Friday, October 8, 2021 - BEFORE THE OPEN
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Friday, October 8, 2021
STOCKS
Source: FactSet (5pm EDT)
BEFORE THE OPEN
Source: Thomson Reuters
Futures for Canada's main stock index were little changed, tracking U.S. stock
index futures, ahead of Canadian jobs data for September, as investors waited
for cues on the pace of economic recovery against the backdrop of rising
inflation. European stocks edged lower as declines in the technology sector
offset gains in oil and auto shares while Asian stocks rose, supported by
advances in Chinese blue chips as trading resumed after the week-long National
Day holiday. The U.S. dollar edged lower while gold prices held steady as COMMODITIES & CURRENCIES
Source: FactSet (5pm EDT)
investors stayed on the sidelines awaiting the confirmation of a strengthening
U.S. labour market. Oil prices rose on signs some industries have begun
switching fuel from high-priced gas to oil and on doubts the U.S. government
would release oil from its strategic reserves for now.
STOCKS IN THE NEWS
Source: Thomson Reuters
Ford Motor Co. (F):
The U.S. automaker will temporarily suspend production from Oct. 11-12 at its
Hermosillo plant in Mexico because of a shortage of material, the plant's labor
union said on Thursday. Workers will be paid 75% of salaries on those days, the
union added in a statement. Ford produces its Bronco Sport SUV at the
Hermosillo plant in Sonora. It did not specify which materials were in short GLOBAL INDICES
supply. Earlier this month, Ford said it would suspend production at its Flat Rock, Source: FactSet (5pm EDT)
Michigan, plant and at parts of its Kansas City plant.
Merck and Co Inc. (MRK):
Two Indian drugmakers, Aurobindo Pharma and MSN Laboratories, want to
discontinue their respective late-stage trials of Merck's experimental antiviral
drug molnupiravir in moderate COVID-19 patients. Both the pharmaceutical
firms, however, will continue their separate trials in mild COVID-19 patients,
according to a statement by the Indian drug regulator's expert committee. TSX SECTORS
Source: FactSet (5pm EDT)
Tesla Inc. (TSLA):
The automaker's Chief Executive, Elon Musk, said on Thursday the electric car
maker plans to move its headquarters from Silicon Valley's Palo Alto, California
to Austin, Texas, where it is building a massive car and battery manufacturing
complex.
THINGS TO KNOW
Source: Bloomberg Finance L.P.
Employers are expected to have added 500,000 positions in September, a
number seen as strong enough to keep the Federal Reserve on the path of
tapering asset purchases as soon as next month. U.S. Treasuries resumed their
selloff in the wake of the agreement to extend the debt limit into December.
Speaking of energy problems, the extreme electricity shortage in China caused
by soaring coal prices is hitting a huge number of industries. It has been a
relatively quiet start to the session today as investors await the payrolls report.
NOT FOR DISTRIBUTION TO THE UNITED STATES. This publication is a general market commentary and is provided for informational purposes only. The author(s) is not a Research Analyst and this
communication is not the product of Canaccord Genuity Corp.’s Research Department. It should not be construed as a research report or investment advice.
For important information, please see the Important Disclosures beginning on page 9 of this document.
CANADIAN EQUITIES OF INTEREST
Listed Alphabetically by Symbol
Tilray* (TLRY: $13.80), Net Change: $0.20, Change: 1.47%
FQ1/22 first look: Relatively flat quarter as Tilray remains #1 in Cdn adult-use market share
• This morning, Tilray reported FQ1/22 financial results (ended Aug/2021) that came in slightly below consensus expectations
for the period
• Net revenue for FQ1/22 came in at ~US$168.0M, which represented a QoQ increase of ~18.1%, which was a bit shy of
consensus expectations of closer to US$174M
• Consolidated gross profit came in at US$51.0M (or ~30.4%), which represented incremental margin expansion from ~29.8%
in the period quarter when excluding post-merger inventory write-offs booked in FQ4/21
• Further, the company continues to hold one of the leading margin profiles in the Canadian sector with adj. gross margin in its
cannabis segment of ~43%
US EQUITIES OF INTEREST
Listed Alphabetically by Symbol
Gatos Silver Inc.* (GATO: $10.79), Net Change: -$0.31, Change: -2.79%
Q3 production results – silver grade impacted by mine sequencing
• Gatos reported Q3/21 production results for its 70% owned Cerro Los Gatos (CLG) mine, located in Chihuahua, Mexico
• Q3 results were impacted by a 20% QoQ reduction in silver grade (256g/t vs 322g/ t), resulting in 1.70Moz of silver produced
vs our estimated 2.02Moz (slightly offset by higher recovery, 89% vs 85%)
• The lower silver grade for the quarter is attributable to mine sequencing, this the product of lower-than-expected
development rates in the Central Zone (due to higher water management requirements)
• Management notes that access to these stopes has now been established, and expects to return to higher silver grade
production in Q4
RADA Electronic Industries* (RADA: $10.88), Net Change: -$0.17, Change: -1.54%
Active protection systems, international sales expand order growth by 36%
• RADA Electronic Industries (RADA) announced that the company had received $24M in new orders during Q3/21
• Unsurprisingly, the vast majority of the new order activity continues to come from RADA’s hemispheric (360-degree) tactical
radar products
• The company announced that RADA’s CHR (compact hemispheric radar) products will be incorporated into the UK’s Modular
Integrated Protection System (MIPS)
• The other critical announcement in this morning’s release was that the US defense market only accounted for 14% of the new
order activity
• Management reiterated their >$120M in 2021 revenue guidance, while stating that they expect continued top-line
momentum in 2022
Zscaler* (ZS: $269.88), Net Change: $5.63, Change: 2.13%
Upbeat management meetings: broader platform adoption driving long-term growth trends
• A critical part of our positive investment thesis on Zscaler is its ability to directly secure users, applications, data, and
workloads versus the old modus of securing the network
• Zscaler’s unique distributed cloud proxy architecture with bi-directional traffic functionality enables its platform to respond
to all outbound/inbound requests on behalf of the user and secure passage to the end destination
• Management highlighted the Zero Trust Exchange proxy architecture is a fundamental advantage versus competitors, which
is difficult to replicate at scale (150 co-located data centers) with the same performance
• Management notes there is a distinct degradation in security, performance, scalability, and interoperability caused by
virtualizing firewalls and security appliances in the cloud and bolting-on proxy capabilities afterwards
Friday, October 8, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
2INDUSTRY UPDATE
Oil
Market
• WTI (November) is up 1.0% to $79.06, Brent (December) is up 0.8% to $82.58 and oil is higher again today, now up six of the
past seven sessions and with WTI approaching the $80/barrel mark
• If WTI closes higher today it will mark its seventh straight week of gains
• Newsflow is fairly thin today; nevertheless, crude is adding to its gains from yesterday, which were helped after the US Energy
Department clarified (contra a Wednesday report in FT) that there are no plans to address current high prices through SPR
releases or an export ban
• There is also continued attention to the global energy crisis, with some analysts looking at the theme of industries switching
from natural gas to oil for power generation
United States – WSJ/Reuters
• The US Coast Guard yesterday boarded the Rotterdam Express containership yesterday, one of eight in the vicinity of the
recent pipeline rupture that spilled ~3K barrels on regional beaches
• The current theory is considering the possibility the pipeline was damaged by a ship's anchor
• Pipeline operator Amplify is alleged to have waited three and a half hours before shutting a pipeline that investigators
suggested it could have detected was leaking
Canada – Reuters
• The Canadian Association of Petroleum Producers (CAPP) made a request to the federal government for a tax credit to cover
75% of the cost of building carbon-capture facilities
• The carbon emitted from oil and gas operations is less geographically concentrated than in other industries, requiring higher
cost per ton to mitigate
• While there is no indication of what the Canadian government is considering, a 75% offset would be comparable to the
support offered in the US
Russia – Platts
• Planned sales of Russian oil products are likely to be lower this month as refinery maintenance season continues (though it is
expected to wind down in November)
• The article notes that smaller refineries are still seen working at full capacity this month after a recent ramp in output against
a backdrop of healthy export markets
Source: FactSet
Friday, October 8, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
3MORNING INK REPORT
Insiders buying as Osisko Metals slips to the bottom of its range
Source: INK Research
As of: Thursday, October 7, 2021
Company Highlight: Osisko Metals (OM)
• Today, we return to the business of zinc mining to revisit Osisko Metals (OM), last featured here on June 17, where at the
time, we noted that insiders were patiently buying and suggested that eventually their patience may be rewarded
• In February of this year, the company started the environmental assessment process for its flagship Pine Point base metals
project in the Northwest Territories
• The company hopes that the process will take about 18 months followed by another year of construction permitting, and as
such, we are not quite 25% of the way through the approvals process
• The timeline appears to be weighing on the stock which has moved towards the bottom of its 52-week range of $0.35 to
$0.52
• In a September 8 press release, CEO Robert Wares remarked that, based on its 2020 Preliminary Economic Assessment (PEA)
sensitivity tables, the project has an indicated after-tax NPV of $730 million at US$1.35/lb zinc and US$1.05/lb lead, compared
to a base case estimate of $500 million
• So far, investors have not factored in the potential value bump the project might get from higher commodities prices
• In Q1 of next year, the company hopes to release an updated PEA with the objective of incorporating improved capital and
operating efficiencies
• Since our June 17 report on Osisko Metals (OM), two insiders have spent a combined $743,010 buying shares in the public
market
• The biggest buyer was CEO Robert Wares (BRW, OII, OSK), as he spent $695,755 adding to his position.
• His most recent purchase took place on October 1st when he picked up 22,000 shares at $0.38 and he now holds 35.56 million
shares representing 18.6% of all shares outstanding
Osisko Metals (OM)
Source: INK Research
Friday, October 8, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
4MARKET MOVERS
Source: FactSet
CANADA 52-Week Highs CANADA 52-Week Lows
TSE Total 52-Week Highs 18 TSE Total 52-Week Lows 13
TSXV Total 52-Week Highs 5 TSXV Total 52-Week Lows 20
Canadian Natural Resources Limited CNQ 48.82 ABC Technologies Holdings, Inc. ABCT 7.96
Canadian Western Bank CWB 38.23 Apollo Healthcare Corp. Class B AHC 1.62
Cardinal Energy Ltd. CJ 4.37 HEXO Corp. HEXO 2.21
Cenovus Energy Inc. CVE 13.69 New Pacific Metals Corp NUAG 3.74
DREAM Unlimited Corp. Class A DRM 29.01 NexTech AR Solutions Corp. NTAR 1.80
Enbridge Inc. ENB 51.20 Perpetua Resources Corp. PPTA 6.01
Enerplus Corporation ERF 11.02 Real Matters, Inc. REAL 9.36
Freehold Royalties Ltd. FRU 11.28
Kelt Exploration Ltd. KEL 4.93
Pipestone Energy Corp. PIPE 2.75
Summit Industrial Income REIT SMU.U 21.78
Sun Life Financial Inc. SLF 68.30
TransAlta Corporation TA 13.88
TransGlobe Energy Corporation TGL 3.82
Westshore Terminals Investment Corporation WTE 27.49
U.S. 52-Week Highs U.S. 52-Week Lows
NASDAQ Total 52-Week Highs 77 NASDAQ Total 52-Week Lows 51
NYSE Total 52-Week Highs 139 NYSE Total 52-Week Lows 11
American International Group, Inc. AIG 57.20 Amgen Inc. AMGN 209.12
Bank of America Corp BAC 44.12 ATAI Life Sciences N.V. ATAI 13.17
Intercontinental Exchange, Inc. ICE 126.40 Aveanna Healthcare Holdings Inc AVAH 7.28
JPMorgan Chase & Co. JPM 170.09 Berkshire Grey, Inc. Class A BGRY 6.11
Marvell Technology, Inc. MRVL 65.15 Compass Inc Class A COMP.EQ 10.87
McDonald's Corporation MCD 248.32 D-MARKET Elektronik Hizmetler ve Ticaret AS Sponsored
HEPS ADR 5.54
Netflix, Inc. NFLX 631.85 Lamb Weston Holdings, Inc. LW 58.20
Northrop Grumman Corporation NOC 382.70 Latham Group Inc SWIM 13.60
Oracle Corporation ORCL 92.31 MultiPlan Corp Class A MPLN 5.11
Palo Alto Networks, Inc. PANW 493.68 Pinnacle West Capital Corporation PNW 68.19
Paychex, Inc. PAYX 118.64 Relay Therapeutics, Inc. RLAY 26.00
Pioneer Natural Resources Company PXD 184.66 Riskified Ltd. Class A RSKD 20.07
Prudential Financial, Inc. PRU 108.49 Turning Point Therapeutics, Inc. TPTX 46.55
Raytheon Technologies Corporation RTX 90.15 Verizon Communications Inc. VZ 53.90
U.S. Bancorp USB 61.88 Warby Parker, Inc. Class A WRBY 49.87
Friday, October 8, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
5ASSET CLASS PERFORMANCE
Source: FactSet
*All numbers presented on the table below are based on total return
Friday, October 8, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
6MACRO-EVENT SCHEDULE
Source: Bloomberg Finance L.P.
EARNINGS
Source: Yahoo Finance
CANADA
Company Ticker Exchange Period Time Est.EPS
Royal Wins Corp SKLL CSE Q2 2021 - -
Bond Resources Inc BJB CSE Q4 2021 - -
EGF Theramed Health Corp TMED CSE Q4 2021 - -
MTY Food Group Inc MTY TSX Q3 2021 - 0.89
FOBI AI INC FOBI TSXV Q4 2021 - -
Reyna Silver Corp RSLV TSXV Q3 2021 - -
Rakovina Therapeutics Inc RKV TSXV Q3 2021 - -
Mexican Gold Mining Corp MEX TSXV Q4 2021 - -
Anquiro Ventures Ltd AQR/P TSXV Q4 2021 - -
USA
Company Ticker Exchange Period Time Est.EPS
Art's-Way Manufacturing Co Inc ARTW NASDAQ Q3 2021 - -
Bank of South Carolina Corp BKSC NASDAQ Q3 2021 - -
Byrna Technologies Inc BYRN NASDAQ Q3 2021 BO -0.01
Indus Realty Trust Inc INDT NASDAQ Q3 2021 - -
JW Mays Inc MAYS NASDAQ Q4 2021 - -
US Global Investors Inc GROW NASDAQ Q4 2021 - -
Friday, October 8, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
7MOST READ NEWS
Source: Bloomberg Finance L.P.
1)A Controversial Tycoon Sits on Adler’s $9 Billion Pile of Debt
2)U.S. Nuclear Sub Hits Mystery Object in South China Sea; 11 Hurt
3)Futures Rise, Stocks Mixed Before U.S. Jobs Data: Markets Wrap
4)Citi Calls $11.6 Billion Lawsuit Extortion From ‘Fantasist’
5)Vonovia Makes Surprise Move on Rival’s Biggest Shareholder
6)Short-Term Increase in U.S. Debt Ceiling Passes Senate
7)TOPLive Starts: Follow September U.S. Jobs Report in Real Time
8)Evergrande Contagion May Trigger Wave of Defaults for Developers
9)NYC's Waldorf Gets Plush Redo, Becomes Icon of China's Overreach
10)U.S. Added 194,000 Jobs Last Month, Way Below Estimates: TOPLive
THE LAST DROP: “The secret of getting ahead is getting started.”
- Mark Twain
Friday, October 8, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
8Appendix: Important Disclosures
While this product is drawn from sources believed to be reliable, the accuracy and completeness of the information contained herein is not guaranteed. Any reference
to a research report or a recommendation is not a solicitation to purchase or sell any security and it does not consider the individual investment objectives, financial
situation, suitability or risk tolerance of any person or corporation. Accordingly, investors should obtain advice based on their own specific circumstances before making
any investment decision. Canaccord Genuity Wealth Management is a division of Canaccord Genuity Corp. Member – Canadian Investor Protection Fund (CIPF) and the
Investment Industry Regulatory Organization of Canada (IIROC).
Quest®: Canaccord Genuity’s proprietary online valuation and analytical tool which combines consensus market figures with the Quest® Discounted Cash Flow (DCF)
Valuation Model.
Quest® triAngle is Canaccord Genuity’s proprietary 15-factor, stock-picking tool, which systematically measures Value, Quality and Momentum and presents the results
in a simple, easy to understand score. It takes a multi-pronged approach to Value, Quality and Momentum using five factors for each component, which adds more
consistency of performance unlike a reliance on one single measure. It uses a mix of historic and forecast data, and combines absolute valuation data with comparisons
relative to history. The triAngle is designed to generate stock ideas and provide a consistent framework for analysis of portfolio holdings.
Quest® Methodology
Quest® is an analytical tool that involves use of a set of proprietary quantitative algorithms and value calculations to derive a number of corporate performance and
valuation metrics, including assigning a Default Quest® value per share and generating a triAngle Score, which is a relative ranking based on a number of operational
and valuation metrics. These algorithms and value calculations are consistently applied to all the companies included in the Quest® database. Third-party data (including
consensus earnings estimates) are systematically translated into a number of default variables and incorporated into the algorithms. The source financial statement,
pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics
of firm performance. These adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national
borders. As the third-party data are updated, the triAngle Score generated by Quest®, and the Default Quest® value per share may change. The default variables may
also be adjusted by the user to produce alternative values, any of which could occur. Additional information about the Quest® methodology is available on request.
Canaccord Genuity Quest® Disclosures
Quest® is at this stage registered in the UK and in the USA, and common law trade mark rights are asserted in other jurisdictions. Quest® is non-independent research
and is a marketing communication under the FCA Conduct of Business rules. All rights reserved. Quest®, CITN®, Companies in the News™, CFROC®, and triAngle™ are
all trademarks of Canaccord Genuity Limited. E&OE. © Canaccord Genuity Limited. For important information and company-specific Quest® disclosures please see
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* Canaccord Genuity and its affiliated companies may have a Corporate Finance or other relationship with the company and may trade in any of the Designated
Investments mentioned herein either for their own account or the accounts of their customers, in good faith and in the normal course of market making. The authors
have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Corporate Finance activities, or to coverage contained
in the Morning Coffee.
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX)
The recommendations and opinions expressed in this research report accurately reflect the Investment Analyst’s personal, independent and objective views about any
and all the Designated Investments and Relevant Issuers discussed herein.
Canaccord Genuity (Australia) Limited is the Australian affiliate of global capital markets group Canaccord Genuity Group Inc. (CF : TSX). The recommendations and
opinions expressed in this research report accurately reflect the Analyst’s personal, independent and objective views about any and all the designated investments and
relevant issuers discussed herein.
Friday, October 8, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
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