Thursday, February 24, 2022 - BEFORE THE OPEN - Leishman Catling & Associates
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Thursday, February 24, 2022
STOCKS
Source: FactSet (5pm EDT)
BEFORE THE OPEN
Source: Thomson Reuters
Futures for Canada's main stock index and U.S. stock indexes plunged, tracking
global markets, after Russian President Vladimir Putin launched an invasion of
Ukraine. Oil prices broke above $100 a barrel for the first time since 2014 on
concerns about disruptions to global energy supply. The Russian rouble tumbled
to a record low and European currencies including the euro bore the brunt of
selling, sparking dramatic moves across foreign exchange markets. Gold prices
surged as investors sought safe-haven assets. COMMODITIES & CURRENCIES
Source: FactSet (5pm EDT)
STOCKS IN THE NEWS
Source: Thomson Reuters
Exxon Mobil Corp. (XOM):
The company said on Wednesday its global workforce fell by 9,000 people last
year as part of a deep cost cutting program after the COVID-19 pandemic
battered energy demand and prices. The largest U.S. oil producer has been
restructuring, selling assets and slashing costs to boost shareholder returns after
suffering a historic loss in 2020. Those efforts helped the company post its best
annual profit in seven years in 2021. Exxon said in a securities filing that it ended
last year with 63,000 regular employees, down from 72,000 in 2020 and from
74,900 before the pandemic.
Johnson & Johnson. (JNJ): GLOBAL INDICES
Source: FactSet (5pm EDT)
Japan said international travellers showing proof of a COVID-19 vaccination with
the Johnson & Johnson shot would be allowed in and be eligible for a shorter
time in quarantine when border controls are eased next month. The J&J shot,
which has not been approved in Japan, will join a list of three other shots that
have been approved by regulators as sufficient for non-residents to enter, after
a nearly two-year ban on such travellers.
JPMorgan Chase & Co. (JPM):
The bank is reviewing the impact that newly imposed U.S. sanctions on Russian TSX SECTORS
Source: FactSet (5pm EDT)
sovereign debt may have on its emerging market bond indexes, a source familiar
with the matter said. JPMorgan is a major provider of emerging market indexes
for local currency and hard currency bonds. The indexes are key performance
benchmarks for international investors in emerging market debt, so membership
can help a country sell bonds and reduce its borrowing costs.
THINGS TO KNOW
Source: Bloomberg Finance L.P.
Russian forces attacked targets across Ukraine, prompting international
condemnation and threats of further sanctions. Equities around the world
plunged, with the MOEX Russia Index collapsing as much as 45% and the ruble
sinking to a record low. Global benchmark Brent crude surged passed $100 to
trade at $105.19 a barrel, with West Texas Intermediate rising more than 8.5%
to $100 a barrel.
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 10 of this document.
CANADIAN EQUITIES OF INTEREST
Listed Alphabetically by Symbol
B2Gold Corp.* (BTO: $1.38), Net Change: $0.13, Change: 2.51%
Q4/21: Closing off another strong year
• Q4/21 adj. EPS of 11c, in line with consensus of 11c and adj. EPS was largely in line with lower production costs offset by
higher depreciation
• Q4/21 cash cost per ounce produced totaled $460/oz; however, cash costs on a per-ounce sold basis was lower at $406/oz,
which essentially drove the EBITDA beat. AISC for the quarter totaled $844/oz
• Full-year production (excluding Calibre) totaled 988 koz, at the upper end of revised guidance of 965-995 koz (increased in
mid-October from 920-970 koz)
• 2021 cash costs on a per-ounce produced basis, totaled $511/oz and within the guidance range of $480-520/oz
Gildan Activewear Inc.* (GIL: $50.75), Net Change: $1.71, Change: 3.49%
First look
• Gildan reported better-than-expected Q4/21 results this morning, with revenue of $784 million coming in ahead of consensus’
respective estimates of $735 million
• The company generated $190 million in adjusted EBITDA during Q4/21, ahead of consensus at $167 million, while adjusted
EPS came in at $0.76, also ahead of consensus forecast of $0.60, respectively
• Revenue of $784 million represents growth of 14% YoY driven primarily by continued strong performance from activewear,
which recorded YoY sales growth of 17%, reflecting higher net selling prices, despite being offset slightly by unfavourable mix
due to YoY timing of fleece sales
• Following the success of its Back to Basics program, Gildan announced its outlook for the next three years, termed the “Gildan
Sustainable Growth” initiative, with the company noting that it is expecting a net sales CAGR of 7-10%, well ahead of the ~3%
CAGR realized from 2015-2019
K92 Mining Inc.* (KNT: $8.20), Net Change: $0.48, Change: 6.22%
K92 resource update tees up Feasibility Study
• Pre-market this morning, K92 released an updated resource estimate for the Kora deposit along with a maiden resource for
Judd
• The updated resource estimate at Kora was primarily focused on upgrading the Inferred resources to M&I in preparation for
the upcoming 'Stage 3' Feasibility Study (expected H1/22), while the maiden resource at Judd is a first for the system after
high-grade underground mineralization was discovered in Q4/20
• At Kora, M&I resources increased substantially as K92's infill program successfully upgraded a large portion of the existing
inferred resource
• Net of depletion M&I gold resources grew ~85%, from 950koz to 1,760koz while inferred resource shrank from 2,980koz to
1,850koz and Global M&I+I resources remained (relatively) stable at 3,610koz (from 3,930koz)
New Gold Inc.* (NGD: $2.11), Net Change: -$0.32, Change: -13.17%
Alta Fox/Hasbro situation
• NGD released its full financial results for 2021, along with detailed guidance for 2022 and production results were previously
released on January 12
• At Rainy River, the grade reconciliation issues at the East Lobe of the pit (~25% of 2022 mill feed) have resulted in the company
assuming just 85% of the previous grade interpretation
• NGD materially increased the size of the underground reserve at Rainy River (albeit aided by a lower cut-off grade) ahead of
an updated life-of-mine plan expected at the end of this quarter
• As previously disclosed, this new mine plan is expected to extend the mine life past 2028, while also allowing for larger
underground ore tonnage (and therefore either less stockpile processing or less batching to keep the mill running optimally)
Thursday, February 24, 2022
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.
2US EQUITIES OF INTERST
Listed Alphabetically by Symbol
Exact Sciences* (EXAS: $68.99), Net Change: -$4.46, Change: --6.07%
Solid 2022 guide as Cologuard gradually rebounds; hereditary cancer testing strategy taking shape
• Screening revenue of $277.7 million (+11% y/y) was in-line with the company's guidance of $277-278 million and the solid
performance was driven by Cologuard volume growth
• The company generated over $100 million in rescreening revenue and over $40 million in revenue associated with patients
ages 45-49 years old
• Precision Oncology revenue of $149.0 million (+27% y/y; +20% organic) compared to Exact's guidance of $148.5-149.5 million
• In 1Q22, the company expects organic Screening revenue of $275-285 million vs. consensus of $276.9 million
• The company also expects PreventionGenetics will contribute $9 million
Kratos Defense & Security Solutions.* (KTOS: $15.04), Net Change: -$1.27, Change: -7.79%
ATA2271 voluntarily paused on fatal serious adverse event, limited read-through to ATA3271 or ATA3219
• Kratos Defense & Security (KTOS) reported Q4/21 revenues of $212M (up 3%) and Adj. EBITDA of $23.4M (up 5%) and the
top-line and bottom-line results were 2% and 3.5% better than expectations, respectively
• Management also indicated that ~$11M in revenue was pushed to the right by international travel restrictions, employees
out sick with COVID, the ongoing continuing resolution and supply chain challenges
• Unmanned Systems (KUS) achieved solid topline expansion of ~10%, though the higher volume represented lower-margin
development contracts
• Kratos achieved robust bookings of $323M and a B2B of 1.5:1 in Q4, along with a total backlog of $954M (up 12% y/y and
14% sequentially)
Maxar Technologies Inc.* (MAXR: $24.50), Net Change: -$2.54, Change: -9.39%
Launch window and campaign adjusted
• Maxar Technologies reported Q4/21 revenues of $468M (essentially flat y/y) and adj. EBITDA of $112M (up 18% y/y)
• Management indicated that the first launch of two WorldView Legion satellites is shifting to the right into a June-July
timeframe
• Previously, Maxar expected to launch the first batch of Legions between May 15 and June 15
• Management attributed the slippage in schedule to additional Covid delays in January, which required company employees
to quarantine and undergo contact tracing during the Omicron variant spike
• Space Infrastructure revenue slipped by 11% y/y to $199M, reflecting the completion of several satellite projects for the US
government
Virgin Galactic Holdings.* (SPCE: $8.09), Net Change: $0.27, Change: 3.45%
Q4/22 commercial service on track, Delta spaceship to debut in 2025
• Virgin Galactic (SPCE) reported Q4/21 sales of $0.1M and a net loss of ($80.8M). SPCE also reported negative adj. EBITDA of
($64.8M)
• Management also provided Q1 FCF guidance indicating an expected use of ~$80M at the midpoint (with ~$2M in midpoint
capex)
• After, Q1, management expects a gradual increase in cash burn to prepare for initiating regular flight operations
• Management is currently working to fill ~250 additional “future astronaut” reservations to reach its goal of 1,000 deposits
before initiating passenger service
Thursday, February 24, 2022
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.
3INDUSTRY UPDATE
Oil
Market
• WTI (April) is up 7.6% to $99.11 and Brent (May) is up 7.4% to $101.03 and WTI is sharply higher after Russia attacked Ukraine,
earlier rising above $100 a barrel for the first time since mid-2014
• Prior to Russia's invasion, JPMorgan was the latest to flag upside risk for prices, saying they see Brent at $110 a barrel and
WTI at $107 in Q2 as tensions over Ukraine escalate, though falling back down to around $90 by year end
• The discount for Russia's Urals grade crude continued to widen, hitting $7.25 a barrel less than Dated Brent yesterday, up
from $6 earlier this week
• While Western governments are likely to further sanction Russia, reports have indicated that the US is likely to exempt energy
from penalties
• OPEC is set to meet next week (4-Mar) to discuss its production plan and is expected to again raise output by 400K bpd
• However, some members said that the group doesn't need to raise output despite high prices, while there are still concerns
around the group's spare capacity
• Elsewhere, reports also indicated that ahead of an expected nuclear deal agreement as soon as this week, Iran has started to
put more oil on ships, with some estimates of more than 100M barrels waiting on tankers
Russia and Ukraine
• The European Commission is expected to unveil a strategy to split from Russian energy next week, as the Russian and Ukraine
crisis has finally forced European countries to potentially make a permanent break from Russian oil and gas
• The plan would take years and cost a lot to European taxpayers, and would push an accelerated transition to renewable
energy to reduce its dependence on Russian fossil fuels
• However, the article noted that Europe would remain attached to Russian energy in for short-run
• The Biden administration is considering tapping emergency supplies in coordination with allies to counter a surge in prices
following Russia's moves against Ukraine
• No decision has been made, but the administration could introduce potential price point triggers and a strategy to coordinate
a release with other nations
• Press Secretary Psaki confirmed yesterday that that a SPR release was an option on the table, while Japan and Australia have
also indicated they may release crude from their reserves
• The Biden administration was not expected to target Russia's crude oil sector with sanctions due to concern about inflation
and the harm it could do to European allies
• Sanctions on crude oil could hurt Russia's economy as oil accounted for a fifth of all exports, though Russia would still be able
to find buyers, including China, if oil sanctions were implemented
Global Markets
• Surging oil prices will dent global growth prospects and drive up inflation, a worrying combination for the Fed as it seeks to
start raising rates to contain inflationary pressures without derailing the post-pandemic recovery
• The oil price run-up will intensify pressure on central banks globally, which could push them to bring forward their tightening
cycle and hike rates more aggressively to contain inflation risks
• However, central bankers may instead be waiting to see how fast and how far energy prices go, while higher prices could
ultimately help global growth as producers generate more income from higher prices
Iran Nuclear Deal
• Iran may have millions of barrels of oil stored offshore that could flow into global markets if a nuclear deal is agreed to,
potentially as soon as this week
• Kpler data that show Iran may have 65 to 80M barrels on stationary tankers, though the overall volume could be over 100M
if crude that's already in transit is included
• Analysts said that the oil held in the tankers can be shipped immediately once sold, with a bulk likely headed to Asian countries
that were previously among Iran's biggest customers prior to sanctions, including South Korea, China, and Japan
Source: FactSet
Thursday, February 24, 2022
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.
4MORNING INK REPORT
Short-sellers start to get squeezed at Athabasca Oil
Source: INK Research
As of: Wednesday, February 23, 2022
Company Highlight: Athabasca Oil (ATH)
• While cannabis stocks grabbed the spotlight in our most recent short report, oil patch names also remained popular with
short-sellers
• Athabasca Oil (ATH) is the 10th most-shorted stock in Canada with 7.1% of its shares shorted as of the February 15 reporting
date
• The shorts appear to be betting that the price of oil is likely to reverse from here
• However, even if it holds around its current level, short positions could face a tough ride
• When Athabasca Oil released preliminary Q4 results on February 2, it said that it expects to generate $900 million in Free
Cash Flow during the three-year time frame of 2022-24
• The outlook is based on the assumption of US$85 WTI crude oil and a Western Canada Select pricing differential of US$12.50
which is about where the differential is trading now
• For 2022, the company estimates production will average between 33,000 and 34,000 barrels of oil equivalent per day with
a mix consisting primarily of thermal oil and light oil
• The company has an objective to cut its debt in half to US$175 million by the end of the first half of 2023
• If it is successful, it will look at ways of returning cash to shareholders that could include dividends or buybacks
• Based on our signals, the stock has a potential short-squeeze setup as short-sellers are betting against a stock with relatively
high insider commitment
• Indeed, since the short-selling reporting date, the stock is already up 20%.
• So far in 2022, insiders at Athabasca Oil (ATH) have spent $482,953 buying shares in the public market
• Director John L. Festival (GEI) was the biggest buyer, picking up 400,000 shares at $1.18 on January 5
• He now holds 1,014,700 shares representing 0.2% of all shares outstanding
• The most recent buyer was Karla D. Ingoldsby, VP of Thermal Oil, who bought 7,880 shares at $1.39 on February 14th. The
officer now holds 452,538 shares
Athabasca Oil (ATH) Chart
Source: INK Research
Thursday, February 24, 2022
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.
5MARKET MOVERS
Source: FactSet
Thursday, February 24, 2022
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.
6ASSET CLASS PERFORMANCE
Source: FactSet
*All numbers presented on the table below are based on total return
Thursday, February 24, 2022
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.
7MACRO-EVENT SCHEDULE
Source: Bloomberg Finance L.P.
EARNINGS
Source: Yahoo Finance
Thursday, February 24, 2022
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.
8MOST READ NEWS
Source: Bloomberg Finance L.P.
1) Russia Invasion of Ukraine Ignites European Security Crisis
2) Heavy Fighting Reported at Airport Near Kyiv: Ukraine Update
3) Ukraine: Russian Forces Enter Kyiv Region Near Belarus Border
4) Stocks Sink, Oil Prices Top $100 on Russia Assault: Markets Wrap
5)Biden’s Inner Circle Feared Sanctions Wouldn’t Stop Putin
6) Russia Attacks From North; U.S. Vows Sanctions: Ukraine Update
7) Vladimir Putin Is Playing With Fire: Clara Ferreira Marques
8) Biden Vows ‘Severe Sanctions’ on Russia as Putin Launches Attack
9) Russian Stock Market Rout Wipes Out $250 Billion in Value
10) Oil Soars to $105 as Russia Attacks Targets Across Ukraine
THE LAST DROP: "Everything you can imagine is real."
- Pablo Picasso
Thursday, February 24, 2022
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.
9Appendix: 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
Important Disclosures at the following website (provided as a hyperlink if this report is being read electronically): https://disclosuresquest.canaccordgenuity.com/.
Please note that analyst data and Quest® data may differ due to different sources and calculation methods. The Quest® platform may be found at the following website
www.canaccordquest.com
* 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.
Thursday, February 24, 2022
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.
10You can also read
