1. finance
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EQUITY RESEARCH
CANADIAN RESEARCH AT A GLANCE
March 17, 2015
Price Target Revisions
! Dorel Industries Inc.
! Encana Corporation
! Ensign Energy Services Inc.
! Labrador Iron Ore Royalty Corp.
! Parallel Energy Trust
Summary
Modest outlook for 2015; Reducing target to C$39
Summary
Equity Offering Closed
Summary
Work to Do on the Homefront
Summary
Conservative iron ore exposure; attractive yield
Summary
Q4/14 - Lowering target on tighter projected liquidity
Summary
Q4/14 preview: Looking over the valley
Summary
Strong 2014 finish could be the start of a recovery in investor sentiment
Summary
Q4/14; Recycle ratio analysis supports reduction to 2015 guidance
Summary
Strong RRSP season: February mutual fund industry flows +18% Y/Y
Earnings Preview
! HNZ Group Inc.
Company Comments
! Algonquin Power and Utilities Corp.
! Northern Blizzard Resources Inc.
Industry Comments
! Canadian Asset Managers
! Global Mining Trends & Values
! Integrated Oil and Senior E&P
! Paper & Forest Products Weekly
! RBC Canadian Energy
! RBC International E&P Daily
Summary
Summary
So what WTIE price are the large caps discounting?
Summary
Summary
Junior/Intermediate E&P: Weekly Review and Valuation Tables
Summary
SIA; LUPE; DETNOR; WZR
Technical Research
! It’s All Relative – March 17, 2015
Summary
Priced as of prior day's market close, EST (unless otherwise noted).
For Required Non-U.S. Analyst and Conflicts Disclosures, see Page 11.
EQUITY RESEARCH
U.S. RESEARCH AT A GLANCE
March 17, 2015
Price Target Revisions
! ECA Marcellus Trust I
! Ensign Energy Services Inc.
! First Republic Bank
! Micron Technology, Inc.
! Seagate Technology
! Western Digital
Summary
4Q14 Light; Updating for 10-K Filing
Summary
Work to Do on the Homefront
Summary
Adjusting Estimates For Common Stock Offering
Summary
F2Q15 Earnings Preview: Lower estimates more than priced in
Summary
Is the Current Stock Correction Overdone Given 4% Yield?
Summary
Adjusting Estimates For WDC, Limited Downside From Here
Summary
Commentary on PCSK-9 mirrors our confidence in outcomes; some risk on CETP orals
Summary
EBITDA for 2014 in line, net debt better
Summary
Moving Forward on the Path of Improving Profitability
Summary
South 32 handed a balance sheet with firepower
Summary
4Q14 Results Strong; 2015 Guidance Meets our Expectations
Summary
Larger than expected share repurchase program announced
Summary
2015 CapEx Budget Down 52% YoY; Liquidity Situation Remains Focal Point
Summary
TVN Transaction Makes Strategic Sense
Summary
Shedding Some Additional Light On The Augment Form 483 Letter
! Card Issuer Trust Trends – February
Summary
Credit Largely Seasonal, Loans Erode More Than Expected
!
! Dollar Store Overview
! Global Mining Trends & Values
! Integrated Oil and Senior E&P
! RBC International E&P Daily
! Slightly Negative February
Summary
Global Payments vs. Vantiv: like them both, but favor GPN
Summary
DLTR is our favorite stock in Hardlines
!
Summary
First Glance Notes
! Amgen Inc.
! Antofagasta plc
Company Comments
! Alphatec Holdings, Inc.
! BHP Billiton plc
! Global Partners LP
! Investors Bancorp, Inc.
! Midstates Petroleum Company Inc.
! Scripps Networks Interactive, Inc.
! Wright Medical Group
Industry Comments
2015
Computer Services & IT Consulting
eCommerce Datapoints
US Chemicals Weekly Watch
Summary
Summary
So what WTIE price are the large caps discounting?
Summary
SIA; LUPE; DETNOR; WZR
Summary
Ongoing outages helping to stabilize ethylene
Technical Research
! It’s All Relative – March 17, 2015
Summary
2
EQUITY RESEARCH
UK & European Research at a Glance
March 17, 2015
Ratings Revisions
! SOCO International plc
Summary
Will SOCO Now Prove To Be Bite-Sized?
Industry Comments
! Global Mining Trends & Values
Summary
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
Dorel Industries Inc.(TSX: DII.B; 35.96)
Sabahat Khan (Analyst)
(416) 842-7880; sabahat.khan@rbccm.com
42.00
52 WEEKS
14MAR14 - 06MAR15
Rating:
Price Target:
Sector Perform
39.00 ▼ 40.00
40.00
Modest outlook for 2015; Reducing target to C$39
38.00
DII reported weaker-than-expected Q4 results and noted a cautious outlook for
2015, particularly in H1. The stronger USD is expected to impact both top-line and
margins in the Juvenile and Sports segments in DII's markets outside the U.S. We
expect the continued strength in the U.S. mass merchant channel and pricing in a
number of international markets to partially offset this impact.
36.00
34.00
32.00
600
400
200
M
A
M
J
Close
J
2014
A
S
O
N
D
J
2015
F
M
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
EPS, Ops Diluted Prev.
2013A
2.34
2014A
2.31↓
2.62
2015E
2.15↓
2.71
2016E
2.35
P/E
12.0x
12.2x
13.1x
12.0x
All market data in CAD; all financial data in USD.
Encana Corporation(NYSE: ECA; 10.80; TSX: ECA)
Greg Pardy, CFA (Analyst)
(416) 842-7848; greg.pardy@rbccm.com
Franz Hargo Muljo, CA (Associate)
416 842 8588; franz.muljo@rbccm.com
Tom Callaghan, CA, CPA (Associate)
(416) 842-7915; tom.callaghan@rbccm.com
52 WEEKS
• Cautious 2015 outlook: F/X headwinds to be partially offset by improvement
in the U.S. mass merchant channel – As expected, DII's 2015 results will be
negatively impacted by the stronger USD versus its various operating currencies,
particularly in H1 2015, according to management. Although H2 2015 results are
expected to benefit from new product launches, F/X headwinds could continue
to impact results into late-2015, in our view. Continued momentum in the U.S.
mass merchant channel, however, is expected to benefit all three segments and
could help offset some of the F/X-related headwinds.
• Free cash will be directed towards debt reduction – DII's net debt/EBITDA as of
Q4 was 2.8x. Over the course of next year, we expect that all free cash flow will
be used to lower the company's debt burden. We do not expect DII to consider
further M&A in the near-term, especially while management works towards
integrating the Lerado acquisition. As DII continues to optimize the acquired
Lerado facilities to meet its production needs, the company also has the option
to monetize some of the assets and real estate that it acquired as part of the
transaction, if it determines that it does not require them going forward.
• Revising F2015E forecasts lower – We are revising our F2015E forecasts to reflect
our expectation of softer revenue growth in Juvenile and Sports segments,
particularly in H1, and weaker margins in both segments. Our 2015E revenue/
EBITDA forecasts are $2,612.8MM/$178.3MM, respectively, ($2,687.2MM/
$203.6MM previously).
Rating:
Price Target:
Outperform
15.00 ▼ 16.00
Equity Offering Closed
14MAR14 - 06MAR15
24.00
22.00
We are maintaining an Outperform recommendation on Encana Corporation and
have trimmed our one-year target price by 6% ($1) to $15 per share in the wake of
its C$1.25 billion common equity offering.
20.00
18.00
16.00
14.00
12.00
60000
40000
20000
M
A
M
Close
J
J
2014
A
S
O
N
Rel. S&P 500
EPS, Ops Diluted Prev.
2013A
1.09
2014A
1.35
2015E
(0.61)↑
(0.80)
2016E
0.57↑
0.56
D
J
2015
F
MA 40 weeks
P/E
9.9x
8.0x
NM
18.9x
M
• As we have argued before, 2014 was a transformational year for Encana as
it repositioned and refocused its portfolio for high margin growth over the
foreseeable future. Encana’s play roster is now centered around the Permian,
Eagle Ford, Montney and Duvernay – which should attract about 80% of its
unchanged 2015 capital program of $2.1 billion.
• Improved Balance Sheet. In connection with its C$1.25 billion (approximately
$1.0 billion) equity financing, Encana’s balance sheet leverage ratios have
improved to levels that are more comparable with its North American peers.
More specifically, Encana’s average net debt-to-trailing cash flow ratio has fallen
from 5.0x to 4.4x in 2015E (vs. our North American peer group average of 4.5x),
and from 3.1x to 2.6x (vs. 2.9x for our peer group) in 2016E.
All values in USD unless otherwise noted.
4
Ensign Energy Services Inc.(TSX: ESI; 9.16)
Dan MacDonald, CFA (Analyst)
(403) 299-2394; dan.macdonald@rbccm.com
Matthew McKellar (Associate)
403 299 5045; matthew.mckellar@rbccm.com
52 WEEKS
Rating:
Price Target:
14MAR14 - 06MAR15
Work to Do on the Homefront
We view ESI as financially positioned to weather the current downturn in land
drilling demand. However, the downturn has dramatically slowed efforts to high
grade its rig fleet via new builds in North America, suggesting it will need to
restart building to regain lost market share at home as the cycle recovers, or use
the downturn for acquisitions. We reaffirm our Sector Perform recommendation.
16.00
14.00
12.00
10.00
3000
2000
1000
M
A
M
J
Close
J
2014
A
S
O
N
D
J
2015
F
M
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
EPS, Ops Diluted Prev.
2013A
0.84
2014A
0.46↓
0.91
2015E
0.42↓
0.45
2016E
0.70↑
0.60
P/E
10.9x
19.9x
21.8x
13.1x
All values in CAD unless otherwise noted.
• Price target now $11, reducing estimates. We revise our 2015/16 EPS to $0.42/
$0.70 from $0.45/$0.60 and our 2015/16e EBITDA to $334.3mm/$461.1mm
from $391.8mm/$471.4mm, respectively, to account for the continued decline
in N.Am. land drilling activity and pricing.
• Pricing commentary - expect the spot market will see below cash break even.
ESI management noted expectations to see drilling rigs bid at or below break
even levels post spring break-up in Canada. This marks the most bearish outlook
reference point seen to-date, in our view. Currently, ESI is seeing 20% pricing
concessions across N.Am but pointed towards 25% of its fleet being contracted
in Canada and 30% in the US.
• Balance sheet flexibility and the dividend. On the whole, ESI's balance sheet
is less levered than the broader group with $701MM in net debt for 25% debt/
cap and 2.3x times 2015 D/CF (vs Cdn drillers averages of 29%/3.5x). From our
perspective, this implies a sustainable dividend, in combination with forecast FCF
in 2H15.
Labrador Iron Ore Royalty Corp.(TSX: LIF; 16.05)
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; fraser.phillips@rbccm.com
Steve Bristo, CFA (Associate)
(416) 842-7826; steve.bristo@rbccm.com
Thomas Klein (Associate)
(416) 842-5339; thomas.klein@rbccm.com
32.00
30.00
28.00
26.00
24.00
Sector Perform
11.00 ▼ 12.00
Rating:
Price Target:
Outperform
19.00 ▼ 20.00
Conservative iron ore exposure; attractive yield
52 WEEKS
14MAR14 - 06MAR15
22.00
20.00
18.00
We have updated our analysis post the 2014 results. At our forecast iron ore
prices of $55/t to $60/t over the next three years, we believe LIF can maintain a
distribution of over $1.00 per share. We estimate that in 2015 IOC should have an
all-in cash cost of $52.72/tonne including $5.58/tonne in sustaining capital, and
therefore do not believe IOC is likely to be closed unless there is another significant
decline in iron ore prices. At a current yield of 7.5%, we believe the shares are
attractive and maintain our Outperform recommendation.
16.00
3000
2000
1000
M
A
M
Close
J
J
2014
A
S
O
N
D
J
2015
F
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
EPS, Adj Diluted Prev.
2013A
2.33
2014A
1.63
2015E
0.94↓
1.13
2016E
0.84↓
0.87
All values in CAD unless otherwise noted.
M
• Revising our model post 2014 results: We have updated our model post the
2014 results and made a number of changes to our forecasts. We have lowered
our forecast future concentrate sales volumes for all years, and increased our
forecast pellet sales to reflect IOC's focus on maximizing pellet production. Our
production for 2016 is set to match LIF's stated targets in its results release, with
constant concentrator and pellet plant utilization rates thereafter. We have also
lowered our costs in 2015 onwards to reflect increasing volumes and improved
operating results. We have removed the assumed take-or-pay revenue from Cliffs
of US$150 million per year for the next three years given IOC will no longer
receive those payments with Bloom Lake in CCAA. The net result is a reduction in
our 2015 EPS and DPS estimates, and an increase in future EPS and DPS estimates
and our NAV. We maintain our Outperform recommendation and lower our price
target slightly to $19.
• LIF declares a dividend of $0.25 per share for Q1/15
• LIF to seek shareholder approval to invest in metal or mineral royalties and
issue shares to finance the investments
• Solid operating performance thus far in Q1/2015: LIF management indicated
to us that they are quite pleased with the significant progress the new senior
5
leadership at IOC has made in improving operating performance. The operating
performance at IOC in February 2015 was the best it has been in any February
in the history of the operations.
Parallel Energy Trust(TSX: PLT.UN; 0.61)
Shailender Randhawa, CFA (Analyst)
(403) 299-6576; shailender.randhawa@rbccm.com
Keith Mackey, CFA (Associate)
403 299 6958; keith.mackey@rbccm.com
52 WEEKS
14MAR14 - 06MAR15
4.00
3.00
Rating:
Sector Perform
Risk Qualifier: Speculative Risk
Price Target: 0.80 ▼ 1.00
Q4/14 - Lowering target on tighter projected liquidity
Parallel Energy Trust reported in-line Q4/14 CFPU as production was pre-released.
However, we've lowered out price target on Parallel from $1.00 to $0.80 per unit
on tighter projected bank line liquidity and weaker Q1 volumes.
2.00
1.00
1500
1000
500
M
A
M
J
Close
J
2014
A
S
O
N
D
J
2015
F
M
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
Total (boe/d) Prev.
7,147
7,083↑
7,080
6,800
6,800
2013A
2014A
2015E
2016E
All values in CAD unless otherwise noted.
Q4/14 CFPU in-line, reiterates 2015 guidance despite weather impacted Q1.
Q4/14 production of 7,110 boe/d (67% liquids) was pre-released and fell 4%
sequentially with no wells drilled in Q4 and only $1.7 million in capital spending
incurred. Parallel's $0.15 CFPU adjusted for $0.01/unit workover costs matched
our $0.15 estimate with $1.42/boe higher opex offsetting $1.77/boe higher
hedging gain. Parallel's management opted to maintain its full year 2015 average
production guidance of 6,800 boe/d despite weather impacted average January
and February volumes of 6,600 boe/d based on field data. Parallel highlighted
that volumes have returned above 7,000 boe/d capacity with normal weather
conditions, but we think there's some downside risk given no drilling planned
over the balance of the year.
• Discounted P/NAV reflects high leverage. At current levels, Parallel is trading at
a 2015E EV/DACF multiple of 13.6x (vs. dividend paying peers at 9.3x) and P/NAV
of 0.1x (0.7x for peers) at RBC's price deck, reflective of its high leverage position.
• Maintaining Sector Perform, Speculative Risk rating with revised $0.80 price
target ($1.00 prior). Our 12-month price target reflects a 0.2x (rounded) multiple
of our base NAV of $4.07. Our price target maps to a 15% cash yield compared
to the yield-paying peer average of 8.2%.
Earnings Preview
HNZ Group Inc.(TSX: HNZ.A; 21.89)
Derek Spronck (Analyst)
(416) 842-7833; derek.spronck@rbccm.com
Walter Spracklin, CFA (Analyst)
(416) 842-7877; walter.spracklin@rbccm.com
52 WEEKS
Rating:
Price Target:
14MAR14 - 06MAR15
24.00
Q4/14 preview: Looking over the valley
We are anticipating challenging Q4/14 results on a Y/Y basis following the
wind-down of the Afghanistan military contract. Furthermore, we expect
2015 guidance to confirm pricing and volume pressures on commodity linked
helicopter services, However, operational discipline and low debt levels positions
HNZ to effectively navigate through 2015 headwinds and to capture material new
contracts and potential acquisitions. Reiterate Outperform.
22.00
20.00
18.00
100
M
A
M
Close
2013A
2014E
2015E
2016E
Outperform
24.00
J
J
2014
A
S
O
N
D
J
2015
F
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
EBITDAR Prev. EV/Adj. EBITDAR
81.2
3.9x
51.8↓
53.0
6.2x
48.5
6.6x
55.9
5.7x
All values in CAD unless otherwise noted.
M
• Expecting challenging Q4/14 results and 2015 guidance. We are looking for
Q4/14 EBITDA of $7.6MM on revenue of $42.5MM – which remains below
consensus at $8.1MM and $45MM, respectively. No question, we do expect
a difficult base operating environment, in which we see a negative bias to
consensus estimates. However, should we get a sense that HNZ is in a position
to win material new contracts or complete an acquisition of size, we expect the
markets to largely overlook what we believe will be challenging Q4/14 results
and 2015 guidance.
• New Shell contract set to offset challenging industry conditions. We are making
only minor revision to our 2015/2016 estimates to account for the low crude and
commodity price environment. The Shell Canada contract that HNZ announced
on January 26, 2015, should more than offset. We will be looking for more colour
6
on the call as to the anticipated margin profile of this contract and other potential
opportunities in Eastern Canada.
• Uniquely positioned; reiterate Outperform. We believe HNZ can effectively
manage through current market conditions, while setting the stage to achieve
an inflection in EBITDAR growth in 2016. Should we see any pull back in the
HNZ shares due to near-term market challenges following Q4/14 results, we
would look to take advantage and accumulate for investors with a longer-term
investment horizon.
• Q4/14 results and CCl: Q4/14 results on Thursday, March 19 (after market close).
CC on Friday, March 20 at 11:00am (EST) at 1-855-859-2056.
Company Comments
Algonquin Power and Utilities Corp.(TSX: AQN; 9.19)
Nelson Ng, CFA (Analyst)
(604) 257-7617; nelson.ng@rbccm.com
Kelsey Roste (Associate)
(604) 257-7383; kelsey.roste@rbccm.com
10.50
Rating:
Price Target:
52 WEEKS
14MAR14 - 06MAR15
Outperform
11.00
Strong 2014 finish could be the start of a recovery in investor sentiment
The stronger-than-expected Q4/14 results and the company's explanation for
the previous delay in the release of Q4/14 results should help rebuild investor
confidence. However, we believe it will take time for investor confidence to fully
recover.
10.00
9.50
9.00
8.50
8.00
4000
3000
2000
1000
M
A
M
Close
J
J
2014
A
S
O
N
D
J
2015
F
M
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
FFO/Sh, Ops Diluted Prev.
2013A
0.69
2014A
0.85↑
0.79
2015E
0.91↑
0.85
2016E
1.06
All values in CAD unless otherwise noted.
Northern Blizzard Resources Inc.(TSX: NBZ; 7.15)
Mark J. Friesen, CFA (Analyst)
(403) 299-2389; mark.j.friesen@rbccm.com
145 DAYS
08AUG14 - 06MAR15
18.00
16.00
Rating:
Price Target:
Sector Perform
11.00
Q4/14; Recycle ratio analysis supports reduction to 2015 guidance
14.00
Motivated by economics, management reduced current year guidance, which we
believe should be viewed positively by shareholders. We model 4% production
growth yr/yr, a sustainable dividend yield of 13% and debt reduction at strip
pricing.
12.00
10.00
8.00
2000
1000
A14
28
S14
19
Close
2013A
2014A
2015E
• Remaining allegations relate to "workplace environment". Algonquin
previously delayed the release of Q4/14 results because it became aware
of certain anonymous allegations regarding certain company personnel. An
independent committee determined that the allegations relating to the
company's financial reporting and related practices do not impact the
financial results. Management highlighted that the remaining allegations under
investigation relate to the "workplace environment".
• Cautiously optimistic that the resolution of remaining allegations will gradually
improve investor sentiment. We believe the share price volatility caused by the
company's decisions in the past two weeks have hurt investor confidence. We
expect the remaining allegations to be resolved in a timely manner, setting the
stage for a gradual recovery of shareholder sentiment.
• Stronger-than-expected Q4 results. Algonquin's Q4/14 Adjusted EBITDA was
$76 million (before HLBV income), which was higher than our estimate of $68
million. The Q4/14 FFO/share was $0.26, exceeding our estimate of $0.21. The
variance was due to stronger-than-expected results from the Utilities division,
which also benefited from the stronger U.S. Dollar.
10
O14
03
N14
24
D14
15
08
J15
29
F15
20
Rel. S&P/TSX COMPOSITE INDEXMA 40 days
Prod (boe/d) Prev.
18,753
20,723↑
20,344
21,607↓
22,368
M15
• Q4/14 results – solid operational performance. Q4 production of 22,808 boe/d
(sales of 22,457 boe/d) beat our estimate of 21,302 boe/d. CFPS of $0.59 was inline with consensus and higher than our estimate of $0.53.
• Reduced 2015 guidance & estimates. Management reduced 2015 capex guidance
34% to $86mm from previous guidance of $130 mm. Reduced spending results
in revised production guidance of 21,600 boe/d, down from earlier guidance of
23,000 boe/d. We have reduced our estimates accordingly.
7
2016E
22,455↓
23,090
All values in CAD unless otherwise noted.
• Recycle ratio analysis supports debt reduction. We calculate a 2015E CF recycle
ratio of 0.6x at strip pricing, which we believe is below threshold value creation
levels and supportive of management's decision to slow investment and use free
cash flow for debt reduction in 2015.
Industry Comments
Geoffrey Kwan, CFA (Analyst)
(604) 257-7195; geoffrey.kwan@rbccm.com
Canadian Asset Managers
Charan Sanghera (Associate)
(604) 257-7657; charan.sanghera@rbccm.com
• Mutual fund industry flows in the key RRSP season month of February were
strong with +$10.7B in net sales, +18% Y/Y vs. +$9.1B in February 2014, showing
notable strength given both recent market volatility and harder Y/Y comps as
2014 flows were quite strong as well. Overall in January and February 2015, the
industry saw net sales of $16.0B, +11% Y/Y, indicating a solid level of sales activity
for the 2015 RRSP season. Although Y/Y acceleration in net sales may diminish
in coming months, monthly net sales have remained resilient and last 12 month
(LTM) mutual fund net sales reached over +$56B in February.
• Equity funds were the 2nd best selling asset class in February with net sales
+15% Y/Y. February equity fund net sales were +$2.1B vs. +$1.8B Y/Y. Balanced
funds remain the best sellers with net sales of +$8.1B in February (vs. +$7.0B Y/
Y), while bond funds saw net sales of +$28MM (vs. +$272MM Y/Y). Mutual fund
industry AUM at the end of February crossed the $1.2T mark and was +3% M/
M and +16% Y/Y.
• For investors looking for quality and dividends (both yield and growth), CI
Financial is our favourite fundco while Gluskin Sheff is our favourite asset
manager stock.
All values in CAD unless otherwise noted.
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; fraser.phillips@rbccm.com
Chris Drew, CFA (Analyst)
+61 2 9033 3060; chris.drew@rbccm.com
Timothy Huff (Analyst)
+44 20 7653 4866; timothy.huff@rbccm.com
Des Kilalea (Analyst)
+44 20 7653 4538; des.kilalea@rbccm.com
Richard Hatch, ACA (Analyst)
+44 20 7002 2111; richard.hatch@rbccm.com
Ioannis Masvoulas, CFA (Analyst)
+44 20 7653 4647; ioannis.masvoulas@rbccm.com
Paul Hissey (Analyst)
+61 3 8688 6512; paul.hissey@rbccm.com
Ken Tham, CFA (Analyst)
+61 2 9033 3064; ken.tham@rbccm.com
Strong RRSP season: February mutual fund industry flows +18% Y/Y
Global Mining Trends & Values
Commodity Price Performance:
• Metal prices were down on average 0.2% last week. Moly was the best performer
up 2.5%, followed by thermal coal up 1.4%, copper up 0.6%, zinc up 0.3%,
uranium flat 0.0%, and iron ore flat 0.0%. Aluminium was the worst performer
down 2.3%, followed by nickel down 1.7%, silver down 1.5%, gold down 0.7%,
lead down 0.7%, and coking coal down 0.1%.
Mining Share Price Performance:
• Mining shares were down on average 6.7% last week. The best performing group
was uranium down 2.6%, followed by nickel down 5.3%, mineral sands down
5.3%, copper down 6.1%, aluminium down 6.3%, coal down 6.5%, miscellaneous
down 7.2%, the diversified group down 9.0%, and iron ore down 10.0%.
Valuation:
• Mining shares are now trading at a 15.8% premium to NAV at forward curve
prices, versus a 14.8% premium one week ago.
Long/Short Metal Positions:
• RBC CM's proprietary data for the LME shows that the net short positions in
copper decreased last week, while net short positions in aluminium, zinc, nickel,
and lead increased last week.
Exchange Inventories:
• Total exchange inventories of nickel decreased last week, while total inventories
of aluminium, copper, and zinc increased last week.
Greg Pardy, CFA (Analyst)
(416) 842-7848; greg.pardy@rbccm.com
Franz Hargo Muljo, CA (Associate)
416 842 8588; franz.muljo@rbccm.com
Integrated Oil and Senior E&P
So what WTIE price are the large caps discounting?
8
Tom Callaghan, CA, CPA (Associate)
(416) 842-7915; tom.callaghan@rbccm.com
All values in USD unless otherwise noted.
Paul C. Quinn (Analyst)
(604) 257-7048; paul.c.quinn@rbccm.com
Hamir Patel (Analyst)
(604) 257-7145; hamir.patel@rbccm.com
• Based on our net asset value analysis, our large cap independent and integrated
coverage universe is currently discounting a long-term escalated WTI equivalent
(WTIE) price of US$72/boe, unchanged from last week; and a long-term WTI price
of US$86/b (vs. US$87/b), down 1% from last week.
• Current WTIE implied prices would compare with prior 2009-2014 YTD peak
and trough levels of US$84/boe and US$61/boe, respectively; while current WTI
implied prices would compare with peak and trough levels of US$102/b and US
$62/b, respectively.
• Spot WTIE prices of US$37/boe (vs. US$42/boe) were down 12% from last week.
Long-dated (2015-2018) WTIE prices of US$50/boe (vs. US$52/boe) were down
4% from last week.
Paper & Forest Products Weekly
• Comparable valuation tables, commodity prices, and total return performance
for our North American Paper & Forest Products coverage universe.
Michael Harvey, P.Eng. (Analyst)
403 299 6998; michael.harvey@rbccm.com
RBC Canadian Energy
Mark J. Friesen, CFA (Analyst)
(403) 299-2389; mark.j.friesen@rbccm.com
News Items Last Week
Luke Davis (Associate)
(403) 299-5042; luke.davis@rbccm.com
Shailender Randhawa, CFA (Analyst)
(403) 299-6576; shailender.randhawa@rbccm.com
Junior/Intermediate E&P: Weekly Review and Valuation Tables
• Cardinal Energy – Notes from the road. We hosted an institutional road trip
with Scott Ratushny, Cardinal Energy’s President & CEO, and Laurence Broos, VP
Finance. With a secure 2015 financial outlook, the discussion largely focused on
Cardinal's operational priorities and acquisition strategy to emerge stronger from
current trough oil prices. See note here.
Sara O'Brien, CFA, CA (Analyst)
(514) 878-7256; sara.obrien@rbccm.com
Victoria McCulloch, CA (Analyst)
+44 131 222 4909; victoria.mcculloch@rbccm.com
RBC International E&P Daily
Nathan Piper (Analyst)
+44 131 222 3649; nathan.piper@rbccm.com
• SIA.L: Will SOCO Now Prove to Be Bite-Sized?; LUPE.ST: Plugs and abandons
Gemini exploration well as a dry hole; DETNOR.OL: Investor day; North Sea
looking to the Budget for help; WZR.V: Positive commentary, but greater
scale remains a requirement; BLVN.L: Etinde farm-out completed; Argentina –
Wintershall targeting Vaca Muerta
Al Stanton (Analyst)
+44 131 222 3638; al.stanton@rbccm.com
Haydn Rodgers, CA (Associate)
+44 131 222 4911; haydn.rodgers@rbccm.com
SIA; LUPE; DETNOR; WZR
Adam Naughton (Associate)
+441312223695; adam.naughton@rbccm.com
All values in USD unless otherwise noted.
Technical Research
Robert Sluymer, CFA (Analyst)
(212) 858-7066; robert.sluymer@rbccm.com
It’s All Relative – March 17, 2015
• Short-term equity market lows taking hold on track – Today's note follow's up
Friday's weekly technical review highlighting the prospects for short-term lows
developing near ‘trend’ support.
• Screening for market and sector leaders and laggards – To help identify ‘leaders’
page 2 and 3 provide a list of those stocks making new multi-week/month relative
highs and lows respectively to the S&P 500 and to each stock’s S&P sector These
screens serve as an efficient 2 page technical ’cheat sheet’ for generalist and
sector dedicated PMs to flag shifting leadership trends within the market and
within each sector.
FEATURED CHART
• Financials (+) Asset Managers: NTRS and IVZ building leadership.
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• Bond Proxies (+/=) Growing list of REITs (AVB) and some Utilities (EIX) bottoming
short-term and are likely counter-trend in nature.
• Healthcare (+) Biotech: REGN and AMGN are beginning to reaccelerate
• Discretionary (+) Discount Stores (DG, TGT) and Select Apparel (HBI, UA)
leadership intact. (-) Select Consumer names are deteriorating: DECK, FOSL,
KATE, PVH
• Technology (+) Software is timely: ORCL, CDK, SNPS, ULTI
• Industrials (+) Transport leadership continues – Airlines: JBLU, LUV, Air Freight:
CHRW, FDX, and Rail/Truckers: JBHT, NSC. (-) Machinery – Weakness continues
despite 'oversold' conditions: GGG, SPW
• Materials (-) Metals and Steels – Relative weakness continues despite recent
declines: AA, FCX, ATI, CRS
• Energy – Weakness continues as oil tests 2015 lows (-) Equipment & Services
continue to underperform the S&P 500 and Energy sector: CRR, NOV, OII, OIS
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Required disclosures
Non-U.S. analyst disclosure
Victoria McCulloch;Nathan Piper;Al Stanton;Haydn Rodgers;Adam Naughton;Sabahat Khan;Greg Pardy;Franz Hargo Muljo;Tom
Callaghan;Derek Spronck;Walter Spracklin;Geoffrey Kwan;Charan Sanghera;Fraser Phillips;Steve Bristo;Thomas Klein;Chris
Drew;Timothy Huff;Des Kilalea;Richard Hatch;Ioannis Masvoulas;Paul Hissey;Ken Tham;Nelson Ng;Kelsey Roste;Dan
MacDonald;Matthew McKellar;Mark J. Friesen;Shailender Randhawa;Keith Mackey;Paul C. Quinn;Hamir Patel;Michael
Harvey;Luke Davis;Sara O'Brien (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.
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Distribution of ratings
For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories
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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
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To access our current policy, clients should refer to
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