1. business and industrial
2. company
3. merger and acquisition

EQUITY RESEARCH
CANADIAN RESEARCH AT A GLANCE
March 11, 2015
Price Target Revisions
! Alimentation Couche-Tard
! Canexus Corp.
! Concordia Healthcare Corp.
! Silver Standard Resources Inc.
Summary
Stocking The Pantry: Anticipating strong Q3 results, target to $52
Summary
Focus on business and NATO updates rather than Q4 results
Summary
Covis deal more than doubles annualized revenue and diversifies the portfolio
Summary
Lowering price target on back of shortened mine life at Pirquitas/year-end update
Summary
Otjikoto reaches commercial production with strong early metrics
Summary
Ambatovy production down in February due to plant shutdown
Summary
Positioned to Outperform in a Risky Environment
Summary
Q4; Recycle ratio analysis supports austerity budget for 2015
Summary
The transition to lower resin prices is still promising, but not as smooth as hoped
Summary
Q4 results in-line with outlook maintained
Summary
Investor Day: Visible fee-based growth remains the name of the game
Summary
In-line Q4/14 results; FFO/unit soon to "normalize" at the lower gearing ratio
Summary
Solid operating trend reinforce Outperform rating
! Bulking Up - RBC's Weekly Review
! Global Mining Trends & Values
! Paper & Forest Products Weekly
! Precious Metals & Minerals Weekly
Summary
Iron ore prices broke below $60/t
!
Summary
First Glance Notes
! B2Gold Corp.
! Sherritt International Corp.
Company Comments
! Agnico Eagle Mines Ltd.
! Gear Energy Ltd.
! Intertape Polymer Group Inc.
! Kelt Exploration Ltd.
! Pembina Pipeline
! Pure Industrial REIT
! Trimac Transportation Ltd.
Industry Comments
Valuation Tables
Q1/15 Global Mining Best Ideas
Portfolio
RBC Flight Deck
Summary
Summary
Summary
Chart of the Week: The Performance of Gold and Gold Equities Around a Fed Rate Hike Cycle
!
! RBC International E&P Daily
! Turnin' to the Right - Canadian
Summary
Key trends keeps positive airline thesis intact
Summary
CNE; TLW; AOI; PXT
Summary
February activity reflects the impact of E&P capex cuts
!
Summary
Ux spot price unchanged at $39.25/lb; TradeTech up $0.50/lb to $39.00/lb
! 2015 RBC Capital Markets’ Financial
Summary
Updates from Day 1
!
Summary
Thesis slightly more negative after Q1/15 due to capital volatility
Oilfield Services Insights
Uranium Weekly
In-Depth Reports
Institutions Conference
Canadian Banks
Priced as of prior day's market close, EST (unless otherwise noted).
For Required Non-U.S. Analyst and Conflicts Disclosures, see Page 15.
EQUITY RESEARCH
U.S. RESEARCH AT A GLANCE
March 11, 2015
Price Target Revisions
! Arista Networks Inc.
! Benefitfocus Inc.
! Chipotle Mexican Grill, Inc.
! Impax Laboratories, Inc.
! Midstates Petroleum Company Inc.
! Ocular Therapeutix, Inc.
! Starbucks Corporation
Summary
No stopping Junior
Summary
Results of Investments on Show
Summary
Nudging EPS estimates higher; Outperform
Summary
Core Pharma deal now closed; Rytary launch and more M&A the focus
Summary
Exits Most Of Remaining Gulf Coast Assets With $44 Million Sale
Summary
More clinical and news flow momentum building; Raising price target
Summary
Premium positioned; Outperform
Summary
Otjikoto reaches commercial production with strong early metrics
Summary
1Q15A Revenues (-) | Operating Performance (+) |Outlook (+)
Summary
Pressing its Leadership: Update from the Digital Marketing Summit
Summary
Positioned to Outperform in a Risky Environment
Summary
Heading for home: Strong Q3 results position CASY for record F15
Summary
Four Key Takeaways from Analyst Day and Investor Feedback from Event
Summary
Investor Day: Visible fee-based growth remains the name of the game
Summary
Investment Platform Primed For Growth
Summary
Updating Estimates; Strong Underlying Fundamentals Apparent Heading Into Deal Close
Summary
Solid Q1/15 results but guidance reduced on F/X
! Bulking Up - RBC's Weekly Review
! Farm Equipment: USDA Reports
Summary
Iron ore prices broke below $60/t
Summary
Corn ending stocks estimates lowered
!
! IT Hardware: February 2015 ODM
Summary
First Glance Notes
! B2Gold Corp.
! NCI Building Systems Inc.
Company Comments
! Adobe Systems, Inc.
! Agnico Eagle Mines Ltd.
! Casey's General Stores, Inc.
! EMC Corporation
! Pembina Pipeline
! STAG Industrial, Inc.
! Tornier NV
! VeriFone Systems, Inc.
Industry Comments
Update
Global Mining Trends & Values
!
Summary
Market Review – PCs Heading South
Machinery: N. America Farm
Summary
Equipment Update
Paper & Forest Products Weekly
Summary
!
! RBC European Industrials Daily
! RBC International E&P Daily
! Specialty Pharma: Short Interest
Softer than normal start to a new year
Feb high-HP retail sales down double-digits y/y; utility tractors decline
Summary
Eurozone growth, Domino bid, Melrose feedback
Summary
CNE; TLW; AOI; PXT
Summary
Closer look at moves in PRGO, ENDP and DEPO
Summary
Updates from Day 1
Summary
In-Depth Reports
! 2015 RBC Capital Markets’ Financial
Institutions Conference
2
EQUITY RESEARCH
UK & European Research at a Glance
March 11, 2015
Ratings Revisions
! Cairn Energy plc
Summary
A rough passage from India
Summary
Long-term growth potential vs. more downgrades.
Summary
Thoughts post the analyst meeting
Summary
Yield, but up front bank costs can't be ignored
Summary
Updating Estimates; Strong Underlying Fundamentals Apparent Heading Into Deal Close
Summary
Iron ore prices broke below $60/t
Price Target Revisions
! Regus PLC
First Glance Notes
! Hannover Re
Company Comments
! CTT
! Tornier NV
Industry Comments
! Bulking Up - RBC's Weekly Review
! Global Mining Trends & Values
Summary
In-Depth Reports
! 2015 RBC Capital Markets’ Financial
Summary
Updates from Day 1
Institutions Conference
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)
3
Price Target Revisions
Alimentation Couche-Tard(TSX: ATD.B; 46.37)
Irene Nattel (Analyst)
(514) 878-7262; [email protected]
Martin Gravel, CFA (Associate)
(514) 878-7264; [email protected]
Alex Carette (Associate)
(514) 878-7254; [email protected]
50.00
52 WEEKS
Rating:
Price Target:
Sector Perform
52.00 ▲ 47.00
Stocking The Pantry: Anticipating strong Q3 results, target to $52
14MAR14 - 06MAR15
45.00
40.00
With yesterday's shareholder approval of the pending acquisition of The Pantry,
ATD is poised to significantly strengthen its position in the U.S. Southeast.
Forecasting EPS of $0.56 (consensus $0.52) when ATD reports Q3/F15 on Tuesday,
March 17 underpinned by strong motor fuel margin environment. Raising target
from $47 to $52.
35.00
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EPS, Ops Diluted Prev.
2014A
1.35
2015E
1.88↑
1.87
2016E
1.80↓
1.90
2017E
2.16
P/E
27.1x
19.4x
20.3x
16.9x
All market data in CAD; all financial data in USD; dividends paid in
CAD.
• PTRY shareholders voted overwhelmingly in favour of the $1.7b merger with
ATD. Favourable outcome was anticipated by the market. The PTRY acquisition
increases ATD's store count in North America by ~24% and significantly
strengthens its position in the Southeast US. Transaction multiple 7.7x TTM
EBITDA at PTRY is in line with industry average over a 10-year period but well
below the elevated multiples seen in 2014 (SUSS ~13.6x). Valuation of the
transaction is consistent with ATD's history of disciplined acquisitions but also
reflects PTRY's leveraged balance sheet and necessary investment in technology,
stores, etc. Transaction could close as early as mid next week, pending Hart-ScottRodino review/approval. Our model assumes the deal closes at F15 year-end.
• Focus on operating and fuel margin environment, PTRY and Europe integration.
Q3 estimate $0.56 unchanged as an increase in retail fuel margin assumptions
(+6¢ to 27¢/gallon in the US and +1¢ to 7.5¢/litre in Canada) is offset by the
negative US$ translation impact of Canadian and European operations.
• Q3 focus will likely be on : (i) PTRY acquisition, forecasted synergies/initiatives,
(ii) acquisition outlook and balance sheet capacity to fund acquisitions; (iii)
operating and demand conditions in North America and Europe and in particular
the impact of pricing, traffic-driving strategies and lower gas prices on SSS
growth, learnings from the expanded fresh program test, and outlook for new
store growth; and iv) update on integration process in Europe.
• Strong USD moderates forecasts, more than recouped on share price
translation, $52 target.
Canexus Corp.(TSX: CUS; 2.37)
Nelson Ng, CFA (Analyst)
(604) 257-7617; [email protected]
Kelsey Roste (Associate)
(604) 257-7383; [email protected]
Rating:
Price Target:
52 WEEKS
14MAR14 - 06MAR15
Outperform
4.00 ▼ 5.00
Focus on business and NATO updates rather than Q4 results
Canexus will be releasing Q4/14 results on March 12, and we believe investors
should focus on a potential update for the NATO sales process and the Business
Improvement Program initiative. We are reducing our price target to $4.00 (from
$5.00) to reflect our reduced expectation from the potential sale of NATO in the
depressed oil price environment.
5.00
4.50
4.00
3.50
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ACFFO/Sh Diluted
2013A
0.36
2014E
0.16
2015E
0.34
2016E
0.61
All values in CAD unless otherwise noted.
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• Sale of NATO seems likely. Canexus received binding offers in late December for
the crude-by-rail facility (NATO). If bids came in too low and Canexus decided to
retain NATO, we believe the company would have announced that by now. As a
result, we believe Canexus may be in advanced stages of negotiation to sell the
facility. We expect management to provide an update in the sales process when
it releases Q4/14 results on March 12 (after market close).
• Share price implies deep discount for NATO. Canexus invested approximately
$500 million in NATO, but we estimate that the current share price implies a value
of $66-$177 million, assuming that the Chemical business is valued at 8-9x our
4
2016 EBITDA forecast. We expect the sale of NATO will be the catalyst to realize
value.
• Large dividend cut is inevitable. Regardless of whether Canexus divests NATO
under the current sales process, or at a later date, we believe Canexus may
announce a significant dividend cut. The magnitude of the dividend cut will
depend on the NATO sale proceeds, and we would not be surprised if the
dividend was reduced by 50%, which would reflect a 65% payout ratio based on
our 2016 forecast (excluding NATO). The current yield is about 17%, compared
to its peer group at 5.5%.
Concordia Healthcare Corp.(TSX: CXR; 80.73)
Douglas Miehm (Analyst)
(416) 842-7823; [email protected]
Fred Garcia (Associate)
(416) 842-7876; [email protected]
64.00
56.00
48.00
52 WEEKS
Rating:
Price Target:
14MAR14 - 06MAR15
Covis deal more than doubles annualized revenue and diversifies the portfolio
Management appears to have accomplished its goal of diversifying its portfolio
with the Covis deal. While the multiple paid for the products is on the higher
end of prior deals, CXR has accelerated its strategy which positions it well for
additional M&A opportunities. Depending on the level of equity utilized (likely
$150-500MM) and close timing, accretion to our 2015 forecast is >50%.
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Revenue Prev.
40.4
121.0↑
120.3
294.5↑
171.5
375.3↑
179.6
2013A
2014E
2015E
2016E
All market data in CAD; all financial data in USD.
52 WEEKS
• $1.2B deal for Covis Pharmaceuticals. The deal is set to close in Q2/15 and will
be financed with an unspecified mix of debt & equity. Management anticipates
leverage to be ~5x at the close and to be reduced to ~3x by the end of 2016.
Based on Covis' Q4/14 revenues of ~47-52MM and gross margins of ~90%,
annualized EBITDA would be ~$170-175MM as synergies of ~$20MM accounts
for the redundant distribution costs. As such, CXR is paying ~7x for the assets.
The ~7x multiple is slightly higher than the 4-6x range management prefers to
obtain assets, but appears warranted considering the increased scale and healthy
diversification of risk.
• Covis revenues were ~$145MM in 2014, ~$200MM in 2015 (annualized). Covis
was formed in December 2011 when it acquired several US rights to drugs
(Fortaz, Zinacef, Lanoxin, Parnate, Zantac injection) from GlaxoSmithKline. Covis
also acquired US rights to Nilandron, Plaquenil, Rilutek, Uroxatral and Kayexalate
from Sanofi in 2013. In total, Concordia is acquiring 18 drugs with sales of ~
$145MM in 2014.
• Accretion guidance, >50% adj EPS, may be conservative. Depending on the
level/price of equity utilized and timing of the close, we believe adjusted EPS in
2015 could be in the $3.89-4.00 range representing 51-55% accretion to our prior
2015 forecast of $2.58. If the deal can be closed earlier than the middle of Q2 and
equity is minimized, accretion levels would be higher. Our base case assumes a
$350MM equity raise and the deal closes in the middle of Q2.
Silver Standard Resources Inc.(NASDAQ: SSRI; 4.31; TSX: SSO)
Dan Rollins, CFA (Analyst)
(416) 842-9893; [email protected]
Mark Mihaljevic (Associate)
(416) 842-3804; [email protected]
12.00
Outperform
105.00 ▲ 47.00
Rating:
Price Target:
14MAR14 - 06MAR15
10.00
Sector Perform
6.00 ▼ 7.50
Lowering price target on back of shortened mine life at Pirquitas/year-end
update
We lower our price target on Silver Standard to $6 from $7.50 as a result of reduced/
limited mine life at Pirquitas and revised valuation following year-end update. With
a strong balance sheet, we expect Silver Standard could look to acquire another
producing mine in 2015/16.
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• Acquisition could fill expected void left by Pirquitas
• We expect Silver Standard could look to make an acquisition in order to offset an
expected decline in production once reserves at Pirquitas are depleted. Including
its $89M stake in Pretium, Silver Standard has close to $275M in capital to put
5
EPS, Adj Diluted Prev.
2014A
0.01↑
(0.15)
2015E
(0.01)↓
0.15
2016E
0.22↑
0.20
2017E
0.47
P/E
•
20.0x
9.2x
All values in USD unless otherwise noted.
•
•
•
•
towards an acquisition. Adding another producing asset like Marigold would
likely be viewed favourably by the market.
Although Silver Standard has demonstrated its ability to turn around assets and
unlock value, we remain cautious on the near-term direction of the company's
share price. Until the company addresses the expected decline in production
post-2017/18, either through reserve additions at Pirquitas or via an acquisition,
we see little to drive the company's share price higher beyond a rebound in silver
and gold prices.
Reserve update disappoints
Silver Standard’s year-end reserve update was disappointing as success at
Marigold was overshadowed by a sizeable decline at Pirquitas. The 40% decline
in reserves at Pirquitas was negative. Backing out the implied throughput of the
pressure jig circuit, the implied reserve life of Pirquitas is ~3 years.
Bolstering reserves key to extending mine life at Pirquitas
Given Pirquitas' implied reserve life, the company is evaluating several initiatives
to extend the mine life, including development of underground resources, pit layback, near-mine targets, regional targets and processing low-grade stockpiles.
The first two initiatives could add 1-2 years of life. Although management
appears constructive on extending the mine life, we assume only modest
additions given lack of historical reserve growth.
First Glance Notes
B2Gold Corp.(TSX: BTO; 1.85; NYSE:MKT: BTG)
Sam Crittenden, P.Eng., CFA (Analyst)
(416) 842-7886; [email protected]
Wayne Lam, CFA (Associate)
(416) 842-7898; [email protected]
3.60
52 WEEKS
Rating:
Outperform
Otjikoto reaches commercial production with strong early metrics
14MAR14 - 06MAR15
3.20
2.80
2.40
2.00
• B2Gold declared commercial production at the Otjikoto mine in Namibia based
on strong early metrics.
• This supports our view that a successful ramp-up at Otjitkoto can provide
catalysts in 2015 and production growth into 2016.
• B2's in-house mine-building team is shifting focus to the Fekola project in Mali,
which could double production and lower costs.
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All market data in CAD; all financial data in USD; dividends paid in
CAD.
Sherritt International Corp.(TSX: S; 2.16)
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]
Rating:
Ambatovy production down in February due to plant shutdown
52 WEEKS
14MAR14 - 06MAR15
4.50
4.00
3.50
3.00
2.50
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• February production at Ambatovy down due to two week plant shutdown:
Sherritt this morning announced that Ambatovy produced 3,870 tonnes of nickel
and 294 tonnes of cobalt on a 100% basis in February, with ore throughput in
the PAL circuit at 59% of nameplate capacity and finished nickel production at
84% of nameplate capacity. Nickel and cobalt production were down by 18%
and 16% MoM, respectively, versus record production in January, but were
up 19% and 56%, respectively, over December levels. Sherritt reported that
production and throughput were lower than expected due to a plant shutdown
that lasted two weeks to investigate and make any adjustments in response
to the hydrogen sulphide gas incident that was announced on February 19
and resulted in a fatality. The shutdown concluded in early March. During the
shutdown, stockpiled material continued to be refined until the stockpiles were
depleted, leading to higher capacity utilization for finished nickel production than
6
PAL throughput. The annualized results continue to compare favourably with
guidance and our expectations.
• We expect production in March to be up as the company attempts to complete
its production test: The shutdown certainly eliminated any buffer Sherritt may
have had in its completion test to achieve an average of 90% of nameplate
capacity over 90 days in a 100-day continuous period. However, the company
believes there is still a chance to achieve the completion test by the end of March
if production remains strong over the next few weeks.
All values in CAD unless otherwise noted.
Company Comments
Agnico Eagle Mines Ltd.(NYSE: AEM; 27.49; TSX: AEM)
Stephen D. Walker (Analyst)
(416) 842-4120; [email protected]
Mark Mihaljevic (Associate)
(416) 842-3804; [email protected]
Elizabeth Gao (Associate)
416 842 8934; [email protected]
52 WEEKS
Rating:
Price Target:
Outperform
38.00
Positioned to Outperform in a Risky Environment
14MAR14 - 06MAR15
40.00
36.00
32.00
28.00
AEM offers investors attractive returns with an experienced management team,
low cost mines with exploration upside and operations in regions of low geopolitical
risk. Below $1,100 gold we see balance sheet risk, however we believe AEM's
has the flexibility to reduce AISC costs and adjust capital allocation priorities for
new project capex, without significantly impairing the balance sheet and the mine
portfolio.
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MA 40 weeks
EPS, Adj Diluted Prev.
2014A
0.72↓
0.87
2015E
0.63↑
0.62
2016E
0.87↓
1.06
2017E
1.19
P/E
38.3x
43.4x
31.4x
23.0x
All values in USD unless otherwise noted.
Gear Energy Ltd.(TSX: GXE; 1.71)
Mark J. Friesen, CFA (Analyst)
(403) 299-2389; [email protected]
6.00
52 WEEKS
14MAR14 - 06MAR15
Rating:
Price Target:
Sector Perform
3.00
Q4; Recycle ratio analysis supports austerity budget for 2015
5.00
4.00
Based on our recycle ratio analysis and current debt ratios at strip pricing, we
believe that management of Gear Energy is making the correct economic decision
by undertaking a minimalist capital budget.
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• Agnico Eagle offers investors attractive returns with an experienced management
team, low cost mines with exploration upside and operations in regions of low
geopolitical risk.
• In a $1,200/oz gold scenario we expect capital allocation decisions to be made
and between the Amaruq, El Barqueno and Meliadine projects and its organic
Kittila shaft and Goldex expansion projects.
• At $1,200 gold we estimate AEM could spend new project capex of ~$500MM
over the next 4 years, along with servicing the scheduled debt repayments and
dividends. In a sub $1,100 gold world, we estimate that Agnico could go to a "nogrowth/no-spending" scenario, cutting all new project capex and have sufficient
liquidity at $1,000/oz gold.
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Prod (boe/d) Prev.
4,079
6,020↓
6,032
6,265↑
6,252
6,476
All values in CAD unless otherwise noted.
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• We are maintaining a Sector Perform recommendation and a $3.00 price target.
• Q4/14 results reflect large hedging gain. Production of 7,001 boe/d was prereleased. CFPS of $0.29 was higher than our estimate of $0.22 due to larger than
expected hedging gains and better operating and G&A cost control.
• Austerity prudent to restore balance sheet strength. Management plans to spend
only $3mm in H1/15 and divert free cash flow to reducing bank credit lines. We
estimate $25mm of debt could be repaid at strip pricing, reducing D/CF to ~1.6x
(from 2.0x).
• Recycle ratio outlook benefits from expected hedging gains. Corporate 2P FD&A
costs were $28.16/boe (including FDC). Based on 2014 results, we calculate a
corporate operating netback recycle ratio of 1.4x and a CF recycle ratio of 1.2x.
While good to be above 1.0x, these results fall shy of the 1.5x CF netback recycle
ratio we use as the indication of core value creation. We calculate a 2015E CF
recycle ratio of 1.4x is possible, which we view as likely being above average in a
7
challenging oil price year. The company's 2014 and expected 2015 recycle ratios
that land in the range of 1.0x-1.4x adds moderate value but is not a strong return
for inherent risks, in our view.
Intertape Polymer Group Inc.(TSX: ITP; 17.93)
Ben Holton, CFA (Analyst)
(416) 842-9949; [email protected]
Steve Arthur, CFA (Analyst)
(416) 842-7844; [email protected]
20.00
Rating:
Price Target:
52 WEEKS
14MAR14 - 06MAR15
18.00
Outperform
23.00
The transition to lower resin prices is still promising, but not as smooth as
hoped
The margin benefits of lower resin prices appear real, and should start in Q2/15,
though the transition to get there is more volatile than anticipated. ITP shares
traded off following weak Q1/15 guidance, though we believe this provides an
opportunity for investors as the current share price does not reflect the forecasted
ramp earnings ramp. We reiterate our Outperform rating and $23 target.
16.00
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Revenue Prev.
781.5
812.7↓
813.0
764.8↓
786.2
789.3↓
811.4
2013A
2014A
2015E
2016E
ITP shares traded off following weak Q1/15 guidance, though we believe this
provides an opportunity for investors as the current share price does not reflect the
forecasted ramp earnings ramp.
Q1/15 guidance below expectations on temporary customer destocking:
Management is guiding towards Q1/15E revenue, gross margin and adj. EBITDA
all being “lower Y/Y”. Volumes will be under pressure as film customers postpone
orders in anticipation of lower prices. We believe this is temporary, and should not
have a significant impact beyond Q1/15E.
All market data in CAD; all financial data in USD.
We (and management) see upside to margin guidance: As anticipated, margin
guidance (beyond Q1) was cautiously optimistic. Management re-iterated their
gross margin guidance of 22-24% following the South Carolina project, though
commented that this does not account for the impact of lower raw material prices
– which should be a positive.
Management is understandably hesitant to quantify the potential upside of lower
resin prices until market pricing becomes more clear (likely though Q2/15), though
we believe the benefit could be significant, and is not being reflected in the current
share price. We forecast gross margins increase to 23.3% in 2015E, and 25.5% in
2016E (from 20.1% in 2014).
Valuation continues to look attractive: ITP shares are trading at too wide of a
discount on forward multiples, in our view. The peer group currently trades at 8.5x
2016E EBITDA and 17.1x EPS, while ITP trades at 7.1x and 12.1x respectively. We
believe this discount should narrow over time.
Kelt Exploration Ltd.(TSX: KEL; 7.51)
Michael Harvey, P.Eng. (Analyst)
403 299 6998; [email protected]
Luke Davis (Associate)
403 299 5042; [email protected]
Rating:
Price Target:
52 WEEKS
14MAR14 - 06MAR15
Outperform
11.00
Q4 results in-line with outlook maintained
Kelt's quarter was largely pre-released, leaving little to surprise. We continue to
rate KEL Outperform - with our $11 target unchanged.
14.00
12.00
10.00
• Production and cash flow in-line with expectations. In-line production of 15,559
boe/d (+12% QoQ) drove CFPS of $0.23 (RBC $0.24). The difference was primarily
attributable to lower realizations and higher royalties than we had anticipated.
• Guidance remains unchanged. 2015 guidance was left unchanged with $150
million in capital spending ($457 million including the Artek acquisition). We
expect that the program could be increased, should commodity prices improve.
8.00
6.00
7500
6000
4500
3000
1500
M
A
M
Close
J
J
2014
A
S
O
N
D
J
2015
F
M
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
8
• Quarterly operations update. Kelt drilled 9 wells (5.4 net) in Q4/14 at a 100%
success rate; 5 (3.1 net) oil wells and 4 (2.3 net) gas wells. In 2014, the company
drilled 36 (27.1 net) wells; 20 (16.2 net) oil wells, 15 (9.9 net) gas wells and 1
service well.
• Costs expected to improve - tweaking estimates. The company completed
a small asset acquisition in December near Inga/Fireweed, which included a
significant infrastructure component expected to reduce operating/transport
costs and improve liquids recoveries in the area. This combined with reduced
interest expenses following the recently announced private placement have led
us to update our estimates resulting in a CFPS improvement of 6% in 2015 and
5% in 2016.
• Bank line likely to be increased. We expect KEL to be 56% drawn (including
working capital) on its $235 million credit facility by year-end 2015. This places
KEL at a 2015E D/CF ratio of 1.3x vs peers at 4.0x. Despite Kelt's strong relative
financial position, we also view a facility increase as likely given the acquisition
of Artek.
Oil (bbl/d) Prev.
963
4,337↓
4,379
8,201↓
8,238
10,493↑
10,268
2013A
2014A
2015E
2016E
All values in CAD unless otherwise noted.
Pembina Pipeline(TSX: PPL; 39.46; NYSE:MKT: PBA)
Robert Kwan, CFA (Analyst)
(604) 257-7611; [email protected]
Michelle Zuliani (Associate)
604 257 7064; [email protected]
Rating:
Price Target:
52 WEEKS
14MAR14 - 06MAR15
52.00
50.00
48.00
46.00
44.00
Outperform
50.00
Investor Day: Visible fee-based growth remains the name of the game
We continue to favour the stock due to the longest line of sight for contracted feebased growth in our midstream coverage. With more than 60% of the $5.9 billion
capital plan slated to come into service in 2017, Pembina has visibility for fee-based
growth into the 2018 time frame as a first full year for projects such as the Phase
III and RFS III expansions.
42.00
40.00
38.00
20000
15000
10000
5000
M
A
M
J
Close
J
2014
A
S
O
N
D
J
2015
F
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
ACFFO/Sh Diluted
2013A
2.31
2014A
2.37
2015E
2.08
2016E
2.79
All values in CAD unless otherwise noted.
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]
Ben Halm, CPA, CA (Associate)
416 842 8720; [email protected]
M
• The long-term contracted growth story remains unchanged; dividend growth
remains intact. Pembina continues to advance its $5.9 billion committed capital
program through 2017, which could see EBITDA double by 2018 while increasing
fee-for-service/cost-of-service cash flows from 64% in 2014 to an estimated
82% in 2018. Despite the current rough patch associated with lower commodity
prices, we believe that the company will continue to grow dividends modestly
in the near term (we project just under 5% this year), with potential for more
significant growth (i.e., closer to 10%) as it completes the capital plan.
• Acquisitions could add to the growth profile in 2015. We believe that
management's commentary regarding its historical success with M&A is a sign
that there are heightened acquisition opportunities, some of which may come
to fruition this year.
• Common equity not a near-term risk, if at all. Management updated the funding
plan and provided commentary that the current plan may still require a modest
amount of common equity, possibly in late 2015 or 2016. However, if commodity
prices improve, Pembina raised the possibility that no common equity (ex-DRIP)
may be required to fund the capital plan.
• While the low commodity price may hurt cash flow, the company sees a
potential silver lining. Management sees potential capital cost savings (target of
$250 million, or 5% of the capital budget), which it expressed as being larger than
the commodity price downside in results.
Pure Industrial REIT(TSX: AAR.UN; 4.70)
Rating:
Price Target:
Outperform
5.25
In-line Q4/14 results; FFO/unit soon to "normalize" at the lower gearing ratio
Pure Industrial REIT's ("AAR") Q4/14 results were very much as expected. Despite
stronger organic growth, significant de-levering and the "carry" of ~$67MM of PUD
were a drag on per unit growth. We expect modest gains in FFO/unit over the
9
52 WEEKS
14MAR14 - 06MAR15
5.00
next two quarters, to a more normalized run-rate based upon ~50% gearing. We've
maintained our $5.25 price target and Outperform rating on the units.
4.80
4.60
4.40
4.20
6000
4500
3000
1500
M
A
M
J
Close
J
2014
A
S
O
N
D
J
2015
F
M
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
FFO/Unit Prev.
0.40
0.37
0.40↑
0.39
0.41
2013A
2014A
2015E
2016E
All values in CAD unless otherwise noted.
Trimac Transportation Ltd.(TSX: TMA; 7.02)
Walter Spracklin, CFA (Analyst)
(416) 842-7877; [email protected]
Erin Lytollis, CFA (Associate)
(416) 842-7862; [email protected]
52 WEEKS
• FFO/unit "in-line"; lower leverage stalls growth – Q4/14 FFO/unit of $0.093
was -1% from Q4/13’s $0.094 and in-line with our $0.090E. Significantly lower
financial leverage was behind the slight decline. 2014 FFO of $0.370 was -7% YoY.
• Leasing: Steady outlook – 650,000 sf of 2015’s contractual rolls (~40%) have been
addressed at positive spreads. Expecting leasing spreads in the 2.5-3.5% range,
but some free rent/downtime in H1, the net impact will likely be 1.0-1.5% 2015
organic growth.
• D/GBV declines ~560bps YoY; lower gearing provides important flexibility –
Q4/14 D/GBV of 48.5% was -560bps YoY. Most (~450bps) was derived from the
“over-equitization” from two equity offerings and $81MM in property sales.
While the significant reduction in leverage clearly hurt H2/14 and 2014 FFO/unit
growth, it has positioned AAR to execute sizable acquisitions and development
deals with the latitude that it likely otherwise would not have enjoyed.
• Investing activities off to a strong start to the year – In the first 60 days of 2015,
AAR has entered into an agreement to build a $128MM FedEx facility north of
Toronto and it has acquired a 51% stake in a 1.3MM sf, US$57MM distribution /
warehouse portfolio in Greensboro/Winston-Salem.
• Index inclusion: On the cusp – Official changes will be announced Friday
after the close. Based upon the recent measurement period, RBC CM’s Global
Program Trading Group notes AAR’s units are on the “extreme borderline pass
for [inclusion in] the Composite.
Rating:
Price Target:
14MAR14 - 06MAR15
7.35
Outperform
8.00
Solid operating trend reinforce Outperform rating
We continue to view TMA's focus on operating efficiency and organic growth
favourably, and we see earnings upside from higher pricing as supply-demand
fundamentals shift in favour of the trucking sector in key markets. Our core
forecasts are materially unchanged on the back of in-line results and guidance.
Reiterate Outperform, $8.00 price target.
7.00
6.65
6.30
5.95
5.60
200
100
M
A
M
Close
2014A
2015E
2016E
J
J
2014
A
S
O
N
D
J
2015
F
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
Revenue Prev.
448.1↑
448.0
437.3↓
464.6
464.3↓
485.5
All values in CAD unless otherwise noted.
M
• Mixed outlook - We are constructive on TMA's yield potential. There are puts
and takes in TMA's outlook for 2015; however, we consider the company's
prospects to be notably more positive than the peer group's near-term
opportunities. TMA's optimism is based on volume upside from fuel and FX
tailwinds in core markets, as well as pricing power in capacity-constrained lanes.
That said, with ~30% of revenue generated in Alberta, TMA is also exposed to
energy headwinds even though the Company does not directly serve the oil sands
sector. Although, management did not quantify revenue guidance, we believe
that our +4%Y/Y top-line growth assumption (ex. fuel surcharges) is consistent
with TMA's near-term growth prospects.
• Reiterate Outperform rating, $8.00 price target. We continue to view TMA’s
efficiency potential and exposure to capacity-constrained markets (chemicals,
cross-border) favourably and we see upside to our earnings forecasts if tight
supply permits stronger than expected rate increases. Further, we believe the
stock is a compelling investment opportunity at current levels offering a +18%
all-in return to our $8.00 target. Reiterate Outperform.
Industry Comments
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; [email protected]
Bulking Up - RBC's Weekly Review
Iron ore prices broke below $60/t
10
Chris Drew, CFA (Analyst)
+61 2 9033 3060; [email protected]
Ken Tham, CFA (Analyst)
+61 2 9033 3064; [email protected]
Wen Tian, CFA (Associate)
(416) 842-4126; [email protected]
All values in USD unless otherwise noted.
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]
Richard Hatch, ACA (Analyst)
+44 20 7002 2111; [email protected]
Ioannis Masvoulas, CFA (Analyst)
+44 20 7653 4647; [email protected]
Paul Hissey (Analyst)
+61 3 8688 6512; [email protected]
Ken Tham, CFA (Analyst)
+61 2 9033 3064; [email protected]
• What's Hot: Iron ore freight rates rallied this week.
• What's Not: Iron ore prices broke below $60/t and hit a six-year low this week.
• Our View: We updated our iron ore, coking coal and thermal coal price forecasts
this week. We lowered our iron ore price forecast from $80 to $60 in 2015 and
our long-term price by $5 to $75. We lowered our coking coal price forecast from
$127.5 to $116 in 2015 and our long-term forecast by $10 to $150.
• The daily Chinese steel production rate for mid February increased 0.6% to
1.64mtpd compared to early February.
• Iron ore inventories at Chinese mills decreased last week.
• Chinese steel inventories held by traders and at mills increased last week.
• Metallurgical coal prices continued to slide this week. The Chinese import
appetite remained weak mainly due to the newly imposed quality testing rules
for coal imports and the ongoing negative market sentiment.
• Thermal coal reversed gains from last week. Limited demand, tight credit, and
the Chinese domestic thermal coal price cuts all put downward pressure on the
thermal coal markets.
• Iron ore prices fell to a six-year low and ended the week at $57.25/t, down 9.1%.
The release of lower Chinese GDP projections, the growing steel inventories at
Chinese mills, and concerns about further steel production cuts to curb pollution
in China all weighed on iron ore prices.
• Steel: HRC and rebar prices decreased in North America, Europe, and China this
week.
Global Mining Trends & Values
Commodity Price Performance:
• Metal prices were down on average 1.4% last week. Lead was the best performer
up 4.6%, followed by uranium up 1.3%, nickel up 0.3%, and thermal coal flat 0.0%.
Iron Ore was the worst performer down 6.8%, followed by silver down 4.2%, gold
down 3.8%, zinc down 3.2%, moly down 2.5%, copper down 0.9%, coking coal
down 0.9%, and aluminium down 0.5%.
Mining Share Price Performance:
• Mining shares were down on average 6.6% last week. The best performing group
was mineral sands up 1.7%, followed by coal up 0.4%, aluminium down 2.1%,
uranium down 3.4%, copper down 6.3%, the diversified group down 8.9%, nickel
down 9.5%, iron ore down 12.0%, and miscellaneous down 13.0%.
Valuation:
• Mining shares are now trading at a 13.9% premium to NAV at forward curve
prices, versus a 2.0% premium one week ago.
Long/Short Metal Positions:
• RBC CM's proprietary data for the LME shows that the net short positions in
copper, aluminium, and zinc decreased last week. Net short positions in nickel
and lead were unchanged last week.
Exchange Inventories:
• Total exchange inventories of aluminium and zinc decreased last week, while
total inventories of copper and nickel increased last week.
Paul C. Quinn (Analyst)
(604) 257-7048; [email protected]
Hamir Patel (Analyst)
(604) 257-7145; [email protected]
Stephen D. Walker (Analyst)
(416) 842-4120; [email protected]
Paper & Forest Products Weekly
Comparable valuation tables, commodity prices, and total return performance for
our North American Paper & Forest Products coverage universe.
Precious Metals & Minerals Weekly Valuation Tables
11
Dan Rollins, CFA (Analyst)
(416) 842-9893; [email protected]
Chart of the Week: The Performance of Gold and Gold Equities Around a Fed
Rate Hike Cycle
Mark Mihaljevic (Associate)
(416) 842-3804; [email protected]
• Ahead of the expected Fed Funds rate hike in mid-2015, we revisit a prior
research report that examined in detail the performance of gold and gold equities
around Fed rate hikes.
• On Average, Gold Equities Outperform Prior to the Hike and Lag Thereafter:
Looking at the average performance over the last nine cycles it appears that gold
and gold equities outperform in the 12 months prior to the first Fed rate hike,
then lag for 9–12 months before beginning to rebound 12–18 months into the
rate hike cycle. Also, the commodity tends to outperform the gold equities after
the rate hike.
• The Devil Is in the Details for Key Drivers: After a rate hike has been announced,
there are clearly two periods of performance: (1) the 4 cycles prior to 1980 that
show gold and gold stocks performed favourably post the rate hike; and (2) after
the September 1980 rate hike, associated with rampant inflation in the early
1980s, where gold and gold equities have clearly underperformed in 4 of the 5
most recent rate hike cycles.
• What Is Different This Time Around – the Market Is Now “Pricing in
Expectations”: With greater monetary policy transparency compared the prior
tightening cycles, we expect the market reaction to the first rate hike to be more
muted than in prior periods and we believe a rate hike is being priced in within
a range of $1,150–1,175/oz.
Sam Crittenden, P.Eng., CFA (Analyst)
(416) 842-7886; [email protected]
Cameron Klutke (Associate)
+61 3 8688 6551; [email protected]
Paul Hissey (Analyst)
+61 3 8688 6512; [email protected]
Timothy Huff (Analyst)
+44 20 7653 4866; [email protected]
Jonathan Guy (Analyst)
+44 20 7653 4603; [email protected]
Richard Hatch, ACA (Analyst)
+44 20 7002 2111; [email protected]
Elizabeth Gao (Associate)
416 842 8934; [email protected]
Ioannis Masvoulas, CFA (Analyst)
+44 20 7653 4647; [email protected]
David Yu (Associate)
416 842 7850; [email protected]
Wayne Lam, CFA (Associate)
(416) 842-7898; [email protected]
All values in USD unless otherwise noted.
Stephen D. Walker (Analyst)
(416) 842-4120; [email protected]
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; [email protected]
Q1/15 Global Mining Best Ideas Portfolio
• We are publishing our weekly update to our Global Mining Best Ideas portfolio.
• For the quarter to date, the Q1/15 Global Mining Best Ideas List is up 3%
compared to the MSCI World Metals & Mining Index, which is down 2%.
Dan Rollins, CFA (Analyst)
(416) 842-9893; [email protected]
Sam Crittenden, P.Eng., CFA (Analyst)
(416) 842-7886; [email protected]
Timothy Huff (Analyst)
+44 20 7653 4866; [email protected]
Des Kilalea (Analyst)
+44 20 7653 4538; [email protected]
Chris Drew, CFA (Analyst)
+61 2 9033 3060; [email protected]
Jonathan Guy (Analyst)
+44 20 7653 4603; [email protected]
Andrew D. Wong (Analyst)
(416) 842-7830; [email protected]
Paul Hissey (Analyst)
+61 3 8688 6512; [email protected]
All values in USD unless otherwise noted.
Walter Spracklin, CFA (Analyst)
(416) 842-7877; [email protected]
RBC Flight Deck
Derek Spronck (Analyst)
(416) 842-7833; [email protected]
• Planes fly fuller in February. Gone are the days in which you could realistically
hope for an empty seat beside you. While it no question presents an opportunity
Key trends keeps positive airline thesis intact
12
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.
to make new friends, the healthy demand environment is the cornerstone of our
positive airline thesis. Air Canada in particular, saw very robust traffic growth in
February, up 11.3% Y/Y (vs. our 7.5%). WestJet saw a nice uptick in traffic growth
as well, coming in at 3.3% Y/Y (vs. our 3.5%). The key is that not only are both
Air Canada and WestJet bringing on low cost capacity, it is stimulating new traffic
demand.
• Fares start to move higher in February. While we did not see the same seasonal
uptick in fare prices in January with our proprietary fare price survey, we did
begin to see it pick-up in February. Should the same trends persist into March,
we believe our current yield estimates for both Air Canada and WestJet will likely
be in the range. However, we wouldn't be alarmed if we saw some additional fare
sale activity through the spring travel season. We note there is plenty of room
for the airlines to adjust fares in light of the low fuel price environment. Again,
we have yet to see any sort of irrational pricing in the markets with the data we
track and believe that both Canadian airlines remain well positioned to garner
significant earnings growth in 2015.
Victoria McCulloch, CA (Analyst)
+44 131 222 4909; [email protected]
RBC International E&P Daily
Nathan Piper (Analyst)
+44 131 222 3649; [email protected]
• CNE.L: A rough passage from India; TLW.L/ AOI.TO: Dry well at Engomo; South
Lokichar appraisal ongoing; PXT.TO: YE14 results; Kurdistan – Theft shuts-in
Ceyhan pipeline; Horn Petroleum: New strategy, management and proposed
financing announced
Al Stanton (Analyst)
+44 131 222 3638; [email protected]
CNE; TLW; AOI; PXT
Haydn Rodgers, CA (Associate)
+44 131 222 4911; [email protected]
Adam Naughton (Associate)
+441312223695; [email protected]
All values in USD unless otherwise noted.
Dan MacDonald, CFA (Analyst)
(403) 299-2394; [email protected]
Turnin' to the Right - Canadian Oilfield Services Insights
Matthew McKellar (Associate)
403 299 5045; [email protected]
• Lower oil-focused drilling activity: Drilling activity is down significantly y/y and
continuing to decrease 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 44% in February, versus 68% in 1Q14.
• Deep drilling down, but relatively resilient: The active deep rig count (>3,050m
rated vertical depth) was down 35% y/y in February, to 260 rigs active on average.
The count of all other active rigs (<3,050m rated vertical depth) was down 67%
y/y in February.
• Increased service intensity per well: Average days to drill in Western Canada
is ~13.0, up 16.0% y/y, with the largest increase in Alberta at 29.6%. As well,
average meters/well is up 7.8% in February at 2,417m with both AB and SK seeing
increases while BC is down 4.5%.
• Horizontal drilling slightly more resilient: Although horizontal wells drilled in
February 2015 were 44% lower y/y, this compares to overall wells drilled which
was down 49%. Horizontal wells represented 79% of all wells drilled, versus 73%
in February 2014.
• Completions activity tracking drilling lower: Total well completions of 627 in
February 2015 were down 40% y/y. However, fracturing-intenstive gas well
completion activity is stronger on a relative basis, down only 9% y/y, versus oil
well completions, which are down 46% y/y.
• Licensing weakest since 2009: With just 491 licenses issued, February was the
weakest month for total well licensing since April 2009.
All values in CAD unless otherwise noted.
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; [email protected]
Steve Bristo, CFA (Associate)
February activity reflects the impact of E&P capex cuts
Uranium Weekly
Ux spot price unchanged at $39.25/lb; TradeTech up $0.50/lb to $39.00/lb
13
(416) 842-7826; [email protected]
Thomas Klein (Associate)
(416) 842-5339; [email protected]
All values in USD unless otherwise noted.
• Ux spot price indicator was unchanged at $39.25/lb and TradeTech was up $0.50/
lb to $39.00/lb.
• Ux term price indicator was unchanged at $49.00/lb, and TradeTech was
unchanged at $50.00/lb (quoted monthly at month-end).
• Uranium Participation Corp. (UPC) traded down 0.4% over the past week to close
at C$5.61 per share (vs. S&P/TSX -2.7%).
• We estimate UPC is discounting a uranium price of $33.55/lb, a 14.5% discount
to spot. Last week we estimated that UPC discounted a uranium price of $34.22/
lb, a 12.8% discount to the then-prevailing spot price.
• We rate Uranium Participation Corp. Outperform with a target price of C$6.50
per share.
In-Depth Reports
RBCCM Global Research (Analyst)
(416) 842-7800; [email protected]
2015 RBC Capital Markets’ Financial Institutions Conference
Jon G. Arfstrom (Analyst)
(612) 373-1785; [email protected]
• This document is a compilation of the notes published by five RBC analysts
with insight from one-on-one meetings and panel discussions with senior
management from Financial Services companies participating on Day 1 of RBC
Capital Markets’ Financial Institutions Conference, held on March 10, 2015, in
New York City.
Jason Arnold, CFA (Analyst)
(415) 633-8594; [email protected]
Eric N. Berg, CPA (Analyst)
(212) 618-7593; [email protected]
Updates from Day 1
Gerard Cassidy (Analyst)
(207) 780-1554; [email protected]
Jake Civiello (Analyst)
(617) 725-2152; [email protected]
Mark A. Dwelle, CFA (Analyst)
(804) 782-4008; [email protected]
Joe Morford (Analyst)
(415) 633-8518; [email protected]
Robert Noble, CFA (Analyst)
+44 20 7029 0786; [email protected]
Bulent Ozcan, CFA (Analyst)
(212) 863-4818; [email protected]
Darko Mihelic, CFA (Analyst)
416 842 4128; [email protected]
Canadian Banks
Brendon Sattich (Associate)
416 842 7804; [email protected]
• Core cash EPS were mixed versus our estimates in Q1/15. Core cash EPS better
than expected for CM and NA and lower than forecast for BMO and BNS. TD’s
EPS was essentially in line with our expectations. Following Q1/15 results, we
decreased our price target to $66 from $67 for BNS. Our price target for CM
increased to $98 from $97. All of our other price targets for the large Canadian
banks were unchanged. We also note that Q1/15 did not show signs of oil & gas
related credit issues.
Vanessa Wan (Associate)
416 842 5638; [email protected]
All values in CAD unless otherwise noted.
Thesis slightly more negative after Q1/15 due to capital volatility
14
Required disclosures
Non-U.S. analyst disclosure
Victoria McCulloch;Nathan Piper;Al Stanton;Haydn Rodgers;Adam Naughton;Irene Nattel;Martin Gravel;Alex Carette;Mark
J. Friesen;Ben Holton;Steve Arthur;Walter Spracklin;Derek Spronck;Anthony Jin;Fraser Phillips;Chris Drew;Timothy Huff;Des
Kilalea;Richard Hatch;Ioannis Masvoulas;Paul Hissey;Ken Tham;Robert Noble;Neil Downey;Kevin Cheng;Michael Smith;Ben
Halm;Paul C. Quinn;Hamir Patel;Stephen D. Walker;Mark Mihaljevic;Elizabeth Gao;Sam Crittenden;Wayne Lam;Robert
Kwan;Michelle Zuliani;Wen Tian;Michael Harvey;Luke Davis;Nelson Ng;Kelsey Roste;Dan MacDonald;Matthew McKellar;Dan
Rollins;Erin Lytollis;Darko Mihelic;Brendon Sattich;Vanessa Wan;Steve Bristo;Thomas Klein;Cameron Klutke;Jonathan Guy;David
Yu;Andrew D. Wong;Douglas Miehm;Fred Garcia (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
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 endeavors to make all reasonable efforts to provide research simultaneously to all eligible clients, having
regard to local time zones in overseas jurisdictions. RBC Capital Markets' equity research is posted to our proprietary website
to ensure eligible clients receive coverage initiations and changes in ratings, targets and opinions in a timely manner. Additional
distribution may be done by the sales personnel via email, fax, or other electronic means, or regular mail. Clients may also
receive our research via third party vendors. RBC Capital Markets also provides eligible clients with access to SPARC on the Firms
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proprietary INSIGHT website, via email and via third-party vendors. SPARC contains market color and commentary regarding
subject companies on which the Firm currently provides equity research coverage. Research Analysts may, from time to time,
include short-term trade ideas in research reports and / or in SPARC. A short-term trade idea offers a short-term view on
how a security may trade, based on market and trading events, and the resulting trading opportunity that may be available. A
short-term trade idea may differ from the price targets and 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 a subject company's common equity that is considered a long-term
'Sector Perform' or even an 'Underperform' might present a short-term buying opportunity as a result of temporary selling pressure
in the market; conversely, a subject company's common equity 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
the firm generally does not intend, nor undertakes any obligation, to maintain or update short-term trade ideas. Short-term trade
ideas 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 securities or strategies discussed herein. Please contact
your investment advisor or institutional salesperson for more information regarding RBC Capital Markets' research.
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
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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
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Additional information is available on request.
To U.S. Residents:
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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
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Dominion Securities Inc., which, without in any way limiting the foregoing, accepts responsibility for this report and its dissemination in Canada.
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This publication has been approved by RBC Europe Limited ('RBCEL') which is authorized by the Prudential Regulation Authority and regulated by the Financial
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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
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this material, consider the appropriateness of this material having regard to their objectives, financial situation and needs. If this material relates to the acquisition
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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 HKMA 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, a registered entity granted offshore bank licence by the Monetary
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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. Royal Bank of Canada, Singapore Branch accepts responsibility for this report and its dissemination
in Singapore.
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 2015 - Member SIPC
Copyright © RBC Dominion Securities Inc. 2015 - Member CIPF
Copyright © RBC Europe Limited 2015
Copyright © Royal Bank of Canada 2015
All rights reserved
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