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A worker in a Magna plant in Puebla, Mexico.Brett Gundlock/The Globe and Mail

Inside the Market's roundup of some of today's key analyst actions

Though it's advancing one of the world's largest copper and gold projects, BMO Nesbitt Burns analyst Andrew Mikitchook initiated coverage of Northern Dynasty Minerals Ltd. (NDM-T) with a "market perform" rating based on both near-term risks and timeline uncertainties.

"The scale of Northern Dynasty's Pebble project in Alaska is challenging to grasp," he said. "It ranks as one of the largest unmined copper resources worldwide with 81 billion pounds contained, as well as one of the largest unmined gold resources worldwide with 108 million ounces contained in all categories. The 2011 PEA presented mine plans of up to 78 years, while only mining 55 per cent of defined resources. In addition, one of the best holes ever drilled on the property is outside of the existing resource. Pebble is located in a first-world jurisdiction, is economic, and is in a technically favourable location for development.

"The challenge for Pebble lies in persistent and entrenched opposition against the project. Legal challenges, aggressive media campaigning, as well as opposition ballot initiatives should be expected right through permitting, construction, and into production. Northern Dynasty has addressed each of these challenges and is targeting three important catalysts to advance the project over the near term. The timing of these catalysts remains the main risk for the company."

Mr. Mikitchook said he sees "strong" potential for Pebble to be developed, with benefits being felt by both stakeholders and shareholders. However, he said reaching that goal will "require continued persistence."

"Development of world class assets requires both extensive financial resources as well as technical expertise," he said. "The track record for such exceptional assets is to see joint venture development or an outright acquisition by a senior producer. Northern Dynasty intends to attract a partner to advance Pebble. Financing challenges for projects of Pebble's scale are significant – the permitting effort alone is estimated to cost $150-million against our estimate of the current Northern Dynasty net cash position of $25-million. We are assuming Northern Dynasty successfully attracts a partner to cover permitting costs and a portion of development costs. The balance of NDM's share of capital costs would likely be financed by a combination of project debt, equity, and potentially hybrid sources of financing such as metals streaming. We are not modelling these sources as the scale and costs of these structures are currently unknown.

"Northern Dynasty's management has persisted in advancing the project through exploration and engineering as well as navigating the numerous challenges to the project to date. Executive Chairman Robert Dickinson and President & CEO Ron Thiessen have track records of advancing projects across multiple companies. Tom Collier, CEO of the Pebble Limited Partnership (PLP) brings extensive U.S. strategic and regulatory experience from a background as a lawyer specializing in environmental permitting and as Chief of Staff with the U.S. Department of the Interior. Pebble Limited Partnership Chairman John Shively also brings significant Alaskan permitting negotiation and regulatory experience to the project."

Mr. Mikitchook set a target price of $2.50 for the company's stock. The consensus average is $3.83.

"We have chosen a 0.60 times price-to-NAV target-setting multiple to reflect the size and scale of the Pebble project with an appropriate discount for the significant risks associated with the project," he said. "Our selected multiple is below the range of other developer peers in [BMO's] coverage universe generally closer to 0.8 times."

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Raymond James analyst Steve Hansen added Methanex Corp. (MEOH-Q, MX-T) to the firm's "Canadian Analyst Current Favourites" list, replacing Exchange Income Corp. (EIF-T).

"We are adding Methanex to our ACF list based upon increasing evidence that global spot methanol fundamentals continue to tighten, most notably in China/Asia, a constructive backdrop that we view as increasingly conducive to contract price increases in the coming weeks/months," he said. "In this context, after a long series of downward/sideways moves, we believe that any 'uptick' of the Chinese contract would serve as a complimentary 'buying signal' that supports our positive fundamental thesis—largely on the premise that the first uptick is typically followed by several more thereafter. Finally, we are also mindful that we are quickly approaching methanol's strongest seasonal period (Oct-Feb), a window often associated with notable supply-side outages."

In justifying the move, he said he sees better near-term catalysts for Methanex shares.

Mr. Hansen currently has an "outperform" rating and $60 (U.S.) target for Methanex stock. The analyst average price target is $52.54, according to Bloomberg data.

For Exchange Income, he has a "strong buy" rating and $48 target. The average is $42.73.

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Cominar Real Estate Investment Trust (CUF.UN-T) may present active investors with an "interesting" short-term opportunity, said Desjardins Securities analyst Michael Markidis.

On Aug. 24, the Quebec City-based company announced its plan to unload about 100 properties, including Calgary's Scotia Centre tower and Dixie Outlet Mall in Mississauga. It plans to allocate more than $1.2-billion from the proceeds stemming from the sales toward reducing debt.

"There is substantial value embedded in the GTA assets," said Mr. Markidis. "CUF owns 21 properties in the Greater Toronto Area (GTA), including (1) Dixie Outlet Mall, (2) Woodside Square, (3) 55 University Avenue, (4) a portfolio of 12 closely clustered flex industrial buildings, and (5) five suburban office properties. Investor appetite for these assets should be strong; we believe the aggregate market value could be in the $600–750-million range.

"The market may need to strengthen in order for CUF to achieve $200-million out west. This segment comprises 14 assets, 11 of which are Calgary office properties (0.9 million square feet). The largest is Scotia Centre, a 42-storey office tower in the heart of the downtown core which was constructed in 1976; the other 10 office properties are located in the suburbs. Management's estimate of the market value for this segment is $200-million ($180/sf). As a reference point, Dream Office REIT sold a portfolio of 12 office properties (1.5msf) for $200-million ($130/sf) earlier this year."

Mr. Markidis said the company's portfolio in Atlantic Canada will likely prove more "challenging," given the small size of its properties and the difficulty in assessing value given a lack of market data.

He maintained a "hold" rating and $13.25 target for units of Cominar. Consensus is $14.

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Citing underperformance from its base business thus far in 2017 and "limited visibility on the asset recycling program in the face of a stretched balance sheet,"  RBC Dominion Securities analyst TJ Schultz downgraded American Midsteam Partners LP (AMID-N) to "sector perform" from "outperform."

"AMID has leaned more heavily on sponsor support than we expected to hit 2017 targets," he said. "Now, with propane being sold, AMID has ambitious plans to materially grow EBITDA in 2018, while also alleviating need for more sponsor support. Current assets won't get it there in our view, so we expect more A&D announcements forthcoming. Experienced management team, but visibility is more limited to hit targets."

His target for the stock fell to $14 (U.S.) from $18. Consensus is $16.83.

"AMID has a diversified portfolio of midstream energy assets and is in the process of optimizing its asset base around key regions in the Permian, East Texas, the Gulf Coast and offshore Gulf of Mexico," said Mr. Schultz. "With the sale of the propane business, AMID has steadied the variability and seasonality of the cash flow stream. However, the MLP leaned heavily on its majority-owned sponsor (ArcLight) in 1H17, and we think the current asset base keeps coverage and debt leverage tight through our forecast period. Upside is dependent on continuing the asset optimization process, in our view, but we have limited visibility here."

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Total System Services Inc. (TSS-N) has transitioned to more diverse revenue streams over the past several years through a series of acquisitions, according to RBC Dominion Securities analyst Daniel Perlin.

He initiated coverage of the Georgia-based payment solutions provider with an "outperform" rating.

"Over the past several years, TSS has made great progress in diversifying its revenue mix from being predominantly an issuer processor (83% of revenue in 2008) to becoming a top 10 merchant acquirer in the U.S. (29 per cent of revenues in 2016) and the number one provider of prepaid debit cards, as measured by gross dollar volume (22 per cent of revenue in 2016) in the U.S.," said Mr. Perlin. "TSS achieved this mix shift by making two strategic acquisitions (1) Netspend in Q3/13 and (2) TransFirst in Q2/16. Additionally, we believe that the company's Issuer and Merchant segments will show continued stable to accelerating organic revenue growth and margin expansion as they (a) gain share in growing industries and (b) benefit from platform reinvestments."

"We believe continued diversification can be achieved as the company looks to increase the size of its merchant solutions business via acquisitions."

Mr. Perlin set a price target of $75 for TSS shares. Consensus is $67.92.

"With two of its three business segments outperforming, we believe it is possible for TSS to both maintain diversification, while improving core revenue and earnings growth," he said. "We expect additional acquisitions and/or share repurchases to drive revenue and EPS above consensus, with optionality for even higher growth if TSS were to exit its underperforming Netspend business."

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Canaccord Genuity analyst Kyle Rose initiated coverage of Sientra Inc. (SIEN-Q), a Santa Barbara, Calif.-based medical aesthetics company, with a "buy" rating.

"We believe Sientra is uniquely positioned to take share across multiple segments of the US aesthetics industry," said Mr. Rose. "We view the firm's execution over 2012-2015 – when it captured an estimated 13-per-cent share in the U.S. breast augmentation market before running into inventory/supply issues – as indicative of the underlying opportunity to quickly recapture share in the breast aesthetics market. Furthermore, we expect market share gains will be supported by Sientra's broader product portfolio that now includes a focus on breast reconstruction, scar reduction, and the energy-based capital device market. With a clear timeline for resolution of inventory constraints expected by YE/17 we believe Sientra shares offer attractive upside potential for both near- and long-term investors."

He set a price target of $14 (U.S.) for Sientra shares, which is the current consensus.

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Expecting a steady rise in titanium dioxide (TiO2) prices over the next 12-18 months with limited downside risk, RBC Dominion Securities analyst Arun Viswanathan initiated coverage of Venator Materials PLC (VNTR-N) with an "outperform" rating.

Spun off by Huntsman Corp., Venator is U.K.-based company engaged in manufacturing TiO2, functional additives, color pigments,timber treatment and water treatment products.

It made its trading debut on Aug. 3.

"Prices troughed at the beginning of 2016 and have gained momentum over the last 12 months," the analyst said. "We believe the following supports favorable supply/demand dynamics going forward: 1) recent capacity rationalization and a low probability of new additions; 2) recent industry consolidation; 3) increased transparency and producer discipline following the consolidation; 4) higher quality Western product relative to Asia; and 5) downstream coatings players have been announcing price increases to pass through higher raw material costs. We believe the above improvements set the stage for a 10-15-per-cent increase in prices over the next 12-18 months while mitigating downside risk and price volatility."

Mr. Viswanathan set a target price of $23 for the stock. Consensus is $23.67.

"We believe the following factors should drive the stock higher towards our target: 1) 12-18 month up-cycle in TiO2 with limited downside risk; 2) VNTR's high leverage to favorable TiO2 pricing dynamics; 3) cost take out initiatives and specialty TiO2 position; 4) cash flow generation for debt paydown and eventual shareholder returns; and 5) an attractive valuation," he said.

Other analysts initiated coverage included: SunTrust Robinson Humphrey's James Sheehan ("buy" rating and $25 target); UBS' John Roberts ("neutral" and $22); and Barclays' Duffy Fischer ("equal-weight" and $22).

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Harris Corp. (HRS-N) provides "best-in-class growth at a reasonable price," said Credit Suisse analyst Robert Spingarn.

He initiated coverage of the Melbourne, Fla.-based technology company, which provides products, systems and services that have defence and civil government applications, with an "outperform" rating.

"Having recently shed the last of its low-margin, non-core businesses and fixed other underperforming legacy Exelis contracts, we believe Harris has emerged transformed and leaner as we enter a new multi-year defense upcycle, with particular support in areas where HRS is well positioned," said Mr. Stingarn. "We expect HRS to be one of the more robust top- and bottom-line growth stories (7 per cent and 15 per cent CAGR, respectively) through the end of the decade, with industry-leading margins and FCF converting solidly greater-than 1.0 times net income, driven by the ramp up of key existing programs, growing international demand, and meaningful new business wins (e.g., Joint Tactical Radio System – JTRS; U.S. Special Operations Command modernization – SOCOM modernization."

Mr. Spingarn set a price target for Harris stock of $144 (U.S.). Consensus is currently $129.

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In other analyst actions:

Magna International Inc. (MGA-N, MG-T) was cut to "equal-weight" from "overweight" by Morgan Stanley analyst Adam Jonas with a target of $47, down from $56. The analyst average is $52.72.

TD Securities analyst Graham Ryding upgraded AGF Management Ltd. (AGF.B-T) to "buy" from "hold" with a $9.50 target, up from $7.50. The consensus average is $7.41.

Bernstein analyst Brandon Fletcher upgraded Dollar Tree Inc. (DLTR-Q) to "market perform" from "underperform" and raised his target to $78 (U.S.) from $65. The average target is $89.55.

Aegis Capital Corp. analyst Rommel Dionisio initiated coverage of Harley-Davidson Inc. (HOG-N) with a "hold" rating and $49 (U.S.) target. The average is $51.

BMO Nesbitt Burns analyst Danilo Juvane upgraded Plains All American Pipeline LP (PAA-N)  and Plains GP Holdings LP (PAGP-N) to "outperform" from "market perform" with $25 (U.S.) targets, rising from $22. Consensus is $25.04.

"We are upgrading PAA shares to Outperform on the confluence of recently announced $1.20 per unit rebased distribution, asset sales, and $600-million imminent preferred equity issuance, the sum of which not only provides a clear deleveraging path but also visibility to resumed dividend growth in 2019," he said. "We are increasing our target price to $25 on a valuation roll-forward to 2019, underscoring that the path to our valuation is dependent on management execution of its fee-based strategy with no need for meaningful Supply & Logistics rebound."

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