National Post (National Edition)
BCE’S WIRELINE BUSINESS NOW VIEWED AS BENEFIT RATHER THAN HINDRANCE
Long seen a barrier to growth, s heavy wireline exposure could now prove to be a strong point, particularly given the threat of intensifying competition in Canada’s wireless market.
The telecom giant’s wireline business, which includes its Fibe TV, Internet and home phone offerings, represents nearly 60 per cent of revenue and EBITDA. Since this is high relative to BCE’s peers, it has hindered the company’s growth, as has its underperformance in wireless.
But recent gains in the wireline segment should not be underestimated. Drew McReynolds, an analyst at RBC Capital Markets, upgraded BCE to outperform from sector perform as he sees an inflection point.
He is forecasting wireline revenue and EBITDA growth in the low single digits, driven by market share improvements in both residential television and Internet. He also highlighted lower network access service line losses, a less negative business market trajectory with possible upside
as It’s never a good idea to assume something will happen before it actually does. But when it comes to specialty pharmaceutical company Merus Labs International Inc., it’s hard not to expect more M&A. After all, the Toronto-based company’s core strategy is to acquire mature drugs that may be under-promoted by big pharma.
The departure of former chief executive Elie Farah in September 2014 caused some uncertainty for investors, but Barry Fishman has managed to build a robust M&A pipeline during his time at the helm. Some, including Canaccord Genuity analyst Neil Maruoka, even think the prospects for deals are better than ever for Merus.
Maruoka notes that Fishman and his team have put together a pipeline of more than 15 products, averaging $10 million of EBITDA.
He believes Merus is able to acquire more than $20 million of EBITDA based on its current balance sheet. That figure continues to grow as the company generates an estimated $2 million of free cash flow per month.
The analyst doesn’t want to include M&A transactions that haven’t happened into his model, but he looked at valuation scenarios for Merus after its next deal gets done. Based on the $20-million figure, Maruoka thinks it is reasonable to assume Merus trades between $4 and $4.50 if it can make an acquisition in the coming months.
The additional EBITDA a transaction like that would provide will also reduce the company’s dependence on its two core products, Enablex and Sintrom. And this could drive a re-rating for Merus that brings it closer in line with peers in the specialty pharma space.
was upgraded to buy from hold ahead of its first-quarter results due out after market close on May 6.
TD Securities analyst Brian Morrison, who also cut his price target on the stock to $86 from $88, expects the Canadian auto-parts manufacturer to meet or exceed its financial targets. He also believes Linamar’s balance sheet is strong enough to make acquisitions or implement more organic initiatives.
“It is our view that Linamar is positioned to deliver an attractive growth profile that should result in annual consensus expectations being raised,” Morrison told clients. “At this point in the coming from a strengthening economy in Eastern Canada, and ongoing cost efficiency efforts.
McReynolds also expects BCE to lead the way in terms of key wireless metrics, which should translate into highsingle-digit EBITDA growth in this area.
His forecast for net asset value growth of more than nine per cent compounded annually through 2017 almost matches that of Cogeco Cable Inc. (13 per cent) and Telus Corp. (10 per cent).
“While the substantial NAV growth differential to Rogers is unlikely to be sustained indefinitely, the momentum runway for BCE looks clear through 2015 and into 2016,” the analyst said, raising his price target on the stock to $57 from $54.
“We expect 2015 to represent an inflection point whereby annual wireline revenue and EBITDA growth turn positive, at minimum, for the next two to three years driven by market share gains and an improving revenue mix.” cycle, we believe that growth in earnings, as opposed to multiple expansion, should drive share price appreciation.”
Linamar’s shares have fallen more than six per cent in the past month.
Morrison is forecasting a 23-per-cent sales increase in the company’s power train and driveline segment, and 13-per-cent growth in the industrial segment.
He also highlighted Linamar’s launch book in excess of $3.4 billion, and the expectation for healthy bidding activity in all of the company’s geographies, particularly Europe, which has a fragmented supplier base.