially higher
Summary
Macro trends remain intact and should continue to drive solid leasing trends
Summary
Lowering estimates modestly as cost headwinds linger
Summary
Aside from FX, a good quarter and outlook
Summary
One step forward, one step back
Summary
Q4/14 beats, FY15 guidance provides solid expectations
Summary
The capital allocation trump card
Summary
Leasing, Development, Balance Sheet Outlook Healthy
Summary
Long term restructuring attractions remain
Summary
4Q Preview - Reducing Estimates: Revised Frac Sand S/D Model
Summary
Summary
Solid Q4 But A Noisy 2015 Outlook
Summary
Very Strong Refining Quarter Shows The Value Of MPC's Integrated System
Summary
4Q golden, 1Q brings Platinum
Summary
Another Strong Quarter in a Strong Year
Summary
Now that was an old-school beat; Maintain OP rating and increase target to $110
Summary
US Centric = Good Place to Be
Summary
Updating Standalone Estimates. We Are Confident That The Merger With WMGI Closes.
Summary
4Q Preview - Reducing Estimates: Revised Frac Sand S/D Model
Summary
4Q14 in Line with Pre-Release – No Surprises
Summary
4Q results beat expectations on light cats, expenses
Summary
Summary
Results Ahead Ex. Items with SS Trends and Initial ’15 Growth Outlook Strong
Summary
Ahead by $0.02 net of debt extinguishment; Operations healthy; Guidance strong
Summary
Results Ahead, SS Healthy Though Initial ’15 Outlook Unlikely To Impress
Summary
Summary
4Q results match recent guidance
! Actavis PLC
! Advanced Drainage Systems, Inc.
! Alexandria Real Estate Equities, Inc.
! ArcBest Corporation
! Automatic Data Processing, Inc
! C.H. Robinson Worldwide
! Cognizant Technology Solutions
! CSG Systems International, Inc.
! Duke Realty Corporation
! E.ON SE
! FMSA Holdings Inc.
! General Motors Company
! IAC/InterActiveCorp
! Marathon Petroleum Corporation
! RenaissanceRe Holdings, Ltd.
! Spectra Energy Partners
! Tableau Software, Inc.
! Clorox
! Tornier NV
! U.S. Silica Holdings Inc.
First Glance Notes
! Brookdale Senior Living Inc.
! Cincinnati Financial Corp.
! Essex Property Trust, Inc.
! Macerich Company
! Mid-America Apartment
! New Gold Inc.
! PartnerRe, Ltd.
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EQUITY RESEARCH
! Sanchez Energy Corporation
! Yum! Brands, Inc.
Summary
Highlights From Meeting With Management
Summary
Looking ahead to a recovery year; Top Pick
Summary
Summary
4Q Preview – Calibrating The Downturn And Jumping The Turn
Summary
2014 Results Preview
Summary
Choosing Value/Flexibility Over Growth
Summary
Noisy Q4 but core businesses performing well
Summary
Double-Digit EPS Growth on Tap for 2015E (Ex FX)
Summary
Ramping investment to support strong business
Summary
Meetings with management: Too many catalysts in 2015 and 2016 to disregard
Summary
Our best GARP idea
Summary
Slowly getting better, but still a long way to go
Summary
Accounting review and other noise hides a solid operating quarter
Summary
Seemingly a tough quarter
Summary
Q4/14 EPS beat on tax; NPAC still the driver (and unclear)
Summary
Will History Repeat Itself? Thinking Through a Positive Server Cycle Refresh
Summary
TXN is nowhere close to peak earnings, cycle peak is a long way off
Summary
Good Q4 and 2015 guidance; Outperform
Summary
Solid quarter; Sector Perform
Summary
As Good as the Cable Nets Are...Broadcast Biz and FX Are Driving Estimates Lower
Summary
(just past) Half Time Show
Summary
Under Two Weeks to Go in 2015 OEP; Late Surge Expected
Summary
Tennessee Medicaid Expansion Dies in Senate
Summary
Revised Frac Sand S/D Model - 2015 Demand Down 10% Y/Y
Summary
ABB Q4 miss but some +ves, Assa beat, China construction/credit
Summary
Improving environment for profitability
Summary
DNO; LUPE; KOS; PMO
Earnings Preview
! Patterson-UTI Energy
! Rolls-Royce Holdings PLC
Company Comments
! Anadarko Petroleum Corp.
! Arthur J. Gallagher & Co.
! Boston Scientific Corp.
! Cadence Design Systems
! Curis, Inc.
! Fortune Brands Home & Security
! Hub Group, Inc.
! Jack Henry & Associates Inc.
! Lincoln National Corporation
! NeuStar, Inc.
! QLogic Corporation
! Texas Instruments Inc.
! Corporate Executive Board
! Hain Celestial Group, Inc.
! Twenty-First Century Fox Inc.
Industry Comments
! Global Aerospace & Defense
! Health Care Services
! Health Care Services
! Oil & Gas Equipment & Services
! RBC European Industrials Daily
! RBC Food Trends Takeaways
! RBC International E&P Daily
! QuaDS Score Model Portfolios
Summary
3
EQUITY RESEARCH
UK & European Research at a Glance
February 5, 2015
Ratings Revisions
! RWE AG
Summary
Lower power price and nuclear ruling both hurting
Summary
Long term restructuring attractions remain
Summary
Post Transition
Summary
Updating Standalone Estimates. We Are Confident That The Merger With WMGI Closes.
Summary
Summary
Letseng site visit - capital projects on track
Summary
Summary
2014 Results Preview
Summary
Q4/14 reporting calendar: Estimates and conference call details
! E.ON SE
! Koninklijke KPN NV
! Tornier NV
First Glance Notes
! Canaccord Genuity Group Inc.
! Gem Diamonds Limited
Earnings Preview
! Rolls-Royce Holdings PLC
Industry Comments
! Canadian REITs and REOCs
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)
4
Ratings Revisions
Clearwater Paper Corporation(NYSE: CLW; 73.76)
Paul C. Quinn (Analyst)
(604) 257-7048; [email protected]
Hamir Patel (Analyst)
Rating:
Price Target:
52 WEEKS
14FEB14 - 03FEB15
74.00
72.00
70.00
68.00
Sector Perform (prev: Outperform)
79.00
Reducing rating to Sector Perform - maintenance/promotional headwinds in
2015
Reducing rating to Sector Perform (from Outperform) and maintaining $79 target.
With significant maintenance headwinds this year, and continued competitive
pressure in consumer tissue, we see few catalysts in 2015. While we continue
to believe mgmt will deliver on planned margin improvement initiatives over the
next 2-3 years, the upside appears more back-end weighted than we originally
anticipated.
66.00
64.00
62.00
60.00
1200
900
600
300
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S
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Rel. S&P 500
N
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2015
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MA 40 weeks
EPS, Adj Diluted Prev.
2013A
2.00
2014A
3.44↓
3.70
2015E
3.81↓
5.19
2016E
5.48↓
6.24
P/E
36.9x
21.4x
19.4x
13.5x
All values in USD unless otherwise noted.
• Reducing rating to Sector Perform (from Outperform) and maintaining $79
price target. With significant maintenance headwinds this year, and continued
competitive pressure in consumer tissue, we see few catalysts in 2015.
• Q414 results lower than expected – Clearwater reported adjusted EBITDA
of $55MM (vs. guidance of $56-64MM), below our forecast of $60MM and
consensus of the same.
• Revising EBITDA estimates – Q115E from $52MM to $40MM, FY15 from
$266MM to $230MM and FY16 from $286MM to $271MM. Management is
guiding for a $12-18MM q/q decrease in Q1.
• Mgmt focus now on achieving operational excellence – In tissue, the company
is looking to increase profitability through reducing its low-margin product
offerings (SKU count already reduced by 13% in 2014); standardizing its
converting lines to improve product flexibility and decrease handling and
transportation costs; and other supply chain improvements.
• Decent FCF yield for patient investors – We expect an average annual FCF yield of
6.8% over 2015-18 (~6.3% yield at our $79/sh target). We model in further share
buybacks of around $75MM in 2015 (under the new $100MM authorization
announced on December 15), as well as the initiation of a $1.40/sh dividend in
H116 (1.8% yield at our target).
Emera Incorporated(TSX: EMA; 42.37)
Robert Kwan, CFA (Analyst)
Kelsey Roste (Associate)
42.00
Rating:
Price Target:
52 WEEKS
14FEB14 - 03FEB15
Outperform
48.00 ▲ 46.00
Even more upside in New England than we had factored in
Positive – The results of the New England 2018–2019 power capacity auction
were released, with the majority of capacity receiving a price of US$9.55/kWmonth, which is 36% higher than the US$7.025/kW-month for the 2017–2018
auction results that were released a year ago and more than triple the current
forward capacity price. We estimate that these results are worth roughly $4/
share.
40.00
38.00
36.00
34.00
32.00
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EPS, Adj Diluted
2013A
1.88
2014E
2.22
2015E
2.09
2016E
2.22
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Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
P/AEPS
22.5x
19.1x
20.3x
19.1x
F
• Another significant price increase in the New England Forward Capacity
Market auction. The ISO New England (ISO-NE) released the results of the
Forward Capacity Market (FCM) auction for 2018–2019. For Emera's Bridgeport
(Connecticut) and Rumford (Maine) gas plants, the clearing price was US$9.55/
kW-month, which is an approximately 36% increase from the 2017–2018 auction
results released a year ago and more than triple the current forward capacity
price.
5
All values in CAD unless otherwise noted.
• Even greater upside for Tiverton and its expansion. Emera's Tiverton gasfired power plant is expected to receive a capacity price in 2018–2019 of US
$11.08/kW-month (versus the US$7.025/kW-month it will receive for 2017–
2018). Furthermore, as a "new resource", Emera is expected to receive US
$17.73/kW-month for its 11 MW expansion of the Tiverton plant.
• Significant EPS upside, albeit in 2018/2019. Based on our analysis shown in
Exhibit 2, we estimate that the annual earnings impact is approximately $0.43/
share after-tax (i.e., a roughly 19% lift compared to our 2016 EPS estimate as a
proxy). Since these capacity prices will not be realized until 2018/2019, there is
no impact on our existing EPS estimates through 2016 and we have left them
unchanged.
• Increasing price target to $48.00 (from $46.00). In our January 23, 2015 report,
we included $2/share of incremental value from the potential auction results.
With the capacity prices clearing above our expectations, we have increased our
price target to reflect the full incremental value (i.e., an incremental $2/share).
Joseph Spak, CFA (Analyst)
Jacob Hughes (Associate)
Ritapa Ray (Associate)
212 266 4099; [email protected]
Steve Arthur, CFA (Analyst)
General Motors Company(NYSE: GM; 35.83; TSX: GMM.U)
38.00
Rating:
Price Target:
Sector Perform
39.00 ▲ 37.00
52 WEEKS
14FEB14 - 03FEB15
A solid quarter and we got more comfortable with what eventual normalized FCF
can look like. But given our unwillingness to push the multiple further than we
are owing to cycle, we believe you need strong confidence in hitting mid-term
targets to justify investing. We still have doubts. PT goes to $39 ($37 prior).
36.00
34.00
32.00
30.00
150000
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Revenue
151,092.0↓
155,134.5↓
158,237.2↓
161,402.0
2014A
2015E
2016E
2017E
2014
J
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S
O
Rel. S&P 500
N
D
2015
J
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MA 40 weeks
Prev.
151,499.2
155,249.5
158,354.5
Intact Financial Corp.(TSX: IFC; 86.71)
Geoffrey Kwan, CFA (Analyst)
Charan Sanghera (Associate)
52 WEEKS
• What’s new? What’s changed? We believe GM can put up solid results in 2015.
However, we remain skeptical on the 2016 10% GMNA margin target. To us, the
GM story is really about the multiple. We are willing to expand the multiple from
current levels for the FCF but concerns about the cycle limit multiple expansion.
If you believe GM’s 2016 targets then the stock is probably in the mid $40s (closer
to our upside case). But for now, we take a more cautious view.
• Where does GMNA go from here? As we think about 2015, maybe mix helps a
bit as do commodities. We believe pricing will get tougher so net are modeling
margins flat vs. 2014. To hit 10% 2016 target, GM is relying on: 1) product
refreshes, 2) New entries, 3) Business model leverage. Higher overhead and
engineering will likely offset. We believe GM could fall 100bps short of 10%.
• Emerging cash story. GM improved 2015 FCF guidance to flat-to-up vs. 2014’s
$3.1bn. 2016 run-rate FCF probably >$5bn which implies an attractive 8-9% yield.
But we also think there could be a DoJ settlement that further delays the right
run-rate. Dividend raised 20% in 2Q15 and potentially further capital returns
after clarity on litigation.
Rating:
Price Target:
14FEB14 - 03FEB15
Sector Perform
91.00 ▲ 88.00
Q4/14 beat, but shares fairly valued
Q4/14 results were strong reflecting IFC’s execution on improving results in
Personal Property and Commercial P&C, but also benefitting from low catastrophe
activity and favourable weather conditions. Although we think IFC’s shares are fully
valued on a fundamental basis, modest valuation upside remains as IFC is likely to
benefit as a large-cap safe haven within Financials given current macro uncertainty.
84.00
80.00
76.00
72.00
68.00
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• Increasing 12-month target to $91/share (was $88), but maintaining Sector
Perform rating.
• Despite a stretched valuation, we think IFC’s shares still have valuation upside
(albeit modest), but perhaps more importantly likely have less downside risk
6
EPS, Ops Diluted Prev.
2013A
3.37
2014A
5.67↑
5.36
2015E
5.67↓
5.69
2016E
6.02↓
6.20
vs. other Canadian Financial stocks if the macro environment worsens. IFC’s
shares trade at 2.3x P/BV, which we believe fully reflects our 14% ROE and almost
10% BVPS growth forecasts in each of 2015 and 2016.
• While we view IFC’s shares as fully valued on a fundamental basis, we think
the “scarcity value” factor is likely to provide valuation support until the macro
environment improves. However, we believe there are other mid- to large-cap
stocks in our coverage that are also defensive and/or have high exposure to the
U.S. which have more valuation upside vs. IFC.
• Q4/14 operating EPS of $1.84 was ahead of our $1.53 forecast and $1.47
consensus.
P/E
25.7x
15.3x
15.3x
14.4x
Interfor Corporation(TSX: IFP; 21.91)
Rating:
Price Target:
52 WEEKS
14FEB14 - 03FEB15
22.00
Outperform
26.00 ▲ 20.00
Reiterating Outperform, raising target to $26
Reiterating Outperform rating and raising target to $26 (from $20) to reflect
anticipated synergies from the Simpson Lumber acquisition, as well as the more
favorable lumber/FX deck we rolled out across our coverage universe last month
(during a period of restriction on IFP). We expect Interfor to continue to pursue
accretive acquisitions/high-return capital projects.
20.00
18.00
16.00
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2013A
0.99
2014E
1.15↓
1.20
2015E
1.50↑
1.30
2016E
2.36↑
1.95
P/AEPS
22.1x
19.1x
14.6x
9.3x
Drew McReynolds, CFA, CA (Analyst)
Jie He (Associate)
Haran Posner (Analyst)
F
• Reiterating Outperform rating and raising target to $26 (from $20) to reflect
anticipated synergies from the Simpson Lumber acquisition, as well as the more
favorable lumber/FX deck we rolled out across our coverage universe last month
(during a period of restriction on IFP). We expect Interfor to continue to pursue
accretive acquisitions/high-return capital projects.
• Simpson Lumber looks like another good deal (and likely not the last) – The
Simpson acquisition provides Interfor diversification away from high log cost
geographies (such as the BC Interior) and potential Canada-US softwood lumber
trade issues, and also provides significant geographic synergies with additional
upside through focused capital projects.
• Lumber prices down 6% so far in 2015 but we expect prices to head higher
with seasonal spring demand – Our W. SPF lumber pricing assumptions are
$355 for 2015 (+2% y/y) and $400 for 2016 (+13% y/y). Prices ended January 30
at $321. Last week, Weyerhaeuser (#3 NA lumber producer) guided for slightly
higher lumber prices q/q in Q1 (WY assuming a pricing rally later in the quarter
as demand sees seasonal improvement), partially offset by higher log costs. We
believe the decline in lumber prices YTD is largely a function of the weakening
loonie.
• Expecting Interfor to report an in-line quarter on February 12 – We expect
Interfor to report EBITDA of $38MM for Q414 (consensus = $39MM; range of
$35MM to $42MM). Our revised analysis assumes more conservative pricing,
shipment and cost assumptions for the quarter.
Manitoba Telecom Services(TSX: MBT; 25.01)
Rating:
Price Target:
Sector Perform
26.00 ▼ 29.00
Pension Solvency Deficit and Dividend Uncertainty to Remain an Overhang
Q4/14 results were below our expectations due to lower than expected Allstream
margins. A new strategic plan will be announced in Q2/15. We expect the
lingering pension solvency deficit and dividend uncertainty to remain an
overhang for the stock.
• We remain on the sidelines pending better visibility on growth and more
imminent catalysts. We expect the lingering pension solvency deficit and
dividend uncertainty to remain an overhang for the stock. While we believe
underlying FCF can support the current dividend and there is sufficient balance
7
52 WEEKS
14FEB14 - 03FEB15
32.00
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Revenue Prev.
1,704.0
1,634.0
1,612.0
1,604.0↓
1,611.0
2012A
2013A
2014A
2015E
Milestone Apartments REIT(TSX: MST.un; 13.25)
Neil Downey, CFA, CA (Analyst)
Kevin Cheng, CFA (Associate)
Michael Smith, CFA (Analyst)
13.50
52 WEEKS
sheet flexibility to meet near-term pension funding requirements, a pending new
strategic plan will ultimately factor in the Board's decision whether to maintain
the dividend. We remain on the sidelines pending better visibility on growth and
more imminent catalysts.
• Maintaining the dividend remains a Board decision, but the new strategic plan
will have an impact. Key factors that are likely to influence dividend policy will
include: (i) Allstream and whether the company commits additional capital to
improve performance, or whether Allstream is put up for sale; (ii) MTS capex
and the extent to which management sees the need to accelerate investments in
new technologies and/or to retain financial flexibility for spectrum auctions; and
(iii) the pension solvency deficit. The dividend payout ratio is 181% of estimated
2015E FCF, or 91% excluding pension solvency funding, or 66% excluding pension
solvency funding and factoring in the DRIP.
• Reducing target from $29 to $26. We have made changes to our forecast
mainly to reflect: (i) an increase in pension solvency funding consistent with the
YoY increase in the pension solvency deficit; and (ii) lower EBITDA margins at
Allstream.
Rating:
Price Target:
Outperform
14.50 ▲ 13.00
Building a better business: Price target increase to $14.50
14FEB14 - 03FEB15
13.00
12.50
12.00
11.50
11.00
Milestone Apartments REIT ("MST") has recently announced a series of acquisitions
and dispositions which we believe are progressive steps toward building a
better business. Since our last standalone update (Nov-7), US$/$CAD FX rate has
continued to strengthen, thus driving our $CAD NAV higher. As such, we have
increased our price target to $14.50 from $13. We reiterate our Outperform rating
on MST's units.
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2014E
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FFO/Unit
0.81
0.99
1.00
1.03
All market data in CAD; all financial data in USD; dividends paid in
CAD.
Sara O'Brien, CFA, CA (Analyst)
Juliane Szeto (Associate)
• An active start to 2015 – MST has agreed to purchase 2 properties ($77MM) in
Kansas City, MO and Orlando, FL. MST has also completed its first two property
sales since its Mar-13 IPO, generating gross/net proceeds of $22MM/$9MM.
• Recycling capital into higher quality properties – MST is acquiring newer,
higher quality properties and trimming older, smaller, lower quality properties.
Characteristically, the two properties under contract have an average of ~290
units, an average age of ~9 years, AMR of $1,040 and are 96.5% occupied. The
two Atlanta sales have an average of ~190 units, and average age of ~27 years.
Thus, MST is improving the overall quality of its portfolio.
• FX movements boost $CAD-denominated NAV; despite price ascent, the units
continue to trade at a sizable NAV-discount – While we run our NAV models with
“real time” pricing, for practical purposes we do not publish our NAV estimates
daily. Interestingly, since our last standalone note (Nov-7), our $12.50 NAV/unit
estimate has remained static. However the 9% gain in US$/$CAD (to 1.24) has
boosted our $CAD-denominated NAV/unit to $C15.50. While MST’s unit price
($CAD-denominated) has been on a solid upward trajectory, most of this move
has been currency-related and we continue to believe that the units are trading
at a sizable (15%) discount to NAV.
• Target price increased to C$14.50 from $13; Outperform rating reiterated – Our
2015E-16E FFO/unit of $1.00/$1.03 are unchanged. MST reports Q4/14 and 2014
results on Wed Mar-4th.
Stella-Jones(TSX: SJ; 37.48)
Rating:
Price Target:
Sector Perform
41.00 ▲ 35.00
Taking target to $41 on FX, valuation roll forward, see continued growth ahead
8
52 WEEKS
14FEB14 - 03FEB15
36.00
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26.00
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2013A
1.35
2014E
1.52
2015E
2.06↑
1.87
2016E
2.29↑
2.11
P/E
27.7x
24.7x
18.2x
16.4x
• Taking price target to $41 on positive USD/CAD FX, valuation roll forward. Our
revised estimates are based on the new FX rate of 1.26. We have adjusted our
multiple on SJ to 18x P/E from 17.5x and rolled forward our valuation to F16 to
derive our new $41 price target.
• Rail tie demand strong, pricing to boost top line and help margins. SJ has seen
stabilized green tie cost in the past 4 months and with contract price escalation
clauses with Class 1 customers (larger one in effect as of Q1), this is expected
to improve EBITDA margin in 2015 vs. 2014. SJ sees opportunity to regain 2013
type margins (15.3% EBITDA range) by year end 2015 and stable input costs. We
model SJ EBITDA margin at 15.2%/15.6% for F15/F16, up from 14.3% in F14.
• Pole demand entering strong cycle, may cause some volatility in quarterly
results. SJ is seeing several customers upping their forecasts for replacement
poles over the next several years. This bodes well for a long-term pick up in pole
demand but will cause some volatility in quarter to quarter results depending on
timing of shipping.
• Acquisition opportunities in Southern Yellow Pine poles. SJ sees SYP market
at ~$600M and we estimate they have ~10% market share, management sees
opportunity to consolidate this market over time. SJ now has debt/EBITDA at 2.5x
and is comfortable taking this to ~3x for the right acquisition.
TMX Group Limited(TSX: X; 46.19)
52 WEEKS
We believe SJ is a defensive growth stock that will continue to drive doubledigit earnings improvement in F15 and F16 with its synergistic acquisitions and
organic growth. We believe SJ will complement our estimates with new tuck-in
acquisitions; however, timing of these is uncertain. With valuation multiples at
a premium to historical trading ranges, we now see SJ shares as close to fairly
valued.
Rating:
Price Target:
14FEB14 - 03FEB15
60.00
Underperform
48.00 ▼ 54.00
Remaining on the sidelines. Maintain Underperform rating
Our Underperform rating reflects our view that there remain multiple near-term
risks (continued weak capital markets environment; potential regulatory changes;
uncertain impact of pending changes to TMX’s equity trading business; and
competition) that continue to indicate a risk-reward profile that is less compelling
vs. other names within our coverage.
58.00
56.00
54.00
52.00
50.00
48.00
300
200
100
F
M
A
Close
2013A
2014A
2015E
2016E
M
J
2014
J
A
S
O
N
D
2015
J
Revenue Prev.
700.5
717.3↓
721.3
746.1↓
764.2
795.2↓
810.3
F
• Q4/14 operating EPS of $0.93 was below our $1.07 forecast and a bit below
consensus of $0.97, with the miss primarily reflecting lower-than-forecast
revenues (in issuer services and trading & clearing), along with higher-thanforecast operating expenses, partly offset by higher business services revenue
(reflecting a significant increase in revenues at Razor Risk).
• Reducing 12-month target to $48/share (was $54) on lower financial forecasts,
but maintaining Underperform rating. The lower target reflects an ~10%
reduction in our 2015 and 2016 EPS forecasts (target multiple remains
unchanged).
• We believe the aforementioned near-term risks are likely to constrain valuation
upside in the near-term and despite the decline in the TMX’s share price in recent
months, we note share prices for other capital markets sensitive names within
our coverage (brokers and asset managers) declined on average more than the
TMX.
Transcontinental Inc.(TSX: TCL.A; 15.73)
Rating:
Price Target:
Sector Perform
18.00 ▲ 17.00
1Q Preview: Healthy FCF Can Support Both Acquisitions And Dividend Growth
9
52 WEEKS
14FEB14 - 03FEB15
16.50
16.00
15.50
Transcontinental will release 1Q15 results and hold its AGM on Tuesday, March 17
(conference call details TBA). We are making modest upward revisions to our Media
segment forecast, and increasing our price target from $17 to $18.
15.00
14.50
14.00
13.50
1200
900
600
300
F
M
A
M
Close
J
2014
J
A
S
O
N
D
2015
J
F
EPS, Ops Diluted Prev.
2013A
2.01
2014A
2.15
2015E
2.32↑
2.29
2016E
2.34↑
2.32
P/E
7.8x
7.3x
6.8x
6.7x
• Increasing target to $18. We have made modest revisions to our forecast, mostly
to reflect higher EBITDA margin assumptions in Media. We believe our prior
forecast may have been overly conservative given management's expectation
of $20MM in Sun Media related synergies. The bulk of these synergies should
be realized in F2015E, and we expect will be partially offset by soft underlying
trends (mostly advertising revenue) and the pending sale of consumer magazines
to TVA (likely $7-8MM of EBITDA). Our F2015E Media segment EBITDA estimate
increases from $64MM to $68MM (versus $62MM in F2014). Our F2015E and
F2016E consolidated EBITDA estimates increase from $366MM and $356MM,
respectively, to $370MM and $358MM.
• 1Q preview: Growth by acquisition. We forecast revenue and EBITDA of
$518MM (+3.8% YoY) and $73MM (+6.9% YoY), respectively (consensus is not
yet meaningful), with YoY growth mostly reflecting recent M&A (Capri packaging,
Sun Media). We assume ~40bps of YoY consolidated EBITDA margin expansion.
Consistent with management's outlook on the 4Q call, we model a "high 20s" tax
rate for F2015, but with a sizable ($20-30MM) increase in cash taxes in 1Q (Quad
Canada NOLs have been fully utilized). Despite elevated capital deployment on
acquisitions, we expect a dividend increase in the area of +10% (similar to last
year's increase), which is supported by the low FCF payout (~27%) and healthy
balance sheet (1.2x net debt/EBITDA).
First Glance Notes
Canaccord Genuity Group Inc.(TSX: CF; 6.44; LSE: CF.)
Peter K. Lenardos (Analyst)
+44 20 7029 0824; [email protected]
Portia Patel (Analyst)
52 WEEKS
Rating:
14FEB14 - 03FEB15
12.00
10.00
8.00
6.00
9000
7500
6000
4500
3000
1500
F
M
A
Close
M
J
2014
J
A
S
O
Sector Perform
N
D
2015
J
• Our take: Q3/15 results were clearly disappointing and we think the shares are
likely to trade lower as a result. Q3/15 normalized operating EPS loss of -$0.19
was well below our forecast of +$0.05 and consensus of +$0.01 (range of -$0.06
to +$0.07). The shortfall was wholly attributable to the capital markets division,
where revenues were below forecast in every key revenue category (trading,
underwriting and M&A) and compensation ratios and non-compensation ratios
were worse than forecast. The silver lining from the quarter was that the Wealth
Management and Corporate & Other segments had Q3/15 results that were
slightly better than our forecast.
• Q3/15 consolidated compensation ratio was 64.7%, worse than our 59.6%
forecast, and compares to 59.1% Q/Q and 59.0% Y/Y.
• Q3/15 consolidated non-compensation expense ratio was 42.0% of revenues,
worse than our 31.8% forecast, and compares to 25.9% Q/Q and 25.8% Y/Y.
F
Canfor Corporation(TSX: CFP; 30.92)
Rating:
Outperform
• Q414 results lower than expected – Canfor reported normalized EBITDA of
$108.9MM, significantly lower than our $155MM forecast and consensus of
$134MM. Normalized EPS was $0.26 in Q414 compared to our estimate of $0.46
and consensus of $0.42. Lumber EBITDA of $71MM was down $18MM q/q due
to lower shipment volumes (-3% q/q) and higher costs (+8%), partially offset by
10
52 WEEKS
14FEB14 - 03FEB15
30.00
28.00
26.00
24.00
22.00
3000
2000
1000
F
M
A
M
Close
J
2014
J
A
S
O
N
D
2015
J
F
Canfor Pulp Products Inc.(TSX: CFX; 16.10)
16.00
Rating:
14FEB14 - 03FEB15
15.00
14.00
13.00
12.00
11.00
400
200
M
A
M
Close
J
2014
J
A
S
Sector Perform
52 WEEKS
F
higher lumber realizations (+3%) reflecting the 4% drop in the C$. Pulp EBITDA of
$45MM was down $5MM q/q in Q4, reflecting higher costs (+9% q/q), partially
offset by higher shipments (+7%) and improved average realizations (+4%), again
FX related.
• Management outlook – Lumber: NA consumption is expected to improve in Q1
while export markets are expected to ease. Log costs are anticipated to trend up
into 2015, but lower cash conversion costs should offset log cost inflation. Pulp:
Canfor anticipates NBSK list pulp prices to soften, but realizations to improve on
the weakening C$.
• Lumber prices down 6% so far in 2015, but we expect prices to head higher
with seasonal spring demand – Our W. SPF lumber pricing assumptions are $355
for 2015 (+2% y/y) and $400 for 2016 (+13% y/y). Last week, Weyerhaeuser
(#3 NA lumber producer) guided for slightly higher lumber prices q/q in Q1
on seasonal improvement, partially offset by higher log costs. With ~45% of
North American lumber capacity based in Canada, a depreciating C$ improves
the competitiveness of Canadian production and tends to weaken US$ lumber
pricing.
O
N
D
2015
J
F
New Gold Inc.(AMEX: NGD; 4.06; TSX: NGD)
Dan Rollins, CFA (Analyst)
Mark Mihaljevic (Associate)
52 WEEKS
• Q414 results lower than expected – Canfor Pulp reported adjusted EBITDA of
$43MM, lower than our $54MM forecast and consensus of $52MM. Adjusted
EPS was $0.30 compared to our estimate of $0.38 and consensus of $0.35.
The $4.5MM q/q decrease in adjusted EBITDA primarily reflected higher
maintenance and fibre costs, partially offset by higher pulp shipments (+8%) and
the benefits of a weaker loonie on realizations. While NBSK list prices were down
0.5% q/q, CFX's C$ pulp realizations actually increased 5.5% (primarily due to the
4.1% decline in the Canadian dollar and improved mix in Asia/NA).
• Paper operations improved slightly – Paper segment results increased $0.6MM
q/q as the company experienced higher realizations (+3.7% due to the weaker
loonie) and slightly higher shipments (+0.3%), partially offset by higher costs
(+3% q/q largely related to higher slush pulp prices and maintenance).
• Management outlook – Pulp: Softwood prices expected to continue to "soften
modestly" through Q1. The company expects to complete the upgrades at its
Intercontinental Pulp mill turbine and begin selling power under an EPA, by
Q215. Planned maintenance outages at Intercontinental and Prince George are
expected to decrease production in Q2 by 10K tonnes, while Northwood will
take its shut in Q4 (25K). Kraft Paper: Markets have been softening heading into
Q1 with potential for modest pricing pressure in NA given increased European
competition (although the weaker C$ should offset). Dividend: CFX declared a
Q1 dividend of 6.25 cents (1.6% yield).
Rating:
Outperform
14FEB14 - 03FEB15
6.50
6.00
5.50
5.00
4.50
We expect New Gold's shares to trade in-line with its peers when markets open
given solid operational guidance for 2015 as well as a prudent decision to stretch
out the development time-line and capital spending for Rainy River. However, these
positives are likely to be offset by lower reported reserves and weaker anticipated
grades at New Afton starting in 2016.
4.00
3.50
40000
30000
20000
10000
F
M
A
Close
M
J
2014
J
A
Rel. S&P 500
S
O
N
D
2015
J
MA 40 weeks
F
11
Redknee Solutions Inc.(TSX: RKN; 3.24)
Paul Treiber, CFA (Analyst)
Sean Ray, P.Eng. (Associate)
Rating:
52 WEEKS
14FEB14 - 03FEB15
6.00
5.50
5.00
4.50
4.00
3.50
3.00
4500
3000
1500
F
M
A
M
Close
J
2014
J
A
S
Outperform
Q1 First Glance: Not as strong as we expected, but better than some feared
O
N
D
2015
J
F
All market data in CAD; all financial data in USD.
• Q1 EBITDA and EPS above Street expectations. Q1 adj. EBITDA of $11.0MM
was above the Street ($8.5MM) but missed our Street-high estimate ($12.7MM).
Similarly, EPS normalized for unusuals of $0.05 was above the Street ($0.04) yet
below RBC ($0.07). Revenue was $62.6MM (3.6% Y/Y, 5.5% constant currency),
below the Street ($65MM) and RBC ($66MM).
• Healthy bookings, although support revenue below our estimate. Backlog
rose 3% Y/Y to $171MM (excluding FX, 5% Y/Y). We estimate Q1 book-tobill is 1.03x, in line with Redknee’s TTM trends (1.02x). We believe bookings
are a leading indicator for the business, and Y/Y growth suggests that renegotiations of former NSN BSS contracts and new wins are offsetting expired/
terminated contracts. Support revenue was $24.6MM, slightly below our
estimate ($26.0MM); however, support appears to be stabilizing in the mid
$20MM level (three of the last four quarters).
• Opex declines more than expected, cashflow negative. Opex dropped from
$33.2MM Q4 to $28.4MM Q1, below our estimate ($30.4MM) on reduced
reliance on subcontractors and initial savings from restructuring; Redknee.
Negatively, operating cashflow was -$4.4MM, below RBC at $0.5M on a drop in
accrued liabilities and higher than expected restructuring payouts Q1. Net cash
declined to $54MM ($0.49/share) from $62MM Q4.
• Management reaffirms long-term strategy, announces automatic share
purchase plan. Management indicated that Redknee is in line with its threeyear plan for the NSN BSS acquisition (i.e., improving margins toward its 20–25%
target). Redknee entered into an automatic share purchase plan (Redknee can
repurchase up to 9.4MM shares under its NCIB).
Earnings Preview
DHX Media Ltd.(TSX: DHX.B; 8.80)
52 WEEKS
Rating:
Price Target:
14FEB14 - 03FEB15
10.00
Sector Perform
10.00
2Q Preview: Expecting Solid Growth Driven by Acquisitions, FX Tailwind
DHX will release 2Q15 results on Tuesday, February 17, and host a conference call at
8:00 a.m. EST (dial-in: 888-231-8191; passcode: 75538678). We expect solid growth
driven by acquisitions and benefiting from an FX tailwind given the recent CAD
depreciation.
9.00
8.00
7.00
6.00
5.00
12000
10000
8000
6000
4000
2000
F
M
A
Close
2013A
2014A
2015E
2016E
M
J
2014
J
A
S
O
N
D
2015
J
Revenue Prev.
97.3
116.1
249.2↓
253.8
293.2↓
301.4
F
• Tweaking estimates; $10 target price unchanged. We have made modest
changes to our forecast mainly to reflect slightly lower growth assumptions for
service revenue at the studios (P&SF) and for owned M&L - with lower growth
assumptions from the Gabba live tour. Our full year revenue and adjusted EBITDA
estimates in 2015E map close to the midpoint of management's guidance, which
was updated at the December AGM to reflect recent acquisitions (Echo Bridge,
Nerd Corps). Our F2015E and F2016E adjusted EBITDA estimates decrease from
$89.1MM and $112.1MM, respectively, to $88.0MM and $107.1MM. Our $10
price target and Sector Perform rating remain unchanged.
• 2Q preview: solid growth set to continue. We forecast revenue and EBITDA of
$68.7MM (+126% YoY) and $24.7MM (+167%), respectively (consensus is not yet
meaningful). The dramatic YoY growth mostly reflects the acquisitions of Family
Channel and Epitome (and to a lesser extent Echo Bridge and Nerd Corps, which
were acquired intra-quarter). We expect the weaker CAD (mostly vis-a-vis the
USD) to provide a tailwind for revenue growth (-7.7% YoY depreciation and ~30%
12
revenue exposure to USD) that is only partly offset by natural hedges (foreign
currency opex and USD debt).
Gold Fields Limited(JSE: GFI; 6,700; NYSE: GFI)
Jonathan Guy (Analyst)
Alexandra Slattery, CPA, CA (Associate)
6900
6600
6300
6000
5700
5400
5100
4800
4500
4200
3900
3600
52 WEEKS
Rating:
Price Target:
14FEB14 - 03FEB15
Sector Perform
6,500
Gold Fields is scheduled to report its FY14 production and financials on Thursday,
February 12th. We expect attributable production of 2,220koz with AISC of US$
$1,035/oz. We are forecasting revenues of US$2,848 million, EBITDA of US$1,048
million and EPS of US$0.09/share. For 2015 we forecast attributable production of
2,226koz.
40000
30000
20000
10000
F
M
A
M
Close
J
2014
J
A
S
O
N
D
2015
J
F
Rel. FTSE/JSE AFRICA ALL SHAREMA 40 weeks
EPS, Adj Diluted
2013A
(0.80)
2014E
0.09
2015E
0.19
2016E
0.35
P/E
• Our target price of ZAR65.00 (unchanged) reflects a 50:50 blend of 1.2x P/NAV
(unchanged) and 12x P/adjCF (unchanged), on our 2016 estimates. We expect
attributable production of 2,220koz with AISC of US$$1,035/oz for FY14. For 2015
we forecast attributable production of 2,226koz.
68.6x
31.0x
16.7x
All market data in ZAc; all financial data in USD.
Torstar Corporation(TSX: TS.B; 7.18)
52 WEEKS
Rating:
Price Target:
14FEB14 - 03FEB15
Sector Perform
8.00
4Q Preview: Effectively a Single-Issue Stock Until Uses of Cash are Determined
Torstar will release 4Q14 results on Wednesday, March 4, and host a conference
call at 8:15 a.m. EST (dial-in: 416-340-2216). We expect soft revenue trends
consistent with 3Q (-7% YoY), with weakness in print advertising, relative stability
in multi-platform subscriber and flyer distribution revenues, and modest growth
in digital.
8.00
7.50
7.00
6.50
6.00
5.50
5.00
3000
2000
1000
F
M
A
M
Close
J
2014
J
A
S
O
N
D
2015
J
EPS, Ops Diluted
2013A
1.12
2014E
0.71
2015E
0.65
2016E
0.62
P/E
6.4x
10.1x
11.0x
11.6x
F
• 4Q preview: revenue environment remains challenging. We forecast segment
revenue and EBITDA (including the JVs) of $252MM (-7.0% YoY) and
$41MM (-15.8% YoY), respectively (consensus is not meaningful). Our revenue
assumptions reflect YoY declines of -10.0% and -4.0% at Star Media Group
and Metroland Media, respectively. Our estimates assume -237bps of segment
EBITDA margin contraction, mostly reflecting a difficult YoY comparison for Star
Media due to the timing of digital investments and a lapping of certain cost
initiatives. There are no changes to our estimates or $8 target at this time.
• Areas in focus this quarter could include: (i) any new thoughts with respect to
potential uses for ~$455MM in Harlequin proceeds ($2.90/share of net cash);
(ii) visibility and the outlook for print advertising (-20% YoY for Postmedia
in its September-November quarter); (iii) an update on the Toronto Star's
multi-platform evolution (La-Presse+ tablet model) including the expected P&L
impact in 2015; (iv) an update on restructuring and cost initiatives across the
organization; (v) the decision to close Metro's digital publications in seven cities
(abandoning all digital-only Metro markets); (vi) any changes to the outlook for
pension funding in 2015E (Torstar's recent guidance as of 3Q was for ~$25MM
in funding); and (vii) the potential revenue loss for Metroland (namely flyer
distribution) associated with Target's Canadian exit.
Company Comments
13
ATS Automation Tooling Systems(TSX: ATA; 14.10)
Steve Arthur, CFA (Analyst)
Ben Holton, CFA (Analyst)
Rating:
Price Target:
52 WEEKS
14FEB14 - 03FEB15
16.00
FQ3/15 results below expectations on muted organic growth; M&A search
continues
Revenue and earnings were below expectations due to weaker than anticipated
organic growth and a larger detrimental margin impact from the M+W PA
acquisition. We take a somewhat more conservative approach on revenue growth,
and reset our near-term margin expectations lower with improvement in coming
years. Continue to see the shares near fair value, and maintain our Sector Perform
rating, $16 target.
15.00
14.00
13.00
12.00
3000
2000
1000
F
M
A
Close
2013A
2014A
2015E
2016E
Sector Perform
16.00
M
J
2014
J
A
S
O
N
D
2015
J
Revenue Prev.
591.1
683.4
901.7↓
927.9
1,035.6↓
1,082.4
F
• FQ3/15 revenue and earnings below expectations: Revenue from continuing
operations of $248.8MM (+40% Y/Y, +6% ex acquisitions) was shy of our
$262.3MM forecast and consensus $251.0MM.
• Adj. EBITDA was $30.4MM, also below our forecast of $35.1MM and consensus
$33.1MM. This was a function of both the lower revenue base and lower than
expected adjusted margins (ex. acquisition costs). Adj. EPS from continuing
operations was $0.18 vs. our $0.20 forecast and consensus of $0.18.
• Order bookings continue to be volatile, but backlog is sizable: Bookings were
$287MM in the quarter, an increase of 21% Y/Y. If we exclude the $60MM in
bookings from the M+W PA acquisition, organic bookings declined by 4% Y/Y. On
this, backlog increased 7% Q/Q and 29% Y/Y to $602MM.
• Management’s convention for backlog conversion indicates slower growth in
FQ4/15E: Management commented that they expect 40-45% of the backlog to
be converted to revenue in the next quarter. However, there are also several
other factors that can impact this metric. Using the guided range would imply
a revenue range of $240-270MM, which brackets consensus estimates (prequarter) of $257MM, and at the midpoint represents 27% Y/Y growth.
• Risk/reward remains balanced: With the shares trading near our price target,
we see ATA risk/reward as balanced. We maintain our Sector Perform rating and
$16 target.
Industry Comments
Al Stanton (Analyst)
RBC International E&P Daily
Nathan Piper (Analyst)
DNO.OL: Looking at local sales to shore up cash flows in 2015; LUPE.ST: Capital
Markets Day - Waiting for Johan Sverdrup; KOS:Mauritania farm-out; PMO.L:
Badada drilling update
Haydn Rodgers, CA (Associate)
DNO; LUPE; KOS; PMO
Victoria McCulloch, CA (Analyst)
Dan MacDonald, CFA (Analyst)
Turnin' to the Right - Canadian Oilfield Services Insights
Matthew McKellar (Associate)
January has started 2015 off on a rough note as drilling activity bears similar
resemblance to 2009 as E&Ps have quickly throttled back capital spending.
Operationally, it is unlikely to get any better until 1Q16, but we see the stocks
discounting this outlook fairly well at current levels. The two modest positives were
gas focused activity, which held flat to up y/y, and deep drilling demand which was
only down 7% y/y.
January Quickly Shows the Impact of Lower E&P Budgets
We note several important trends to begin 2015:
14
• Lower oil-focused drilling activity: Drilling is down markedly y/y through much
of Alberta and Saskatchewan as E&Ps have been quick to rein in winter drilling
programs in the current oil price environment. Rig fleet utilization was 54% in
January, versus 68% in 1Q14.
• Deep drilling more resilient: The active deep rig count (>3,050m rated vertical
depth) was down only 7% in January to 321 rigs active on average.
• Increased service intensity per well (+ve CEU, SES): Average days to drill in
Western Canada was ~12.7 in January, up 11.7% versus January 2014, with the
largest increase in Alberta at 24.3%.
• Shift to horizontal drilling continues (+ve PHX, CEU, SES): Although horizontal
wells drilled in January 2015 were 27% lower y/y, they represented 77% of all
wells drilled, versus just 71% in January 2014. Further, horizontal licenses were
76% of all licenses issued, up from 52% in January 2014.
Chad McAlpine, CFA (Analyst)
Bish Koziol (Associate)
QuaDS Score Model Portfolios
• Headwinds in January. Our Canada Overall Top 40 list declined -3.3% last month
and underperformed the S&P/TSX Composite total return of 0.5% during January.
Over the same period, our Canada Overall Bottom 40 list climbed 5.9%. This
demonstrated the market’s lack of interest in good fundamentals as 2015 kicked
off, and it presented a challenging environment for most types of disciplined
quantitative strategies. For a second straight month, Financial sector holdings
were responsible for most of the portfolio loss in January, and if their negative
contribution were removed along with the poor performance of Industrials last
month, the model portfolio would have outpaced the benchmark.
• Exiting Energy. At the end of January, deteriorating Momentum and
Predictability composite scores were responsible for six stocks being removed
from our Canada Overall Top 40 List. With the removal of two Energy positions
at month-end, the portfolio now holds just one name in the group. Despite the
poor performance of Industrials last month, both Canadian railways were added
to the model portfolio at the end of January
15
Required disclosures
Non-U.S. analyst disclosure
Paul C. Quinn;Hamir Patel;Al Stanton;Nathan Piper;Haydn Rodgers;Victoria McCulloch;Dan Rollins;Mark Mihaljevic;Jonathan
Guy;Alexandra Slattery;Chad McAlpine;Bish Koziol;Sara O'Brien;Juliane Szeto;Steve Arthur;Drew McReynolds;Jie He;Haran
Posner;Geoffrey Kwan;Peter K. Lenardos;Charan Sanghera;Portia Patel;Paul Treiber;Sean Ray;Dan MacDonald;Matthew
McKellar;Robert Kwan;Kelsey Roste;Ben Holton;Neil Downey;Kevin Cheng;Michael Smith (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 31-Dec-2014
Rating
BUY [Top Pick & Outperform]
HOLD [Sector Perform]
SELL [Underperform]
Count
897
686
112
Percent
52.92
40.47
6.61
Investment Banking
Serv./Past 12 Mos.
Count
Percent
290
32.33
137
19.97
6
5.36
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
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Dissemination of research and short-term trade ideas
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16
subject companies on which the Firm currently provides equity research coverage. Research Analysts may, from time to time,
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17
or possible acquisition of a particular financial product, a recipient in Australia should obtain any relevant disclosure document prepared in respect of that product
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.® 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 2015 - Member SIPC
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18

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