Newmont Corporation

Newmont Corporation (TSX: NGT) is the world's leading gold company and a producer of copper, silver, zinc and lead. The company's world-class portfolio of assets is located in North America, South America, Australia, and Africa.

Guidance: For the period ended FY20, the company expects total gold production of 5,900 koz. Attributable production is expected at 6,000 koz. Consolidated Sustaining Capital Expenditure is expected at USD 800 million. General & Administrative Expense is estimated at ~USD 265 million, while depreciation and amortization are predicted at ~USD 2,125 million.

Q1FY20 Financial Highlights:  For the period ended March 2020, NGT reported sales at USD 2,581 million, as compared to USD 1,803 million in pcp. The increase was primarily driven by higher price realization from gold, followed by a higher sales volume.  Realized price of gold, during the first quarter, stood at USD 1,591/oz, against USD 1300/oz, a year ago. The period was marked by higher costs and expenses of USD 2,124 million, up from USD 1,515 million in Q1FY19. The increase was primarily attributable to the increase in the costs applicable to sales, depreciation and amortization and general and administrative costs. Income before income and mining tax and other items stood at USD 779 million, as compared to USD 275 million in pcp. Net income from continuing operations came in at USD 839 million, as compared to USD 145 million in the previous corresponding quarter.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Risk: The company’s top-line is correlated to the gold prices. Any event which affects the gold prices negatively would impact the company’s performance adversely.

Valuation Methodology: Price to CF Based (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of NGT stood resilient and appreciated ~25% and ~45% in the last three months and six months, respectively. The Company derives its majority revenue from the Gold Sales, and due to elevated gold prices, the Business delivered a tremendous top-line and bottom-line growth. In the recent past, investors were leaning toward gold for investment purpose, due to its defensive nature. Gold is likely to remain in the limelight within the investor's community, the recent data released from World Gold Council reveals that Gold-backed Exchange Traded Funds (ETFs) saw a massive inflow of 298 tones and pushed global gold holding in these products to an all-time high of 3,185 tonnes. Further, the trend continued in April '20 as well, with globally gold-backed ETFs adding inflow of another 170t which helped to push ETFs' holding to a new all-time high of 3,355t. Investors should note that NGT is trading above the 200-days Simple Moving Average (SMA) of CAD 63.64, indicating a bullish trend. We have valued the stock using P/CF based relative valuation method and have arrived at a target upside of double-digit (in percentage terms). For the said purposes, we have considered peers like Barrick Gold Corp, Agnico Eagle Mines Ltd, and Franco-Nevada Corp etc. Hence, we recommend a 'Buy' rating on the stock at the closing market price of CAD 81.53 on June 29, 2020. 

NGT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Bausch Health Companies Inc.

Bausch Health Companies Inc. (TSX: BHC) offers diversified health care products and engaged into developing, manufacturing and distribution of a range of pharmaceutical, medical device and over-the-counter products, majorly in the therapeutic areas of eye health, gastroenterology and dermatology.

Operational Highlights:

• The Company launched ARAZLO™ (tazarotene) Lotion, 0.045%, will be available in the United States. ARAZLO is the first tazarotene acne treatment available in lotion formulation. The drug was approved by the USFDA in December 2019.

• The Company informed that its subsidiary named Bausch + Lomb had received approval from the National Medical Products Administration in China for its product named BAUSCH + LOMB ULTRA® monthly silicone hydrogel contact lenses. The primary feature of the product is that it maintains 5% of lens moisture for 16 hours.

Q1FY20 Financial Highlights:  BHC announced its first quarter results and reported a stable revenue of USD 2,012 million as compared to USD 2,016 million in Q1FY19. The quarter was marked by a flat revenue from Bausch + Lomb/International segment, while the Salix segment reported a 7% y-o-y growth driven by its XIFAXAN® product. Total operating cost stood higher at USD 1,764 million as compared to USD 1,729 million in pcp, primarily attributed to a surge in selling, general and administrative expense, a slight increase in research & development expense. This was partially offset by a lower cost of goods sold and a decline in the amortization of intangible assets. Net loss, during the quarter, increased to USD 152 million, as compared to USD 48 million in the previous corresponding period, due to lower operating income and an increase in loss on extinguishment of debt, partially offset by lower interest expense. The company exited the quarter with cash and cash equivalent of USD 1,923 million while total long-term debt and other stood at USD 24,701 million.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Risk: Any extension in restrictive measures or further outbreak of coronavirus might result in facility shutdown and supply chain disruptions and could hamper the group’s financial performance.

Valuation Methodology: EV to Sales Based (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of BHC corrected ~36% so far this year, on account of a drastic correction in the broader equity market. The launch of ARAZLO™ in the US market is likely to drive a higher business for the company as the potential market of the drug is huge while we expect, BHC is well poised to tap the growing demand. We believe, the company will be benefit from its recent product launches and would witness significant support for the top line and the cash flow. The company has a good product presence, and we believe the international segment would derive a higher income for the Business in the coming years. The company has shown 14th consecutive quarter of organic revenue growth, which is impressive looking at the current macro conditions. The stock soared ~23% in the last three months, outperforming the sector by ~6%.  We have valued the stock using EV to Sales based relative valuation method and have arrived at a target upside of double-digit (in percentage terms). For the said purposes, we have considered peers like Mylan NV, Bristol-Myers Squibb Co and Biogen Inc. Hence, we recommend a ‘Buy’ rating on the stock at the closing market price of CAD 24.88 on June 29, 2020. 

BHC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Keyera Corp.

Keyera Corp. (TSX: KEY) operates as a midstream energy business in western Canada. The Company’s primary operations consist of gathering, processing, and fractionation of natural gas in western Canada; storage and transportation of crude oil and natural gas byproducts; and marketing of natural gas liquids. 

Key Highlights:

• The Company announced a cash dividend of CAD 0.16 per common share, payable on July 15, 2020.
• Recently, the Company closed its CAD 400 million of senior unsecured medium-term notes, having a fixed coupon of 3.959% per annum with a maturity date of May 29, 2030. The above funds would be used to repay its existing debt and for general corporate purposes.
• On May 19, 2020, the Group informed the appointment of Ms. Eileen Marikar from the post of Senior Vice President and Chief Financial Officer, effective May 20, 2020. 

Q1FY20 Financial Highlights: KEY announced its quarterly results, wherein, the Company reported revenues of CAD 1,060.30 million, as compared to CAD 836.75 million in pcp, primarily driven by higher revenue from the Canada region. The Company reported a higher sales volume of 171 Bbl/day, as compared to 150.6 Bbl/day in a year-ago period. Operating margin stood at CAD 412.68 million, thanks to the higher revenue and lower expense. General & administrative expenses stood at CAD 22.76 million, increased from CAD19.26 million in pcp due to inclusion of severance costs related to the closure of the Nevis and Gilby gas plants. Finance cost rose sharply due to higher interest on long-term debt. Net earnings stood at CAD 85.61 million, significantly higher from CAD 34.95 million in pcp, amidst an inclusion of impairment gain amounting to CAD 194 million. The Company exited the quarter with a cash balance of CAD 33.28 million while total assets stood at CAD 7,481.05 million.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Risks: A further slump in the oil and gas demand could dent the operations of midstream companies. As coronavirus cases sill moving higher, a potential near term demand distortion could be witnessed.

Valuation Methodology: Price to Cash Flow Based (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of KEY corrected ~42% so far this year on account of lower oil demand. To weather the current downturn, the Company took prudent measures, including advancing its gathering and processing optimization plan and reducing its overall cost structure. The group has lowered its 2020 capital program and expects its growth capital investments in the range of CAD 475 million to CAD 525 million in FY20 against CAD 700 million to CAD 800 million, stated earlier. The lifting of COVID-19 restrictions and balancing acts by market players for the supply and demand of condensate, and other natural gas liquids is likely to increase demand for the storage and transportation services significantly, that would have a positive impact on the group’s business. The stock offers an attractive dividend yield of ~9.4%, which is lucrative, considering the current interest rate environment. We have valued the stock using Price to CF based relative valuation method and have arrived at a target upside offering double-digit (in percentage terms). For the said purposes, we have considered peers like Inter Pipeline Ltd, PTT PCL, Pembina Pipeline Corp etc. Hence, we recommend a ‘Buy’ rating on the stock at the closing market price of CAD 20.47 on June 29, 2020.

KEY Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Quebecor Inc.

Quebecor Inc. (TSX: QBR.B) is a Canadian based integrated telecommunications Company, which provides telecommunication services, entertainment, news media and culture. The Group operates through three operating segments, namely telecommunications, media and sports & entertainment.

Q1FY20 Financial Highlights: Quebecor impresses with its quarterly results, wherein the Company reported revenue of CAD 1,055.5 million, improved from CAD 1,027.3 million in Q1FY19. The increase was driven by decent growth in its across telephony service, driven by an increased number of subscriber connections. A significant improvement in the customer equipment sales further supported the topline. The Group reported a 1.4% y-o-y growth from its income from Internet access services, while cable television services reported a decline of 4.9% on y-o-y basis on account of a net decrease in the customer base. Videotron’s total ABPU remained flat at CAD 49.87 in Q1FY20, against CAD 49.47 in Q1FY19. The quarter was marked by a net increase of 14,200 revenue-generating units, which includes 39,300 connections within the mobile telephony service, Club illico over the top video service stood at 8,600 subscriptions to the cable Internet access service. Income from continuing operations was significantly higher at CAD 130.1 million, increased significantly from CAD 89.4 million in Q1FY19. The growth was aided by higher revenue including a gain on valuation and translation of financial instruments while higher financial expenses, rise in the purchase of goods and services and higher depreciation and amortization costs remained a drag. During the first quarter of FY20, the Company announced the official launch of its mobile network in Rimouski, which was conducted after several months testing across the Lower St. Lawrence region.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Risk: The group might face an increase in delinquent or unpaid bills on account of job losses and associated financial hardship owing to COVID-19 pandemic.

Valuation Methodology: Price to Earnings Based Relative Valuation (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of QBR.B corrected ~12% so far this year, due to a stiff correction in the broader market on account of COVID 19 crisis. Despite the ongoing economic cycle, the company successfully added 39,300 connections within the mobile telephony service, which is commendable. As consumers are staying at home, we expect higher data consumption to sustain in the near term, which is a key positive for the company. The Group is strategizing on a new platform and launched a music streaming platform, accessible through a mobile app or from the Website. The above platform contains more than 50 million tracks, which can be played as per the customer’s request. We expect an increase in traffic from the above application, which would further contribute to increasing customer base. We have valued the stock using Price/Earnings based relative valuation approach and considered peers like BCE Inc (TSX: BCE), Telus Corp (TSX: T) and Rogers Communications Inc (RCI.B) etc., and arrived at a target price offering double-digit upside potential (in % terms). Hence, we recommend a ‘Buy’ rating on the stock at the current price of CAD 29.30 as on June 29, 2020.

QRB.B Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Scotia Bank

Supporting Businesses through the Expanded CEBA Program: Scotia Bank (TSX: BNS) is known as Canada's international bank and is a global financial services provider. As on 29 June 2020, the market capitalization of the bank stood at CAD 67.37 billion. The bank has recently announced that it is accepting applications for the next phase of the Canada Emergency Business Account which will enable a broader group of businesses to apply for the financial relief program. The relief measures include deferral of payment on small business credits, online application for CEBA, CEWS.

Quarterly Performance (For the Period Ended 30 April 2020): The Bank has a history of standing by its customers in challenging times and has provided financial relief to its customers across its footprint. During the quarter, the bank reported a net income of CAD 1,324 million as compared to CAD 2,259 million in the same period last year. In the same time span, diluted earnings per share went down by 42% to CAD 1.0 from CAD 1.73 in the previous year and Return on Equity stood at 7.9% as compared to 13.8% in the previous year. The results were significantly impacted by higher loan loss provisions and provisions for the metals business and investigations.

Quarterly Financial Highlights (Source: Bank Reports)

Key Risks: A lot of businesses faced a temporary shutdown owing to the COVID-19 Pandemic, which is likely to result in a higher unemployment rate. Further, these businesses might take time to resume operations and generate profitability. Consequently, the bank might face a delay in receiving the repayment of loans, and the demand for new loans might be affected, which could dampen the bank’s performance.

What to Expect: The Bank remains well-positioned from a capital and liquidity perspective and is appropriately reserved for potential credit losses. It has launched several digital banking solutions this quarter which enabled the bank to provide financial relief to a number of households. 

Valuation Methodology: Price to Book Value Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Refinitiv)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The Bank reported a Common Equity Tier 1 capital ratio of 10.9% and a liquidity coverage ratio of 132%. Strong levels of capital and liquidity are likely to protect the bank in times of uncertainty. As per TSX, the stock of BNS is inclined towards its 52-weeks’ low level of CAD46.39, proffering a decent opportunity for the investors to enter the market. The stock of BNS gave a return of 2.45% in the past three months. We have valued the stock using Price to Book Value Multiple Based Illustrative Relative Valuation and have arrived at a target price of lower double-digit (in percentage terms). We have considered Canadian Imperial Bank of Commerce, Bank of Montreal, and National Bank of Canada etc., as a peer group for comparison purpose. Considering the attractive trading levels, decent capital, and liquidity position, we recommend a ‘Buy’ rating on the stock at the closing market price of CAD 55.62 on 29 June 2020.

BNS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.