1. business and industrial

EQUITY RESEARCH
CANADIAN RESEARCH AT A GLANCE
November 11, 2014
Price Target Revisions
! Cargojet Inc.
! Eldorado Gold Corporation
! New Gold Inc.
! NorthWest Healthcare Properties
! Vermilion Energy Inc.
Summary
Pricing trends accelerate in Q3/14
Summary
Improving fundamentals to drive outperformance
Summary
On solid footing to weather lower metal prices
Summary
Q3 results a bit soft; focused on driving value-creating initiatives
Summary
Entering the Lower 48
Summary
Q3 EBITDA miss on volume, weaker market conditions challenge F15 9% margin target
Summary
3Q14 results miss on weak Kestrel contribution
Summary
DHX to launch new content platform with China's CNTV
Summary
Q3/14 results above expectations; continuing to generate free cash flow
Summary
Exports provide some respite from oversupplied NA markets
Summary
In line Q3/14; Laying the groundwork for growth
Summary
Slight slowdown in new build cadence
Summary
Q3/14 results shy of expectations
Summary
Q3/14 - Distribution outlook: uncertain
First Glance Notes
! Aecon Group Inc.
! Anglo Pacific Group Plc
! DHX Media Ltd.
! Thompson Creek Metals Company
Company Comments
! Ainsworth Lumber Co. Ltd.
! Choice Properties REIT
! Ensign Energy Services Inc.
! Northern Blizzard Resources Inc.
! Parallel Energy Trust
Industry Comments
! Global Mining Trends & Values
! Integrated Oil and Senior E&P
! RBC Flight Deck
! RBC International E&P Daily
Summary
Summary
So what WTIE price are the large caps discounting?
Summary
Canadian airlines continue to operate in a strong demand environment
Summary
CNE; DNO; AFR; TGL
Quantitative Research
! Benchmarks
Summary
In-Depth Reports
! 2014 RBC Capital Markets’
Summary
Updates from Day 1
Technology, Internet, Media &
Telecommunications Conference
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
November 11, 2014
Initiations
! JP Energy Partners LP
Summary
Permian Possibilities
Summary
Chopping down more than it should have...downgrading to Sector Perform
Summary
CAPEX Positions Assets for 2015 Growth
Summary
Another Soft Quarter but Looking out to 2015
Summary
Light 3Q14 Distribution; Lowering Price Target
Summary
Improving fundamentals to drive outperformance
Summary
Despite Light 3Q14; 2015 Momentum Remains
Summary
On solid footing to weather lower metal prices
Summary
Strong 3Q14 margins; $500M share buyback initiated
Summary
Raising price target by $10 to reflect introduction of YE15 NAV estimate; introducing 2016 estimate
Summary
Raising tgt to $34; RLJ remains well positioned to aggregate select service hotels
Summary
Raising price target to reflect our outlook for steady growth through 2016
Summary
Lowering target to $23/share due to modest growth expectations
Summary
Strong 3Q14 Results; Growth Projects Continue to Advance
Summary
3Q14 $0.01 CFPS Miss To Consensus
Summary
Pricing of $3.0 Billion Senior Notes
Summary
Q3/14 results above expectations; continuing to generate free cash flow
Summary
F4Q'14 Preview
Summary
Making the Right Moves, Now Time for Execution
Summary
3Q a non-event - CEO search now a focus as Zalviso re-submission progresses
Summary
Tivantinib Phase III data in 2016 (or sooner)
Summary
2015-17 Backlog Modestly Below Expectations; Adjusting Estimates
Summary
CUDC-907 shows highly promising activity in r/r DLBCL
Summary
Slight slowdown in new build cadence
Summary
Focusing Effort on East Texas; Sabine Merger Vote Soon
Summary
So where do we go from here? Thinking short- and long-term post AASLD data
Summary
Juniper has a new CEO...again
Ratings Revisions
! Rayonier, Inc.
Price Target Revisions
! Bonanza Creek Energy, Inc.
! Cumulus Media, Inc.
! ECA Marcellus Trust I
! Eldorado Gold Corporation
! EV Energy Partners, L.P.
! New Gold Inc.
! Rackspace Hosting, Inc.
! Regency Centers Corporation
! RLJ Lodging Trust
! Rouse Properties Inc.
! Senior Housing Properties
! Spectra Energy Partners
First Glance Notes
! Eclipse Resources Corporation
! Freeport-McMoRan Inc.
! Thompson Creek Metals Company
Earnings Preview
! Energizer Holdings, Inc.
Company Comments
! 3D Systems Corp.
! AcelRx Pharmaceuticals Inc.
! ArQule Inc.
! BorgWarner Inc.
! Curis, Inc.
! Ensign Energy Services Inc.
! Forest Oil Corporation
! Intercept Pharmaceuticals, Inc.
! Juniper Networks, Inc.
2
EQUITY RESEARCH
! LTC Properties, Inc.
! Occidental Petroleum Corporation
! PDL BioPharma Inc.
! Sabra Health Care REIT Inc.
! Sunesis Pharmaceuticals, Inc.
! Transocean Ltd.
Summary
Investments trends are improving; The bulk of the activity will not occur until '15
Summary
Building Plenty Of Dry Powder With $2.6 Billion In Monetizations
Summary
Cerdelga deal looks attractive but Glumetza disclosure could be an overhang
Summary
Investment trends remain intact; Leverage metrics are above the long-term target
Summary
Circling the controversy: Is vosaroxin approvable?
Summary
Executing Well but Still Looking for the Bottom
! Farm Equipment: WASDE Update
! Financial Stability Board (FSB)Issues
Summary
Corn yield revised lower/soybean up; maintain SP rating on farm equipment OEMs
Summary
The FSB issues a TLAC proposal of 16-20% of RWA excluding capital buffers.
!
! Health Care Services
! Hep B update at AASLD
! Highlights from Beer Marketer's
Summary
!
! Picture of the Week Vol. 41
! RBC European Industrials Daily
! RBC International E&P Daily
! US Chemicals Weekly Watch
Summary
So what WTIE price are the large caps discounting?
Summary
Coca-Cola Volumes: On a Diet?
Summary
Morgan - relief; rail contracts; weak commodities
Summary
CNE; DNO; AFR; TGL
Summary
Spot Ethylene Slides as Buyers Hold off Purchases; DOW Investor Day This Week
Summary
Updates from Day 1
Industry Comments
Preliminary TLAC Proposal
Global Mining Trends & Values
INSIGHTS Conference
Integrated Oil and Senior E&P
Summary
HHS Enrollment Estimates Provide Another Scare, but Adjustment May Not Be So Bad
Summary
ARWR update, GILD, Novira, etc
Summary
In-Depth Reports
! 2014 RBC Capital Markets’
Technology, Internet, Media &
Telecommunications Conference
3
EQUITY RESEARCH
UK & European Research at a Glance
November 11, 2014
Initiations
! ASOS PLC
! Associated British Foods
! B&M European Value Retail
! Debenhams PLC
! Dixons Carphone PLC
! Dunelm Group PLC
! Hennes & Mauritz AB
! Home Retail Group PLC
! Hugo Boss
! Inditex
! Kingfisher PLC
! Marks & Spencer Group PLC
! Next PLC
! Sports Direct International PLC
! SuperGroup PLC
Summary
Initiating coverage: Exciting long-term story but margin expectations too high
Summary
Initiating coverage: Discount juggernaut
Summary
Initiating coverage: Discount polarisation increasing, B&M one of the winners
Summary
Initiating coverage: On the recovery trail but consensus looks optimistic
Summary
Initiating coverage: Plugged in to the connected world
Summary
Initiating coverage: Margin pressure underestimated
Summary
Initiating coverage: global winner, sales potential underestimated
Summary
Initiating coverage: Macro and competitive headwinds emerging
Summary
Initiating coverage: Undervalued growth potential
Summary
Initiating coverage: Lower but more durable growth
Summary
Initiating coverage: Clear UK plan but some macro & structural headwinds ahead
Summary
Initiating coverage: Survey work supportive of online catch-up
Summary
Initiating coverage: Super-normal margins and returns starting to peak
Summary
Initiating coverage: Structural winner but lacking earnings momentum
Summary
Initiating coverage: Bumpy road ahead
Summary
Traffic slows, capex does too
Summary
Second Senegal Success
Summary
Forecasts, price target nudged up; maintaining Outperform
Summary
3Q14 results miss on weak Kestrel contribution
Summary
Premium justified, Outperform
! A&D PRISM
! European Exchanges & Asset
Summary
Europeans outperform a flat US
Summary
Q3/14: the scores so far; AHL continues to rise
!
! Global Mining Trends & Values
Summary
What's in store for 2015?
Price Target Revisions
! Atlantia S.p.A.
! Cairn Energy plc
! Schroders Plc
First Glance Notes
! Anglo Pacific Group Plc
Company Comments
! Swisscom AG
Industry Comments
Managers Weekly
European General Retail
Summary
In-Depth Reports
! 2014 RBC Capital Markets’
Summary
Updates from Day 1
Technology, Internet, Media &
Telecommunications Conference
4
EQUITY RESEARCH
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)
5
Price Target Revisions
Cargojet Inc.(TSX: CJT; 24.54)
Walter Spracklin, CFA (Analyst)
(416) 842-7877; [email protected]
Derek Spronck (Analyst)
(416) 842-7833; [email protected]
52 WEEKS
Rating:
Price Target:
15NOV13 - 07NOV14
24.00
22.00
20.00
Top Pick
28.00 ▲ 26.00
Pricing trends accelerate in Q3/14
While the core of our investment thesis is based on upside from the Purolator
contract and subsequent fleet enhancements, strong volume growth combined
with positive (and accelerating) pricing trends suggests CJT's core overnight
business remains robust. With strong pre-holiday volumes already shaping up with
further pricing increases yet to be realized, we continue to see considerable upside
from current levels. Reiterate Top Pick.
18.00
16.00
14.00
12.00
400
200
N
2013
D
J
F
Close
M
A
2014
M
J
J
A
S
O
N
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
Revenue Prev.
175.4
188.3↑
183.2
310.9↑
306.8
345.5↓
347.9
2013A
2014E
2015E
2016E
All values in CAD unless otherwise noted.
Eldorado Gold Corporation(NYSE: EGO; 5.30; TSX: ELD)
Dan Rollins, CFA (Analyst)
(416) 842-9893; [email protected]
Mark Mihaljevic (Associate)
(416) 842-3804; [email protected]
8.50
8.00
7.50
52 WEEKS
• Solid Q3/14 results with strong volume and pricing trends. Cargojet reported
Q3/14 adjusted EBITDA of $5.7MM, which was roughly in line with our $5.2MM
estimate. Core volumes were up again for the eighth consecutive quarter at 4.5%
Y/Y; and while below our 7% estimate, was off of a very strong Q3/14 comp.
However, more than offsetting any variance, positive pricing of 7.8% Y/Y was well
above our 1.2% estimate and up from the 1.2% achieved in the prior quarter.
• Making a list and checking it twice. Cargojet continues to make the necessary
fleet, infrastructure, and personal enhancements for the launch of the Canada
Post airfreight contract set for Q2/15. Management noted that crew and pilot
training has already started with launch readiness progressing well and on plan.
• More to come. With the seasonally strong Q4/14 already in progress, initial
indications are pointing to a robust quarter. CJT noted that they were seeing
strong trends and highlighted that growth has been across the board and
continuing (if not accelerating), with further pricing increases set to be realized
in Q4/14.
• Revising price target to $28; reiterate Top Pick. We are adjusting our forecasts
to reflect: 1) Q3/14 actuals and improving pricing trends; and 2) our evolving
fleet lease/ownership assumptions. With strong operating cash flows, new adhoc and charter revenue, and improved pricing trends, we are taking our 2016
EBITDA up to $47.3MM (from $46.7MM). Based on our estimate revisions, we
are adjusting our target to $28 (from $26). Reiterate Top Pick rating.
Rating:
Price Target:
15NOV13 - 07NOV14
Outperform
8.50 ▼ 9.00
Improving fundamentals to drive outperformance
We expect Eldorado to outperform its peers given the company's near-term growth
potential, improving free cash flow prospects, solid balance sheet and experienced
management team. Unlike many of its peers which are likely to struggle to deliver
improving and sustainable free cash flow at current metal prices, Eldorado is well
positioned to do just that given the start-up of low-cost projects in 2016.
7.00
6.50
6.00
5.50
5.00
40000
30000
20000
10000
N
2013
D
J
Close
F
M
A
2014
M
J
J
Rel. S&P 500
EPS, Adj Diluted Prev.
2013A
0.28
2014E
0.22
2015E
0.20↑
0.19
2016E
0.43↓
0.48
All values in USD unless otherwise noted.
A
S
O
MA 40 weeks
P/E
19.0x
24.4x
26.3x
12.4x
N
• Well positioned to deliver on near-term growth. With a solid balance sheet,
longer-dated debt and strong cash flow from its existing operations, Eldorado is
well positioned even at current spot prices/currencies to deliver meaningful low
cost production growth over the next few years. With the start-up of Skouries,
Olympias Phase II and Eastern Dragon projects in 2016, we forecast per share
gold production (attributable basis) to increase at a 3-year CAGR of 9% through
2017.
• Solid balance sheet with very manageable debt. Eldorado has one of the
strongest balance sheets amongst the Tier I and II gold producers with $563
6
million in cash and $600 million in debt at quarter end. At spot metal prices/
currencies, Net Debt-to-EBITDA is forecast to top out at 1.6x in 2015 before
declining significantly with the start-up of Skouries, Olympias II and Eastern
Dragon.
• Management team has the experience needed to navigate current low price
environment. Eldorado has one of the stronger management teams in the sector
which is evidenced by a consistent operational performance, willingness to defer
growth projects to maintain a strong balance sheet and prioritization of projects
based on IRR, not NAV and/or production.
• Outperform rating reiterated; price target tweaked lower. Given our positive
outlook on Eldorado, we maintain our Outperform rating. As a result of tweaking
our near-term operational and financial forecasts, we have modestly lowered our
price target on Eldorado to $8.50 from $9.
New Gold Inc.(AMEX: NGD; 3.61; TSX: NGD)
Dan Rollins, CFA (Analyst)
(416) 842-9893; [email protected]
Mark Mihaljevic (Associate)
(416) 842-3804; [email protected]
52 WEEKS
Rating:
Price Target:
15NOV13 - 07NOV14
6.50
6.00
Outperform
6.50 ▼ 7.50
On solid footing to weather lower metal prices
New Gold remains a preferred precious metal investment as the company not
only has the ability to weather lower metal prices, but thrive should metal prices
rebound. Given the solid underlying fundamentals, New Gold, in our view, is well
positioned to Outperform.
5.50
5.00
4.50
4.00
3.50
40000
30000
20000
10000
N
2013
D
J
Close
F
M
A
2014
M
J
J
Rel. S&P 500
EPS, Adj Diluted Prev.
2013A
0.13
2014E
0.09↓
0.13
2015E
0.17↓
0.24
2016E
0.30
A
S
O
MA 40 weeks
P/E
28.9x
40.0x
20.8x
12.2x
All values in USD unless otherwise noted.
N
• Strong cash flow from current suite of mines
• Backed by its low cost New Afton mine, New Gold's portfolio provides solid free
cash flow within the current price environment. In an ex-growth scenario, where
development of Rainy River is deferred, we estimate that between 2015 and
2017, New Gold could generate $90M in annual free cash flow at spot metal
prices.
• Solid balance sheet with manageable debt
• New Gold's balance sheet remains in good stead with $416M in cash and $800M
in long-term debt on its books as of Q3. At spot metal prices, we believe the
company's Net Debt-to-EBITDA would top-out at 2.4x before falling quickly under
a growth scenario and would be less than 1.5x under an ex-growth scenario.
• Full control over deployment of capital
• Should metal prices remain under prolonged pressure, we expect New Gold
would slow play or defer the development of Rainy River to maintain a strong
balance sheet and be in a position to take advantage of a rebound in metal prices.
• Consistent strategy and experienced management team
differentiate New Gold from many of its peers
• In addition to having a management team/board of directors with the experience
needed to navigate current choppy waters, New Gold's strategy has remained
fairly consistent with the company avoiding the "flavour of the day approach"
too often seen in the sector.
Neil Downey, CFA, CA (Analyst)
(416) 842-7835; [email protected]
Kevin Cheng, CFA (Associate)
(416) 842-3803; [email protected]
Michael Smith, CFA (Analyst)
(416) 842-7805; [email protected]
Leslie Cho, CPA, CA (Associate)
416 842 7894; [email protected]
NorthWest Healthcare Properties(TSX: NWH.UN; 9.75)
Rating:
Price Target:
Sector Perform
10.50 ▼ 11.00
Q3 results a bit soft; focused on driving value-creating initiatives
NorthWest Healthcare Properties' ("NWH") is making progress via debt
refinancings, non-core asset sales and value creation initiatives. Yet, with slower
than anticipated new leasing this year, a -0.8% Q3/14 same-property NOI stat, and
the pending roll-off of certain IPO head-leases, 2015 FFO/unit growth will likely be
a challenge. We have trimmed our price target by $0.50, to $10.50, and maintained
our Sector Perform rating.
7
10.75
52 WEEKS
15NOV13 - 07NOV14
10.50
10.25
10.00
9.75
900
600
300
N
2013
D
J
F
Close
M
A
2014
M
J
J
A
S
O
N
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
FFO/Unit Prev.
1.00
0.99↓
1.01
0.97↓
1.06
1.02
2013A
2014E
2015E
2016E
All values in CAD unless otherwise noted.
Vermilion Energy Inc.(TSX: VET; 63.58)
Greg Pardy, CFA (Analyst)
(416) 842-7848; [email protected]
Dillon Culhane, CFA, CA (Analyst)
(416) 842-7915; [email protected]
Franz Hargo Muljo, CA (Associate)
416 842 8588; [email protected]
52 WEEKS
• Q3/14 FFO a bit light – Q3/14 FFO/unit of $0.25 was -7% from Q3/13’s $0.26 (as
re-stated) and 5% below our $0.26E. Our review of key P&L line items shows the
“miss” was entirely related to a shortfall of $0.6MM in actual versus forecast NOI.
• Pushing forth with value-enhancing initiatives – NWH continues to make
progress on value-enhancing initiatives such as rezoning for more density, the
pursuit of municipal approvals at a proposed redevelopment project in Dorian
and a new initiative for the launch of a "turnkey" managed clinic program
• Non-core asset sales progressing – NWH is on track to hit $25MM of sales
this year. The originally stated plan was $40MM, and we believe this should be
achieved by mid-2015.
• Re-financings working; more opportunity – During Q3, two mortgages with
$22MM of total principal were refinanced for 5- and 10-year terms, crystallizing
rate roll-down of ~200bps (weighted-average). With $156MM of maturing
2015-16 mortgage debt at a WAIR of 5.3%, we see the opportunity for further
savings.
• Trimming our FFO/unit estimates – We’ve lowered our 2014E-15E FFO/unit $0.02/-$0.09 to $0.99/$0.97. Part of the 2015 reduction relates to our more
conservative view on the timing/re-leasing of some 40,000 sf of head lease space
which is subject to a March 2015 expiry. Our newly introduced 2016E FFO/unit
is $1.02
• Target reduced to $10.50 from $11; Sector Perform rating reiterated.
Rating:
Price Target:
Outperform
77.00 ▼ 79.00
Entering the Lower 48
15NOV13 - 07NOV14
76.00
72.00
Vermilion Energy delivered respectable third-quarter results, punctuated by in-line
production of 49,920 boe/d, and lower than expected operating costs and cash
taxes. The company reaffirmed its 2014 capital program of $650 million and nudged
up its 2014 production guidance by 1% to a mid-point of 49,250 boe/d.
68.00
64.00
60.00
3000
2000
1000
N
2013
D
J
Close
2013A
2014E
2015E
2016E
F
M
A
2014
M
J
J
A
S
O
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
CFPS Diluted Prev.
6.40
7.41↑
7.33
8.15↓
8.49
9.59↓
9.73
P/CFPS
9.9x
8.6x
7.8x
6.6x
All values in CAD unless otherwise noted.
N
• 2015 Guidance – Early December. Vermilion plans to release its 2015 budget
in early December, but flagged on its conference call that while its 2015 capital
investment would be lower year/year, it remains comfortable with production in
the 56,000–57,000 boe/d range.
• US Acquisition. VET announced a modest $11.1 million property acquisition
in Wyoming that may lead to a broader expansion in the United States. The
acquisition caught us off guard to some degree, and while we would prefer to see
greater focus in Vermilion’s portfolio, we can live with diversification provided
that the company’s execution remains sharp.
• Corrib – Remains On-Track. Vermilion’s Corrib (18.5% wi) natural gas field offshore Ireland remains on-track to ramp-up to full rates of 58 mmcf/d (net) of high
netback gas production commencing in mid-2015. We peg Corrib’s pre-tax cash
flow contribution at $0.59/share (7%) in 2015 and $1.53/share (16%) in 2016 in
the context of National Balancing Point pricing of US$8.50/mmBtu in both 2015
and 2016.
• High Yield Growth Model. Supported by its two-thirds oil weighting and 36%
exposure to Brent-linked pricing, we believe Vermilion remains well positioned to
execute a high yield growth model with a dividend stream that should grow in the
future. Given its organic growth initiatives, we estimate Vermilion’s production
growth outlook at 21% in 2014 and 17% in 2015. The company remains on the
lookout for acquisitions in both North America and international markets.
First Glance Notes
Sara O'Brien, CFA, CA (Analyst)
(514) 878-7256; [email protected]
Juliane Szeto (Associate)
Aecon Group Inc.(TSX: ARE; 14.40)
Rating:
Outperform
8
(416) 842-3806; [email protected]
52 WEEKS
15NOV13 - 07NOV14
18.00
17.00
16.00
15.00
14.00
1600
1200
800
400
N
2013
D
J
F
Close
M
A
2014
M
J
J
A
S
O
N
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
All values in CAD unless otherwise noted.
Rating:
150.00
135.00
120.00
105.00
3000
2000
1000
2013
D
J
Close
F
M
A
2014
M
J
J
Rel. FT ALL-SHARE
A
S
O
N
MA 40 weeks
All market data in GBp; all financial data in GBP; dividends paid in
GBp.
Haran Posner (Analyst)
(416) 842-7832; [email protected]
Drew McReynolds, CFA, CA (Analyst)
(416) 842-3805; [email protected]
Outperform
3Q14 results miss on weak Kestrel contribution
15NOV13 - 07NOV14
210.00
195.00
180.00
165.00
N
• Volume weakness in all segments drives Q3 miss. Consolidated revenue was
down 6% YoY (and 8% below our forecast) as volume was impacted by longer
than anticipated ramp-up on new projects due to externally-driven delays.
EBITDA of $76.5M was down 4% YoY and vs our estimate as higher margin of
9.1% (up 20bps YoY) was not enough to offset lower volume. EPS was a miss at
$0.49 vs Street at $0.61 and our estimate of $0.52 (and down 8% YoY).
• Infrastructure flat YoY; Energy and Mining volumes down significantly.
Infrastructure revenue was up 1% YoY. Infrastructure EBITDA margins were up
slightly to 7.8%. Energy revenue was down 9% YoY. Energy EBITDA margins at
7.6% were hit 200 bps YoY. Mining revenues were down 14% YoY. Mining margins
were very strong at 10.8% (up 660 bps YoY).
• Outlook: More cautious client approach continues to defer some projects,
challenge to meet 9% EBITDA target in 2015. Despite a strong backlog of work,
ARE may have difficulty reaching its Adjusted EBITDA margin target of 9% by 2015
if current market conditions persist, but it does see some improvement in margin.
Backlog stood at $2.7B at the end of Q3, up 28% YoY.
• Conference call Tuesday, November 11th at 10AM ET: 1-888-225-2703. Our
focus: 1) Update on sale progress of Quito; 2) Bidding opportunity to drive Energy
margin up; 3) Any impact of crude correction to mining revenue timing.
Anglo Pacific Group Plc(LSE: APF; 136; TSX: APY)
Timothy Huff (Analyst)
+44 20 7653 4866; [email protected]
Ioannis Masvoulas, CFA (Associate)
+44 20 7653 4647; [email protected]
52 WEEKS
Q3 EBITDA miss on volume, weaker market conditions challenge F15 9% margin
target
• Royalty income in 3Q14 weak – APF reported 3Q14 royalty income at just £0.5m,
below our 3Q14 run rate of £1.5mn and down from £3.2mn in 3Q13, mainly on
the back of weaker than expected contribution from Kestrel and Amapa.
• Cash balance down sequentially but supported by sale of investments – Cash
balance at the end of 3Q14 stood at £9.2mn, down from £14.4mn at the end of
2Q14. In line with company guidance, APF has continued its gradual sell down
of its non-core mining and exploration portfolio, realising £1.8mn during the
quarter, with a remaining £14.3mn of value in non-core mining and exploration
interests and receivables.
• Kestrel contribution to remain volatile in coming quarters – APF expects that
Kestrel volumes within APF’s lands will improve to 50% of production in 4Q14,
but they will then pull back to 25% in Jan-Sep 2015, before recovering towards
the end of 2015. As a result, we would expect Kestrel’s royalty income to remain
volatile in the coming quarters.
• Amapa royalty to recover from 2015 - With the Santana port currently being
rebuilt, there have been minimal iron ore shipments from Amapa from which
APF is entitled to receive royalty income. Completion of the port is expected in
1Q15 which should enable APF to see increased income from the Amapa royalty.
DHX Media Ltd.(TSX: DHX.B; 9.56)
Rating:
Sector Perform
DHX to launch new content platform with China's CNTV
• DHX to launch new content platform in China. DHX announced a cooperation
agreement with China National Television (CNTV), the new-media broadcast
division of China Central Television (CCTV), China’s state broadcaster. Under
the agreement, DHX and CNTV will launch a new streaming service exclusively
dedicated to offering DHX’s children’s entertainment content across multiple
platforms in the People’s Republic of China (excluding Hong Kong, Macau, and
Taiwan). Based on the revenue sharing agreement, DHX will initially provide more
than 700 half hours of children’s content for the new platform, which is expected
to include video on demand (VOD), advertising video on demand (AdVOD) and
subscription video on demand (SVOD) services.
9
52 WEEKS
15NOV13 - 07NOV14
10.00
8.00
6.00
4.00
12000
10000
8000
6000
4000
2000
N
2013
D
J
F
Close
M
A
2014
M
J
J
A
S
O
N
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
All values in CAD unless otherwise noted.
Thompson Creek Metals Company(TSX: TCM; 2.24; NYSE: TC)
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; [email protected]
Steve Bristo, CFA (Associate)
(416) 842-7826; [email protected]
Thomas Klein (Associate)
416 842 5339; [email protected]
52 WEEKS
Rating:
15NOV13 - 07NOV14
3.00
2.70
2.40
2.10
6000
4500
3000
1500
2013
D
J
Close
F
M
A
2014
M
J
J
A
S
O
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
All market data in CAD; all financial data in USD.
Sector Perform
Q3/14 results above expectations; continuing to generate free cash flow
3.30
N
• Content industry fundamentals remain very favourable. We will look for
additional detail on this agreement when DHX reports 1Q15 results later this
week, including deal structure, revenue split, rights exclusivity, pricing, and
any incremental investment and/or licensing revenue for DHX. Nevertheless,
we believe the announcement is noteworthy and positive given the large
programming commitment and the expansion in a large emerging market with a
strong local partner. At this point, we are leaving our DHX forecast unchanged.
Assuming the new streaming services launch mid-2015, we would expect a
modest revenue contribution this fiscal year (June year-end), with a more
meaningful pick-up in F2016E. While upside to our forecast remains (new
commissioning/distribution deals, acquisitions, etc.), our revenue estimates
increasingly map to the upper end of management's guidance for F2015E, and we
already assume healthy distribution revenue growth in F2016E as well (+25%).
N
• Bottom line: The results were better than expected and the company once
again had positive free cash flow in the quarter. Mt. Milligan throughput is
improving, but fluctuating. The company continues to expect Mt. Milligan will
achieve throughput of 48,000 tpd (80% of design) consistently by the end of
2014. The impact of additional secondary crushing on throughput continues
to be evaluated and TCM expects to reach a decision by the end of 2014 and
announce the decision in January 2015. Thompson Creek mine is to be put on
care and maintenance after Q4/14 while conducting a limited stripping program
to maintain optionality going forward. Endako saw an improvement in mill
throughput and availability this quarter as a result of modifications made over
the past several quarters. Guidance was unchanged.
• Mt. Milligan recoveries show modest improvement: Recoveries in Q3/14 were
up to 83.1% for copper and 66.6% for gold versus 80.4% and 65.1% last quarter,
respectively.
• Mt. Milligan throughput slightly improved: The company continues to believe
it will achieve 48,000 tpd (80% of design capacity of 60,000 tpd) consistently by
year end.
• Decision on secondary crushing expected in January 2015
• Thompson Creek mine to be put on care and maintenance: However, TCM
will conduct limited stripping while on care and maintenance to maintain the
optionality of the mine while continuing to evaluate viable alternatives.
• Positive free cash flow increases cash balance
• Conference call: Tuesday, November 11, at 12:00 p.m. ET. Dial-in: 888-211-7383.
Company Comments
Paul C. Quinn (Analyst)
(604) 257-7048; [email protected]
Hamir Patel (Analyst)
(604) 257-7145; [email protected]
Ainsworth Lumber Co. Ltd.(TSX: ANS; 2.64)
Rating:
Price Target:
Sector Perform
2.75
Exports provide some respite from oversupplied NA markets
Maintaining Sector Perform rating and $2.75 price target. While we see significant
long-term upside in ANS as housing recovers, we expect it to be constrained over
the next 12 months due to excess OSB capacity and depressed prices. We note
that Ainsworth is well positioned to serve growing Chinese demand and its steady
Japanese business.
• Q314 results weaker than expected – Ainsworth reported adjusted EBITDA of
$4.7MM in Q314, lower than our $7MM forecast and well below consensus
of $11MM. Adjusted EPS was ($0.03) compared to our estimate of $0.02 and
10
4.20
52 WEEKS
15NOV13 - 07NOV14
3.85
3.50
3.15
2.80
2.45
15000
10000
5000
N
2013
D
J
F
Close
M
A
2014
M
J
J
A
S
O
N
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
EPS, Adj Diluted Prev.
2013A
0.22↑
0.16
2014E
(0.09)↓
0.06
2015E
0.07↓
0.14
2016E
0.44↓
0.48
P/E
12.0x
37.7x
6.0x
All values in CAD unless otherwise noted.
Choice Properties REIT(TSX: CHP.UN; 10.51)
Michael Smith, CFA (Analyst)
(416) 842-7805; [email protected]
Matt Logan (Associate)
416 842 3770; [email protected]
Neil Downey, CFA, CA (Analyst)
(416) 842-7835; [email protected]
Ben Halm, CPA, CA (Associate)
416 842 8720; [email protected]
52 WEEKS
consensus of $0.00. While weaker than expected, the results are in line with
peers.
• Management outlook: Housing starts: remains optimistic that the recovery
will regain traction in 2015 resulting in increased demand for ANS' products
and continued absorption of industry supply. Japan: expected to remain a
consistent and reliable export market as OSB continues to take share from
plywood. In addition, recent changes in building codes are expected to increase
ANS' penetration into new applications. For 2015, the company sees potential
headwinds in housing starts and economic conditions along with a weaker
Japanese Yen (increasing pricing pressure from Japanese plywood). China:
confident in the long-term growth of its core stock product (50 mmsf YTD;
expected to at least double in 2015), but expects quarterly volatility as the
company continues to ramp-up.
• Operations picking up in Q4 – High Level: production in Q4 is guided to meet or
exceed Q214 volumes (Q3 had six weeks maintenance downtime), with further
increases anticipated into 2015 (65+ op. rate planned). Costs: resin should come
down in 2015. Capex: ~$20MM in 2015 (slightly lower YoY) due to less project
specific work, with no movement planned on GP2.
Rating:
Price Target:
Sector Perform
11.00
In line Q3/14; Laying the groundwork for growth
15NOV13 - 07NOV14
11.00
10.80
While the quarter was largely uneventful, we're pleased to see Choice laying the
ground work for additional future growth. The REIT's planned internalization of
property management functions remains on track for Q4/14, with revenue growth
of 8%-10% expected from the ancillary portfolio in 2015. In addition, the REIT's
development pipeline is beginning to take shape and vend-ins are becoming a
regular occurrence.
10.60
10.40
10.20
900
600
300
N
2013
D
J
Close
2013A
2014E
2015E
2016E
F
M
A
2014
M
J
J
A
S
O
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
FFO/Unit Prev.
0.44
0.92↑
0.91
0.93↑
0.92
0.95
All values in CAD unless otherwise noted.
Dan MacDonald, CFA (Analyst)
(403) 299-2394; [email protected]
Matthew McKellar (Associate)
403 299 5045; [email protected]
N
• Another in line quarter; development pipeline taking shape – FFO/unit of $0.23
increased 4% YoY and was in-line with our estimate. Concurrent with Q3/14, CHP
provided additional colour on its development pipeline with a total potential
investment of $260MM (~3% of total assets) over the next two to three years,
providing additional GLA of up to 860,000 sf.
• Property management internalization on track with effectively all key hires
already made – On the call, management indicated its goal of internalizing
property management functions by the end of the year remains on track and
expects to drive better occupancy rates from the ancillary portfolio with a target
occupancy level of 85% by the end of 2015, up from 82.6% at Q3/14. In addition,
it expects revenue growth of 8%-10% from the portfolio, driven by the lease-up
of vacant space and rental bumps on 12% of ancillary GLA expiring next year.
• Drop down acquisitions are becoming a regular occurrence – Subsequent to
the quarter, Choice acquired another large 1.3MM sf portfolio from Loblaw for
$212MM. The properties were acquired at 6.6% cap rate and provide future
development potential of up to 280,000 sf. On the call, management indicated it
plans to continue its double-digit pace of GLA growth over the near-term, driven
by acquisitions and development completions. Overall, we believe vend-ins are
likely to occur on a regular basis, with roughly 8MM sf of GLA remaining at the
parent company.
Ensign Energy Services Inc.(TSX: ESI; 13.31)
Rating:
Price Target:
Sector Perform
17.00
Slight slowdown in new build cadence
11
52 WEEKS
15NOV13 - 07NOV14
17.00
16.00
15.00
14.00
13.00
12.00
2000
1500
1000
500
N
2013
D
J
F
M
Close
2014
M
A
J
J
A
S
O
N
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
EPS, Ops Diluted Prev.
2013A
0.84
2014E
0.93↓
1.04
2015E
1.16↓
1.24
2016E
1.34↓
1.38
P/E
15.8x
14.3x
11.5x
9.9x
All values in CAD unless otherwise noted.
64 DAYS
Rating:
Price Target:
08AUG14 - 07NOV14
Sector Perform
19.00
Q3/14 results shy of expectations
Updated guidance for 2015 calls for the company reaching the bottom end of
its previously disclosed production guidance on a smaller spend, which should
be seen as defensive in the lower oil price environment. Much of the year/year
production growth is being driven by the recent ramp up in Plover and Viking
volumes, making 2015 production guidance relatively low risk in our view.
18.00
17.00
16.00
15.00
14.00
2000
1000
14
A14
21
28
Close
2013A
2014E
2015E
2016E
• Estimates reduced; price target unchanged at $17: Our estimates decline
modestly, primarily to account for the likelihood of lower drilling activity in N.
Am. in 2015, partially offset by its ongoing new build program, international
operations, and stronger than expected US segment results in Q3/14.
• Middle East exposure. ESI has the largest exposure to Middle Eastern land drilling
amongst the Canadian group, with 15 rigs in the MENA region. Of note, five rigs
in Libya have been idled due to the security situation, and one rig in Gabon (W.
Africa) is being returned to Canada after completion of its contract. ESI's one
drilling rig in Kurdistan is operating as normal.
• New build program – holding the plan for now, flexibility to ramp down:
ESI remains on track to deliver 34 new builds between Q4/14 and Q2/16, a
slightly longer time frame than before, which targeted YE15. Importantly, half are
signed to contracts with clients, leaving ESI flexibility to respond should market
conditions change, which as of yet have not. In addition, ESI maintains its plans
for seven major retrofits by mid-15.
Northern Blizzard Resources Inc.(TSX: NBZ; 15.95)
Mark J. Friesen, CFA (Analyst)
(403) 299-2389; [email protected]
Luke Davis (Associate)
(403) 299-5042; [email protected]
19.00
Overall, Q3/14 results showed a strong U.S. business and expanding corporate
margins. The focus remains on the new build program's ability to drive market
share growth, which could prove a more uphill battle given the concerns
surrounding lower E&P spending in 2015. However, the rigs are ideally suited to
shale play development, and ESI is only committed to ~50% of the planned 34
rigs.
05
12
S14
19
26
03
10
O14
20
27
03
Rel. S&P/TSX COMPOSITE INDEXMA 40 days
Prod (boe/d) Prev.
18,753
20,596↓
20,968
24,391↓
25,232
26,733↓
27,215
All values in CAD unless otherwise noted.
Shailender Randhawa, CFA (Analyst)
(403) 299-6576; [email protected]
Keith Mackey, CFA (Associate)
403 299 6958; [email protected]
N14
• Q3 results shy of expectations. Q3/14 production averaged 20,279 boe/d, 2%
shy of our estimate of 20,718 boe/d. The sequential increase in production from
19,665 boe/d in Q2/14 is the result of initial production response from Plover
SAGD and accelerated Viking drilling. Operating FFO of $0.64 came in close to
our estimate of $0.66, but shy of street consensus of $0.75.
• Positive start up of Plover Lake SAGD. Following initial steam injection at Plover
Lake SAGD in July, production exceeding 2,000 b/d after quarter end and is
expected to reach design capacity of 2,400 b/d by exit 2014.
• Capex reassigned; Viking accelerated & SAGD deferred. The majority of the
$45 mm reduction to the 2015 capital program to $215 mm (from $260 mm) is
explained by accelerating $14 mm of Viking spending into 2014 and deferring
$20 mm of SAGD spending into 2016.
Parallel Energy Trust(TSX: PLT.UN; 2.98)
Rating:
Sector Perform
Risk Qualifier: Speculative Risk
Price Target: 4.00
Q3/14 - Distribution outlook: uncertain
Parallel Energy Trust's in-line Q3/14 results confirmed its 2014 production
guidance but provided little insight on its 2015 plans as weak mid-con NGL prices
cast uncertainty on the sustainability of its distribution.
2015 guidance expected by early December. Our preliminary 2015 estimates
calls for flat production of 7,200 boe/d and $16.5 million of capital spending
12
4.80
52 WEEKS
15NOV13 - 07NOV14
4.40
4.00
3.60
3.20
2.80
1200
900
600
300
N
2013
D
J
F
Close
2013A
2014E
2015E
2016E
M
A
2014
M
J
J
A
S
O
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
Total (boe/d)
7,147
7,150
7,200
7,200
N
prior to acquisitions with formal guidance expected by early December. We do
not anticipate a dramatic change to the Trust's financial framework and expect
the company to reduce its capital program to manage its payout ratios and
liquidity situation. At current levels, we think Parallel will continue to deploy DRIP
proceeds for tuck-in acquisitions as 15% projected utilization results in modest 2%
annual dilution. However, higher DRIP utilization as a counter-balance to weaker
commodity prices represents an overhang, in our view.
Distribution outlook: 20% cash yield reflects 40% potential cut. Parallel's current
$0.60/unit distribution maps to a 20% cash yield, with the projected basic payout
increasing from 76% in 2014 to 86% in 2015 at RBC's price deck. Assuming a
constant 55% discount for mid-con NGL's vs WTI, we estimate Parallel's all-in
payout ratio would rise to approximately 135% (post 15% DRIP) at an average WTI
price of $80/bbl in 2015, likely forcing a 40% distribution cut. Parallel's exit 2014
liquidity appears sufficient with approximately US$33 million undrawn capacity on
its renewed US$190 million bank line with about one-quarter of production hedged
in Q4 and Q1/15.
All values in CAD unless otherwise noted.
Industry Comments
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; [email protected]
Chris Drew, CFA (Analyst)
+61 2 9033 3060; [email protected]
Timothy Huff (Analyst)
+44 20 7653 4866; [email protected]
Des Kilalea (Analyst)
+44 20 7653 4538; [email protected]
Ken Tham, CFA (Analyst)
+61 2 9033 3064; [email protected]
Global Mining Trends & Values
• Highlights
• Commodity Price Performance:
• Metal prices were down on average 1.1% last week. Coking Coal was the best
performer up 2.5%, followed by aluminium up 1.0%, uranium up 0.7%, gold
up 0.4%, and thermal coal up 0.1%. Zinc was the worst performer down 4.6%,
followed by iron ore down 3.8%, nickel down 3.5%, silver down 2.3%, copper
down 1.7%, moly down 1.1%, and lead down 0.9%.
• Mining Share Price Performance:
• Mining shares were down on average 1.5% last week. The best performing group
was coal up 14.5%, followed by uranium up 4.4%, the diversified group up 0.7%,
miscellaneous up 0.3%, copper down 0.4%, aluminium down 2.6%, mineral sands
down 3.0%, iron ore down 8.2%, and nickel down 8.7%.
• Valuation:
• Mining shares are now trading at an 11.3% discount to NAV at forward curve
prices, versus a 13.3% discount one week ago.
• Long/Short Metal Positions:
• RBC CM's proprietary data for the LME shows that the net short positions
in copper decreased last week, while net short positions in nickel and lead
increased last week. Net short positions in aluminium and zinc were unchanged
last week.
• Exchange Inventories:
• Total exchange inventories of aluminium, copper, and zinc decreased last week,
while total inventories of nickel increased last week.
Greg Pardy, CFA (Analyst)
(416) 842-7848; [email protected]
Integrated Oil and Senior E&P
Dillon Culhane, CFA, CA (Analyst)
(416) 842-7915; [email protected]
• Based on our net asset value analysis, our large cap independent and integrated
coverage universe is currently discounting a long-term escalated WTI equivalent
(WTIE) price of US$73/boe (vs. US$72/boe), up 1% from last week; and a longterm WTI price of US$88/b (vs. US$87/b), also up 1% from last week.
• Current WTIE implied prices would compare with prior 2009-2014 YTD peak
and trough levels of US$84/boe and US$61/boe, respectively; while current WTI
implied prices would compare with peak and trough levels of US$102/b and US
$62/b, respectively.
• Spot WTIE prices of US$65/boe were unchanged from last week. Long-dated
(2015-2018) WTIE prices of US$66/boe (vs. US$67/boe) were down 1% from last
week.
Franz Hargo Muljo, CA (Associate)
416 842 8588; [email protected]
All values in USD unless otherwise noted.
So what WTIE price are the large caps discounting?
13
• Our implied WTIE price (defined as an equivalent barrel economically weighted
approximately 75% to WTI crude oil and 25% to Henry Hub natural gas) is the
long-term price incorporated into our collective net asset value analysis, which
equates current share prices for our group to a P/NAV ratio of 100%. This analysis
incorporates an 8.5% after-tax discount rate. Please refer to Exhibit 1 for our WTI
equivalent price analysis.
Walter Spracklin, CFA (Analyst)
(416) 842-7877; [email protected]
RBC Flight Deck
Derek Spronck (Analyst)
(416) 842-7833; [email protected]
• Core fare growth remains positive. For the month of October, the RBC Fare
Tracker continues to point to positive fare growth for both Air Canada and
WestJet. While the data is pointing relatively in line to our current Q3/14 yield
estimates (if not with a slight upside bias), traffic trends are exceeding our
expectations. With strong traffic trends heading into the seasonally high holiday
travel season, we believe both Canadian airlines will manage adjusted yields
higher (ex. stage length impact) in the back-half of Q4/14 and into 2015.
• Dialing in the optimal balance. Late on Friday, WestJet announced that they
would be reducing Econo fares by as much as 15% on 15 city-pairs. This
announcement coincides with the $25 first bag fee being introduced this quarter.
The key here is that management is looking to find the optimal balance between
yields and demand stimulation. While WestJet is set to lower fares, first bag fees
and increased demand should more than offset leading to continued unit profit
expansion.
• Bombardier new order heat gauge warming up. We are taking up the heat again
this month on our Bombardier New Order Map. United Airlines has indicated that
they plan to evaluate the CSeries (and other OEMs) for a possible replacement
aircraft and fill a void in the 100- to 150-seat category. We believe this could
represent an order north of 50+ aircraft (which is the current number of older
A319 aircraft United is currently flying).
Anthony Jin, CFA, P.Eng. (Analyst)
(416) 842-5338; [email protected]
Steve Arthur, CFA (Analyst)
(416) 842-7844; [email protected]
All values in EUR unless otherwise noted.
Canadian airlines continue to operate in a strong demand environment
Al Stanton (Analyst)
+44 131 222 3638; [email protected]
RBC International E&P Daily
Nathan Piper (Analyst)
+44 131 222 3649; [email protected]
CNE.L: Target price increased to 290p; DNO.OL: Q3/14 Earnings Preview; AFR.L:
Operating update highlights Ameena East exploration well spud on OML 115 and
Ebok installation ongoing; TGL.TO: Declares quarterly dividend; COP.L: Directorate
Change
Haydn Rodgers, CA (Associate)
+44 131 222 4911; [email protected]
CNE; DNO; AFR; TGL
Victoria McCulloch, CA (Analyst)
+44 131 222 4909; [email protected]
All values in USD unless otherwise noted.
Quantitative Research
Chad McAlpine, CFA (Analyst)
(416) 842-7869; [email protected]
Bish Koziol (Associate)
(416) 842-7866; [email protected]
Benchmarks
• At the beginning of each week, this report summarizes the recent performance
of the most commonly tracked North American benchmark indices.
• Also presented are the returns of the sectors and major industry groups of the
S&P/TSX Composite over the same periods.
• To better understand the relative performance of different investment strategies
over time, RBC has created and maintains style-specific composite indices.
In-Depth Reports
RBCCM Global Research
(416) 842-7800; [email protected]
2014 RBC Capital Markets’ Technology, Internet, Media &
Telecommunications Conference
Jonathan Atkin (Analyst)
(415) 633-8589; [email protected]
Updates from Day 1
14
David Bank (Analyst)
(212) 858-7333; [email protected]
Amit Daryanani, CFA (Analyst)
(415) 633-8659; [email protected]
• This document is a compilation of the notes published by 12 RBC analysts with
insight from one-on-one meetings with senior management of TIMT companies
participating in Day 1 of RBC Capital Markets’ Technology, Internet, Media &
Telecommunications Conference held on November 10, 2014, in New York City.
David Francis (Analyst)
615 372 1337; [email protected]
Doug Freedman (Analyst)
(415) 633-8631; [email protected]
Matthew Hedberg (Analyst)
(612) 313-1293; [email protected]
Ross MacMillan (Analyst)
(212) 428-7917; [email protected]
Dan Bergstrom (Analyst)
(612) 313-1254; [email protected]
Mark S. Mahaney (Analyst)
(415) 633-8608; [email protected]
Rohit Kulkarni (Analyst)
(415) 633-8652; [email protected]
Daniel R. Perlin, CFA (Analyst)
(410) 625-6130; [email protected]
Mahesh Sanganeria, CFA (Analyst)
(415) 633-8550; [email protected]
Mark Sue (Analyst)
(212) 428-6491; [email protected]
Paul Treiber, CFA (Analyst)
(416) 842-7811; [email protected]
Andrew Dunn (Analyst)
+44 20 7029 7877; [email protected]
15
Required disclosures
Non-U.S. analyst disclosure
Al Stanton;Nathan Piper;Haydn Rodgers;Victoria McCulloch;Paul Treiber;Andrew Dunn;Dan Rollins;Mark Mihaljevic;Greg
Pardy;Dillon Culhane;Franz Hargo Muljo;Walter Spracklin;Derek Spronck;Paul C. Quinn;Hamir Patel;Sara O'Brien;Juliane
Szeto;Fraser Phillips;Steve Bristo;Thomas Klein;Michael Smith;Matt Logan;Neil Downey;Ben Halm;Dan MacDonald;Matthew
McKellar;Shailender Randhawa;Keith Mackey;Mark J. Friesen;Luke Davis;Kevin Cheng;Leslie Cho;Chris Drew;Timothy Huff;Des
Kilalea;Ken Tham;Ioannis Masvoulas;Anthony Jin;Steve Arthur;Haran Posner;Drew McReynolds;Chad McAlpine;Bish Koziol (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
16
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
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:
17
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
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:
RBC Capital Markets (Hong Kong) Limited and Royal Bank of Canada, Hong Kong Branch (both entities regulated by the Hong Kong Monetary Authority 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 Hong Kong Monetary Authority 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, an offshore bank regulated 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.
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
18