TD Several companies were named to TD Cowen’s “Canada Best Ideas” list in separate research reports released on Monday.
They include:
* Bombardier Inc. with a “buy” rating and $129 target. The average on the Street is $112.36.
Analyst Tim James: “We believe Bombardier is transitioning from a turnaround story to a re-rating story. We believe a re-rating is warranted given significant operational and financial progress made by the new management team from 2020 through Q2/24, our 2-3 year forecast growth, and expectations for further deleveraging, revenue diversification, and returning capital to shareholders beyond 2025.”
* Brookfield Renewable Partners LP (BEP-N, BEP.UN-T) with a “buy” rating and US$34. The average is $29.37.
Analyst Sean Steuart: “BEP is our pick for Canada Best Ideas. Global renewable power and energy transition growth opportunities are expanding at an accelerating rate, augmented by surging demand from corporate buyers. We believe that BEP offers compelling exposure to this theme given its leading funding position, expanding organic development pipeline, and relatively transparent FFO and distribution growth potential.”
“Several characteristics separate BEP from its peers: scale; a broad/deep growth opportunity set; an ability to act on large/complex transactions; operating/procurement expertise; management depth; a strong funding platform; and high exposure to positive corporate PPA momentum. We believe BEP’s relative valuation premium is poised for further expansion.”
* HudBay Minerals Inc. with a “buy” rating and $16 target. The average is $15.82.
Analyst Craig Hutchison: “Hudbay is a mid-cap copper producer with production of 150ktpa supplemented by a substantial gold credit of 300kozpa (30 per cent of revenues). With three operating assets and an attractive growth project in Copper World progressing towards FID the company is well positioned for investors looking for copper growth exposure in top-tier jurisdictions and is our Top Pick in the base metals space.”
“In contrast to many of its peers, Hudbay’s copper production growth is expected to come from stable jurisdictions (the U.S. & Canada). Additionally, we view the company’s current flagship operation, the Constancia mine in Peru, as an attractive low-cost, long-life cash flow generating asset with significant exploration potential. Another differentiator relative to peers, nearly one-third of the company’s revenues come from gold, which offers investors exposure to more defensive-oriented cash flows with gold prices at record highs.”
* RioCan REIT with a “buy” rating and $23 target. The average is $20.85.
Analyst Sam Damiani: “RioCan’s valuation remains unfairly discounted, reflecting higher interest cost growth and concerns about the condo pipeline. With interest cost headwinds now rapidly fading, we see RioCan’s solid SPNOI growth flowing through to strong AFFO growth starting in 2025. This, together with the falling Debt/EBITDA we forecast, should improve the relative valuation vs both Canadian and U.S. peers.”
“We view RioCan as an attractive way to gain exposure to Canada’s strong retail leasing markets, while taking advantage of a historically low relative value vs. both Canadian Retailfocused REITs and U.S. peers.”
* Veren Inc. with a “buy” rating and $15 target. The average is $14.29.
Analyst Aaron Bilkoski: “Veren’s recent underperformance has resulted in an improved entry point. Veren offers high impact assets, organic volume growth, improving FCF generation, robust (and potentially increasing) RoC via the dividend/NCIB, and is approaching its near-term debt target. Despite these attributes, the company trades at an attractive 2025 estimated FCF yield of 14 per cent based on strip pricing.”
“We believe the recent underperformance could be driven by the perception Veren’s recently acquired assets are not performing as originally expected (a view we believe is unjustified) and weaker than originally anticipated Q3 volumes (in part due to third-party outages) - both factors should ebb with time.”