Special Situations Coverage Update
Rolling Forward Valuations Ahead of 2019
TD Investment Conclusion
With this industry note, we are updating our target prices, reflecting updated valuation multiples (due to recent changes in the valuations of company comparables) and the rolling forward of valuations for the companies under our coverage (now generally basing our target prices on F2020 EBITDA versus the midpoint of F2019 and F2020 EBITDA previously). We have also made estimate revisions for two companies under coverage, as shown in Exhibit 2.
We are also upgrading two stocks under coverage this morning: Superior Plus Corp. (ACTION LIST BUY versus Buy previously) and Transcontinental Inc. (BUY versus Hold previously). Please see the separate Action Notes published on these two companies for additional details on the rating changes and our investment theses.
Ag Growth International Inc. (AFN-T; ACTION LIST BUY; $79.00 target price) and Superior Plus Corp. (SPB-T; ACTION LIST BUY; $16.00 target price) are our top picks for the next 12 months. We believe that both companies are well-positioned competitively, have good near-term and long-term growth opportunities, including potential for additional upside from acquisitions, have attractive and sustainable yields, and are undervalued at their respective current share prices.
Chemtrade Logistics Income Fund (CHE.UN-T; BUY; $15.00 target price), Great Canadian Gaming (GC-T; BUY; $70.00 target price), GDI Integrated Facility Services Inc. (GDI-T; BUY; $25.00 target price), Intertape Polymer Group (ITP-T; BUY; $23.00 target price), Transcontinental Inc. (TCL.A-T; BUY; $29.00 target price), and TFI International Inc. (TFII-T; BUY; $57.00 target price) are all BUY-rated, as we believe that they offer attractive risk/reward trade-offs at current levels.
CCL Industries Inc. (CCL.B-T; HOLD; $59.00 target price), Just Energy Group Inc. (JE-T/N; HOLD; $6.00 target price), Waste Connections Inc. (WCN-N/T; HOLD; US $87.00 target price), and Winpak Ltd. (WPK-T; HOLD; $49.00 target price) remain HOLD-rated, as these companies offer relatively lower forecast returns over the next 12 months, and we believe that there are more compelling opportunities in the rest of our coverage universe at this time.
Exhibit 1. Special Situations: Coverage Overview